Half Year Report - 2023 Interim Report - Part 4

RNS Number : 9039H

HSBC Holdings PLC

01 August 2023

Directors' responsibility statement

The Directors¹ are required to prepare the condensed consolidated financial statements on a going concern basis unless it is not appropriate. They are satisfied that the Group has the resources to continue in business for the foreseeable future and that the financial statements continue to be prepared on a going concern basis.

The Directors confirm that to the best of their knowledge:

- the financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the UK, IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB') and IAS 34 'Interim Financial Reporting' as adopted by the European Union, and the Disclosure Guidance and Transparency Rules ('DTR') sourcebook of the UK's Financial Conduct Authority;

- this Interim Report 2023 gives a true, fair, balanced and understandable view of the assets, liabilities, financial position and profit or loss of the Company; and

- this Interim Report 2023 includes a fair review of the information required by:

- DTR 4.2.7R, being an indication of: important events that have occurred during the first six months of the financial year ending 31 December 2023 and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

- DTR 4.2.8R, being: related party transactions that have taken place in the first six months of the financial year ending 31 December 2023, which have materially affected the financial position or performance of HSBC during that period; and any changes in the related parties transactions described in the Annual Report and Accounts 2022 that could materially affect the financial position or performance of HSBC during the first six months of the financial year ending 31 December 2023.

On behalf of the Board

Mark E Tucker

Group Chairman

1 August 2023

1 Mark Tucker*, Geraldine Buckingham†, Rachel Duan†, Georges Elhedery, Carolyn Julie Fairbairn†, James Anthony Forese†, Steven Guggenheimer†, José Antonio Meade Kuribreña†, Kalpana Morparia†, Eileen K Murray†, David Nish† and Noel Quinn.

* Non-executive Group Chairman † Independent non-executive Director

Independent review report to HSBC Holdings plc

Report on the interim condensed financial statements

Our conclusion

We have reviewed HSBC Holdings plc's interim condensed financial statements (the 'interim financial statements') in the interim report of HSBC Holdings plc and its subsidiaries (the 'Group') for the six month period ended 30 June 2023 (the 'period').

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK-adopted International Accounting Standard 34, 'Interim Financial Reporting', International Accounting Standard 34, 'Interim Financial Reporting' as issued by the IASB, International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union, and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

- the consolidated balance sheet as at 30 June 2023;

- the consolidated income statement and the statement of comprehensive income for the period then ended;

- the consolidated statement of cash flows for the period then ended;

- the consolidated statement of changes in equity for the period then ended; and

- the notes to the interim financial statements and certain other information¹.

The interim financial statements included in the interim report of the Group have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' , International Accounting Standard 34, 'Interim Financial Reporting' as issued by the IASB, International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom ('ISRE (UK) 2410'). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the Group to cease to continue as a going concern.

Responsibilities for the interim condensed financial statements and the review

Our responsibilities and those of the directors

The interim report of the Group, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report of the Group in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the interim report of the Group, including the interim financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

London

1 August 2023

1 'Certain other information' comprises the following tables: 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' and 'Distribution of financial instruments to which the impairment requirements of IFRS 9 are applied, by credit quality and stage allocation'.

Interim condensed financial statements

Contents

108	Consolidated income statement
109	Consolidated statement of comprehensive income
110	Consolidated balance sheet
111	Consolidated statement of changes in equity
114	Consolidated statement of cash flows

Consolidated income statement
		Half-year to¹
		30 Jun	30 Jun
		2023	2022
	Notes*	$m	$m
Net interest income		18,264	13,385
- interest income		46,955	19,788
- interest expense		(28,691)	(6,403)
Net fee income	2	6,085	6,228
- fee income		7,947	7,913
- fee expense		(1,862)	(1,685)
Net income from financial instruments held for trading or managed on a fair value basis		8,112	4,856
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss		4,304	(11,849)
Insurance finance income/(expense)		(4,234)	11,773
Insurance service result		524	370
- insurance revenue		1,104	980
- insurance service expense		(580)	(610)
Gain on acquisitions²	15	1,507	-
Reversal of impairment loss relating to the planned sale of our retail banking operations in France³	15	2,130	-
Other operating income		184	(218)
Net operating income before change in expected credit losses and other credit impairment charges⁴		36,876	24,545
Change in expected credit losses and other credit impairment charges		(1,345)	(1,087)
Net operating income		35,531	23,458
Employee compensation and benefits		(8,954)	(8,896)
General and administrative expenses		(4,912)	(5,337)
Depreciation and impairment of property, plant and equipment and right-of-use assets		(782)	(1,072)
Amortisation and impairment of intangible assets		(809)	(822)
Total operating expenses		(15,457)	(16,127)
Operating profit		20,074	7,331
Share of profit in associates and joint ventures		1,583	1,449
Profit before tax		21,657	8,780
Tax (charge)/credit		(3,586)	151
Profit for the period		18,071	8,931
Attributable to:
- ordinary shareholders of the parent company		16,966	7,966
- other equity holders		542	626
- non-controlling interests		563	339
Profit for the period		18,071	8,931
		$	$
Basic earnings per ordinary share	4	0.86	0.40
Diluted earnings per ordinary share	4	0.86	0.40

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2 Provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.

3 Reversal of the $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.

4 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

* For Notes on the interim condensed financial statements, see page 115.

Consolidated statement of comprehensive income
	Half-year to¹
	30 Jun	30 Jun
	2023	2022
	$m	$m
Profit for the period	18,071	8,931
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
Debt instruments at fair value through other comprehensive income	549	(6,246)
- fair value gains/(losses)	804	(8,120)
- fair value gains transferred to the income statement on disposal	(63)	(52)
- expected credit (recoveries)/losses recognised in the income statement	(3)	17
- income taxes	(189)	1,909
Cash flow hedges	(1,062)	(2,063)
- fair value losses	(1,700)	(1,646)
- fair value (gains)/losses reclassified to the income statement	227	(1,127)
- income taxes and other movements	411	710
Share of other comprehensive income/(expense) of associates and joint ventures	101	(142)
- share for the period	101	(142)
Net finance income/(expense) from insurance contracts²	(101)	1,360
- before income taxes	(136)	1,833
- income taxes	35	(473)
Exchange differences	(347)	(8,382)
Items that will not be reclassified subsequently to profit or loss:
Fair value gains on property revaluation	1	-
Remeasurement of defined benefit asset/(liability)	(112)	95
- before income taxes	(105)	(132)
- income taxes	(7)	227
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk	(653)	2,263
- before income taxes	(867)	3,030
- income taxes	214	(767)
Equity instruments designated at fair value through other comprehensive income	7	158
- fair value gains	7	158
Effects of hyperinflation	578	428
Other comprehensive expense for the period, net of tax	(1,039)	(12,529)
Total comprehensive income/(expense) for the period	17,032	(3,598)
Attributable to:
- ordinary shareholders of the parent company	15,986	(4,405)
- other equity holders	542	626
- non-controlling interests	504	181
Total comprehensive income/(expense) for the period	17,032	(3,598)

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2 Net finance income/(expense) from insurance contracts in other comprehensive income is the amount that offsets the effective interest rate and expected credit losses on supporting assets that have been designated at fair value through other comprehensive income. In the first half of 2023, movements in net finance income/(expense) from insurance contracts of $(101)m (1H22: $1,360m) was booked, and offsetting fair value through other comprehensive income ('OCI') movements on supporting assets of $108m was recorded (1H22: ($1,439m)).

Consolidated balance sheet
		At¹
		30 Jun	31 Dec
		2023	2022
	Notes*	$m	$m
Assets
Cash and balances at central banks		307,733	327,002
Items in the course of collection from other banks		10,649	7,297
Hong Kong Government certificates of indebtedness		42,407	43,787
Trading assets		255,387	218,093
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss		104,303	100,101
Derivatives	8	272,595	284,159
Loans and advances to banks		100,921	104,475
Loans and advances to customers		959,558	923,561
Reverse repurchase agreements - non-trading		258,056	253,754
Financial investments	9	407,933	364,726
Assets held for sale		95,480	115,919
Prepayments, accrued income and other assets		175,473	156,149
Current tax assets		1,262	1,230
Interests in associates and joint ventures	10	29,546	29,254
Goodwill and intangible assets		11,925	11,419
Deferred tax assets		8,248	8,360
Total assets		3,041,476	2,949,286
Liabilities and equity
Liabilities
Hong Kong currency notes in circulation		42,407	43,787
Deposits by banks		68,709	66,722
Customer accounts		1,595,769	1,570,303
Repurchase agreements - non-trading		170,110	127,747
Items in the course of transmission to other banks		10,776	7,864
Trading liabilities		81,228	72,353
Financial liabilities designated at fair value		139,618	127,321
Derivatives	8	269,560	285,762
Debt securities in issue		85,471	78,149
Liabilities of disposal groups held for sale		87,241	114,597
Accruals, deferred income and other liabilities		155,275	134,313
Current tax liabilities		1,921	1,135
Insurance contract liabilities		115,756	108,816
Provisions	11	1,722	1,958
Deferred tax liabilities		976	972
Subordinated liabilities		23,286	22,290
Total liabilities		2,849,825	2,764,089
Equity
Called up share capital		10,073	10,147
Share premium account		14,737	14,664
Other equity instruments		19,392	19,746
Other reserves		(9,935)	(9,133)
Retained earnings		149,903	142,409
Total shareholders' equity		184,170	177,833
Non-controlling interests		7,481	7,364
Total equity		191,651	185,197
Total liabilities and equity		3,041,476	2,949,286

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

* For Notes on the interim condensed financial statements, see page 115.

Consolidated statement of changes in equity

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

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

Consolidated statement of changes in equity (continued)
				Other reserves
	Called up share capital and share premium	Other equity instru- ments	Retained earnings	Financial assets at FVOCI reserve	Cash flow hedging reserve	Foreign exchange reserve	Merger and other reserves	Insura-nce finance reserve¹	Total share- holders' equity	Non- controlling interests	Total equity
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
At 1 Jul 2022	24,850	21,691	140,860	(6,011)	(2,232)	(31,051)	30,204	664	178,975	7,130	186,105
Profit for the period	-	-	6,967	-	-	-	-	-	6,967	351	7,318
Other comprehensive income (net of tax)	-	-	(1,244)	(1,027)	(1,578)	(1,524)	174	415	(4,784)	71	(4,713)
- debt instruments at fair value through other comprehensive income	-	-	-	(998)	-	-	-	-	(998)	12	(986)
- equity instruments designated at fair value through other comprehensive income	-	-	-	(29)	-	-	-	-	(29)	(22)	(51)
- cash flow hedges	-	-	-	-	(1,578)	-	-	-	(1,578)	(14)	(1,592)
- changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk	-	-	(341)	-	-	-	-	-	(341)	-	(341)
- property revaluation	-	-	-	-	-	-	174	-	174	106	280
- remeasurement of defined benefit asset/liability	-	-	(1,127)	-	-	-	-	-	(1,127)	1	(1,126)
- share of other comprehensive income of associates and joint ventures	-	-	(225)	-	-	-	-	-	(225)	-	(225)
- effects of hyperinflation	-	-	449	-	-	-	-	-	449	-	449
- insurance finance income/ (expense) recognised in other comprehensive income	-	-	-	-	-	-	-	415	415	-	415
- exchange differences	-	-	-	-	-	(1,524)	-	-	(1,524)	(12)	(1,536)
Total comprehensive income for the period	-	-	5,723	(1,027)	(1,578)	(1,524)	174	415	2,183	423	2,606
Shares issued under employee remuneration and share plans	2	-	(2)	-	-	-	-	-	-	-	-
Dividends to shareholders	-	-	(2,342)	-	-	-	-	-	(2,342)	(131)	(2,473)
Redemption of securities³	-	(1,945)	402	-	-	-	-	-	(1,543)	-	(1,543)
Cost of share-based payment arrangements	-	-	223	-	-	-	-	-	223	-	223
Transfers⁷	-	-	(2,499)	-	-	-	2,499	-	-	-	-
Cancellation of shares	(41)	-	-	-	-	-	41	-	-	-	-
Other movements	-	-	44	-	2	-	291	-	337	(57)	280
At 31 Dec 2022	24,811	19,746	142,409	(7,038)	(3,808)	(32,575)	33,209	1,079	177,833	7,364	185,197

1 The insurance finance reserve reflects the unwinding of the discount rate on insurance liabilities for which the OCI option has been elected for our insurance business in France. It is recorded after excluding the amount that offsets the effective interest rate and expected credit losses on supporting assets that have been designated at fair value through other comprehensive income.

2 During 2023, HSBC Holdings issued $2,000m of contingent convertible securities on which there were $4m of external issue costs.

3 During 2023, HSBC Holdings redeemed $2,350m contingent convertible securities. In 2022, HSBC Holdings redeemed €1,500m 5.250% and SGD1,000m 5.875% contingent convertible securities.

4 In February 2022 HSBC announced a share buy-back of up to $1.0bn, which concluded in July 2022. Additionally, in May 2023, HSBC Holdings announced a share buy-back of up to $2.0bn.

5 Includes a payment of $749m (1H22: $435m) to the HSBC Holdings Employee Benefit Trust 2001 (No. 2) to purchase shares in order to settle liabilities on Group share plans.

6 The impact of IFRS 17 on previously reported total equity was $(10,585)m at 30 June 2022 and $(10,831)m at 31 December 2022.

7 Permitted transfers from the merger reserve to retained earnings were made when the investment in HSBC Overseas Holdings (UK) Limited was previously impaired. In 2022, part-reversals of these impairments resulted in transfers from retained earnings back to the merger reserve of $2,499m.

Consolidated statement of cash flows
	Half-year to¹
	30 Jun	30 Jun
	2023	2022
	$m	$m
Profit before tax	21,657	8,780
Adjustments for non-cash items:
Depreciation, amortisation and impairment	1,591	1,894
Net loss/(gain) from investing activities	(41)	173
Share of profits in associates and joint ventures	(1,583)	(1,449)
(Gain)/loss on disposal of subsidiaries, businesses, associates and joint ventures	(3,604)	(71)
Change in expected credit losses gross of recoveries and other credit impairment charges	1,482	1,242
Provisions including pensions	148	201
Share-based payment expense	228	177
Other non-cash items included in profit before tax	(1,661)	82
Elimination of exchange differences²	(6,558)	48,921
Change in operating assets	(52,745)	19,713
Change in operating liabilities	72,836	(35,752)
Dividends received from associates	124	60
Contributions paid to defined benefit plans	(87)	(102)
Tax paid	(1,664)	(1,264)
Net cash from operating activities	30,123	42,605
Purchase of financial investments	(298,182)	(265,427)
Proceeds from the sale and maturity of financial investments	263,838	247,517
Net cash flows from the purchase and sale of property, plant and equipment	(329)	(589)
Net cash flows from purchase/(disposal) of customer deposits and loan portfolios	-	(3,756)
Net investment in intangible assets	(1,123)	(1,240)
Net cash flow on (acquisition)/disposal of subsidiaries, businesses, associates and joint ventures³	1,228	(525)
Net cash from investing activities	(34,568)	(24,020)
Issue of ordinary share capital and other equity instruments	1,996	-
Cancellation of shares	(1,273)	(1,840)
Net sales/(purchases) of own shares for market-making and investment purposes	(823)	(443)
Net cash flow from change in stakes of subsidiaries	-	(197)
Redemption of preference shares and other equity instruments	(2,350)	(723)
Subordinated loan capital issued	2,744	2,659
Subordinated loan capital repaid	(1,044)	(11)
Dividends paid to shareholders of the parent company and non-controlling interests	(7,508)	(4,497)
Net cash from financing activities	(8,258)	(5,052)
Net increase in cash and cash equivalents	(12,703)	13,533
Cash and cash equivalents at the beginning of the period	521,671	574,032
Exchange differences in respect of cash and cash equivalents	8,565	(40,243)
Cash and cash equivalents at the end of the period⁴	517,533	547,322

Interest received was $46,817m (1H22: $20,957m), interest paid was $29,222m (1H22: $7,146m) and dividends received (excluding dividends received from associates, which are presented separately above) were $751m (1H22: $800m).

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2 Adjustments to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.

3 The 'Net cash flow on (acquisition)/disposal of subsidiaries, businesses, associates and joint ventures' includes $1.2bn of net cash inflow on acquisition of Silicon Valley Bank UK Limited in March 2023.

4 Includes $7.5bn (1H22: $1.7bn) of cash and cash equivalents classified as held for sale.

Notes on the interim condensed financial statements

Contents
115	1	Basis of preparation and material accounting policies	131138	11	Provisions
117	2	Net fee income	132	12	Contingent liabilities, contractual commitments and guarantees
117	3	Dividends	132	13	Legal proceedings and regulatory matters
118	4	Earnings per share	134	14	Transactions with related parties
118	5	Segmental analysis	135	15	Assets held for sale, liabilities of disposal groups held for sale and business acquisitions
121	6	Fair values of financial instruments carried at fair value	135	15
126	7	Fair values of financial instruments not carried at fair value	137	16	Effects of adoption of IFRS 17
127	8	Derivatives	140	17	Events after the balance sheet date
128	9	Financial investments	140	18	Interim Report 2023 and statutory accounts
128	10	Interests in associates and joint ventures

1	Basis of preparation and material accounting policies

(a) Compliance with International Financial Reporting Standards

Our interim condensed consolidated financial statements have been prepared on the basis of the policies set out in the 2022 annual financial statements, except for those relating to IFRS 17 'Insurance Contracts' and amendments to IAS 12 'Income Taxes' as set out below. They have also been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the UK, IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB'), IAS 34 'Interim Financial Reporting' as adopted by the EU, and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. Therefore, they include an explanation of events and transactions that are significant to an understanding of the changes in HSBC's financial position and performance since the end of 2022.

These financial statements should be read in conjunction with the Annual Report and Accounts 2022, which was prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements were also prepared in accordance with International Financial Reporting Standards ('IFRSs') as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee. These financial statements should be read in conjunction with the information about the application of IFRS 17 'Insurance Contracts' as set out below and the new policies for insurance contracts as described on pages 7 to 9 of our Report on Transition to IFRS 17 'Insurance Contracts' issued on 2 May 2023.

At 30 June 2023, there were no IFRSs effective for the half-year to 30 June 2023 affecting these financial statements that were not approved for adoption in the UK by the UK Endorsement Board. With the exception of amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules', which is expected to be endorsed by the EU in the second half of 2023, there was no difference between IFRSs adopted by the UK, IFRSs as adopted by the EU, and IFRSs issued by the IASB in terms of their application to HSBC.

Standards applied during the half-year to 30 June 2023

IFRS 17 'Insurance Contracts'

On 1 January 2023, the Group adopted the requirements of IFRS 17 'Insurance Contracts' retrospectively with comparatives restated from the transition date, 1 January 2022. At transition, the Group's total equity reduced by $10,459m.

On adoption of IFRS 17, balances based on IFRS 4, including the present value of in-force long-term insurance business ('PVIF') asset in relation to the upfront recognition of future profits of in-force insurance contracts, were derecognised. Insurance contract liabilities have been remeasured under IFRS 17 based on groups of insurance contracts, which include the fulfilment cash flows comprising the best estimate of the present value of the future cash flows (for example premiums and payouts for claims, benefits, and expenses), together with a risk adjustment for non-financial risk, as well as the contractual service margin ('CSM'). The CSM represents the unearned profits that will be released and systematically recognised in insurance revenue as services are provided over the expected coverage period.

In addition, the Group has made use of the option under the standard to re-designate certain eligible financial assets held to support insurance contract liabilities, which were predominantly measured at amortised cost, as financial assets measured at fair value through profit or loss, with comparatives restated from the transition date.

The key differences between IFRS 4 and IFRS 17 are summarised in the following table:


Balance sheet	- Insurance contract liabilities for non-linked life insurance contracts are calculated by local actuarial principles. Liabilities under unit-linked life insurance contracts are at least equivalent to the surrender or transfer value, by reference to the value of the relevant underlying funds or indices. Grouping requirements follow local regulations. - An intangible asset for the PVIF is recognised, representing the upfront recognition of future profits associated with in-force insurance contracts.	- Insurance contract liabilities are measured for groups of insurance contracts at current value, comprising the fulfilment cash flows and the CSM. - The fulfilment cash flows comprise the best estimate of the present value of the future cash flows, together with a risk adjustment for non-financial risk. - The CSM represents the unearned profit.
Profit emergence/ recognition	- The value of new business is reported as revenue on Day 1 as an increase in PVIF. - The impact of the majority of assumption changes is recognised immediately in the income statement. - Variances between actual and expected cash flows are recognised in the period they arise.	- The CSM is systematically recognised in revenue as services are provided over the expected coverage period of the group of contracts (i.e. no Day 1 profit). - Contracts are measured using the general measurement model ('GMM') or the variable fee approach ('VFA') model for insurance contracts with direct participation features upon meeting the eligibility criteria. Under the VFA model, the Group's share of the investment experience and assumption changes are absorbed by the CSM and released over time to profit or loss. For contracts measured under GMM, the Group's share of the investment volatility is recorded in profit or loss as it arises. - Losses from onerous contracts are recognised in the income statement immediately.
Investment return assumptions (discount rate)	- PVIF is calculated based on long-term investment return assumptions based on assets held. It therefore includes investment margins expected to be earned in future.	- Under the market consistent approach, expected future investment spreads are not included in the investment return assumption. Instead, the discount rate includes an illiquidity premium that reflects the nature of the associated insurance contract liabilities.
Expenses	- Total expenses to acquire and maintain the contract over its lifetime are included in the PVIF calculation. - Expenses are recognised across operating expenses and fee expense as incurred and the allowances for those costs released from the PVIF simultaneously.	- Projected lifetime expenses that are directly attributable costs are included in the insurance contract liabilities and recognised in the insurance service result. - Non-attributable costs are reported in operating expenses.

Transition

In applying IFRS 17 for insurance contracts retrospectively, the full retrospective approach ('FRA') has been used unless it has been impracticable. When the FRA is impracticable such as when there is a lack of sufficient and reliable data, an entity has an accounting policy choice to use either the modified retrospective approach ('MRA') or the fair value approach ('FVA'). The Group has applied the FRA for new business from 2018 at the earliest, subject to practicability, and the FVA for the majority of contracts for which the FRA is impracticable.

Under the FVA, the valuation of insurance liabilities on transition is based on the applicable requirements of IFRS 13 'Fair Value Measurement'. This requires consideration of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The CSM is calculated as the difference between what a market participant would demand for assuming the unexpired risk associated with insurance contracts, including required profit, and the fulfilment cash flows that are determined using IFRS 17 principles.

In determining the fair value, the Group considered the estimated profit margin that a market participant would demand in return for assuming the insurance liabilities with the consideration of the level of capital that a market participant would be required to hold, and the discount rate with an allowance for an illiquidity premium that takes into account the level of 'matching' between the Group's assets and related liabilities. These assumptions were set taking into account the assumptions that a hypothetical market participant operating in each local jurisdiction would consider.

Amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules'

On 23 May 2023, the IASB issued amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules', which became effective immediately and were approved for adoption by all members of the UK Endorsement Board on 19 July 2023. On 20 June 2023, legislation was substantively enacted in the UK to introduce the OECD's Pillar Two global minimum tax rules and a UK qualified domestic minimum top-up tax, with effect from 1 January 2024. The Group has applied the IAS 12 exception from recognising and disclosing information on associated deferred tax assets and liabilities. As noted above, the EU has not yet endorsed these IAS 12 amendments but is expected to do so in the second half of 2023.

There were no other new standards or amendments to standards that had an effect on these interim condensed financial statements.

(b) Use of estimates and judgements

Management believes that the critical accounting estimates and judgements applicable to the Group are those that relate to impairment of amortised cost and FVOCI debt financial assets, the valuation of financial instruments, deferred tax assets, provisions, interests in associates, impairment of goodwill and non-financial assets, post-employment benefit plans, and non-current assets and disposal groups held for sale.

There were no material changes in the current period to any of the critical accounting estimates and judgements disclosed in 2022, which are stated on pages 99 and 337 to 347 of the Annual Report and Accounts 2022.

There were no material changes in the composition of the Group in the half-year to 30 June 2023. For further details of future business acquisitions and disposals, see Note 15 'Assets held for sale, liabilities of disposal groups held for sale and business acquisitions'.

(d) Going concern

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include stressed scenarios, as well as considering potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.

(e) Accounting policies

The accounting policies that we applied for these interim condensed consolidated financial statements are consistent with those described on pages 335 to 348 of the Annual Report and Accounts 2022, as are the methods of computation, with the exception of those relating to IFRS 17 and amendments to IAS 12 as described above.

2	Net fee income

	Half-year to^1,2
	30 Jun	30 Jun
	2023	2022
	$m	$m
Net fee income by product
Funds under management	1,176	1,222
Cards	1,351	1,201
Credit facilities	798	790
Account services	765	720
Broking income	555	707
Unit trusts	386	408
Underwriting	345	257
Global custody	432	471
Remittances	405	394
Imports/exports	328	322
Insurance agency commission	159	162
Other	1,247	1,259
Fee income	7,947	7,913
Less: fee expense	(1,862)	(1,685)
Net fee income	6,085	6,228
Net fee income by global business
Wealth and Personal Banking	2,694	2,753
Commercial Banking	2,009	1,972
Global Banking and Markets	1,382	1,503

1 In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers' respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.

2 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

Dividends

On 1 August 2023, the Directors approved a second interim dividend for 2023 of $0.10 per ordinary share in respect of the financial year ending 31 December 2023. This distribution amounts to approximately $1.974bn and will be payable on 21 September 2023. No liability is recognised in the financial statements in respect of these dividends.

Dividends paid to shareholders of HSBC Holdings plc
	Half-year to
	30 Jun 2023		30 Jun 2022
	Per share	Total	Per share	Total
	$	$m	$	$m
Dividends paid on ordinary shares
In respect of previous year:
- second interim dividend	0.23	4,590	0.18	3,576
In respect of current year:
- first interim dividend	0.10	2,001	-	-
Total	0.33	6,591	0.18	3,576
Total coupons on capital securities classified as equity		542		626
Dividends to shareholders		7,133		4,202

4	Earnings per share

Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding, excluding own shares held. Diluted earnings per ordinary share is calculated by dividing the basic earnings, which require no adjustment for the effects of dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding, excluding own shares held, plus the weighted average number of ordinary shares that would be issued on conversion of dilutive potential ordinary shares.

Basic and diluted earnings per share
	Half-year to¹
	30 Jun 2023			30 Jun 2022
	Profit	Number of shares	Amount per share	Profit	Number of shares	Amount per share
	$m	(millions)	$	$m	(millions)	$
Basic²	16,966	19,693	0.86	7,966	19,954	0.40
Effect of dilutive potential ordinary shares		136			131
Diluted²	16,966	19,829	0.86	7,966	20,085	0.40

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

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

5	Segmental analysis

The Group Chief Executive, supported by the rest of the Group Executive Committee ('GEC'), is considered the Chief Operating Decision Maker ('CODM') for the purposes of identifying the Group's reportable segments. Global business results are assessed by the CODM on the basis of constant currency performance that removes the effects of currency translation from reported results. Therefore, we disclose these results on a constant currency basis as required by IFRSs. The income statement for the half-year to 30 June 2022 is converted at the average rate of exchange for 2023, and the balance sheets at 30 June 2022 and 31 December 2022 at the prevailing rates of exchange on 30 June 2023.

Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully attributed to global businesses. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.

Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm's length terms. The intra-Group elimination items for the global businesses are presented in Corporate Centre.

Resegmentation

In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers' respective needs, a portfolio of our Global Banking customers within our entities in Latin America was transferred from Global Banking and Markets to Commercial Banking for reporting purposes. Comparative data have been re-presented accordingly. Similar smaller transfers from Global Banking and Markets to Commercial Banking were also undertaken within our entities in Australia and Indonesia, where comparative data have not been re-presented.

Our global businesses

We provide a comprehensive range of banking and related financial services to our customers in our three global businesses. The products and services offered to customers are organised by these global businesses:

- Wealth and Personal Banking ('WPB') provides a full range of retail banking and wealth products to our customers from personal banking to ultra high net worth individuals. Typically, customer offerings include retail banking products, such as current and savings accounts, mortgages and personal loans, credit cards, debit cards and local and international payment services. We also provide wealth management services, including insurance and investment products, global asset management services, investment management and private wealth solutions for customers with more sophisticated and international requirements.

- Commercial Banking ('CMB') offers a broad range of products and services to serve the needs of our commercial customers, including small and medium-sized enterprises, mid-market enterprises and corporates. These include credit and lending, international trade and receivables finance, treasury management and liquidity solutions (payments and cash management and commercial cards), commercial insurance and investments. CMB also offers customers access to products and services offered by other global businesses, such as Global Banking and Markets, which include foreign exchange products, raising capital on debt and equity markets and advisory services.

- Global Banking and Markets ('GBM') provides tailored financial solutions to major government, corporate and institutional clients and private investors worldwide. The client-focused business lines deliver a full range of banking capabilities, including financing, advisory and transaction services, a markets business that provides services in credit, rates, foreign exchange, equities, money markets and securities services, and principal investment activities.

HSBC constant currency profit before tax and balance sheet data
	Half-year to 30 Jun 2023
	Wealth and Personal Banking	Commercial Banking³	Global Banking and Markets³	Corporate Centre	Total
	$m	$m	$m	$m	$m
Net operating income/(expense) before change in expected credit losses and other credit impairment charges²	16,200	12,216	8,501	(41)	36,876
- external	12,416	12,897	13,939	(2,376)	36,876
- inter-segment	3,784	(681)	(5,438)	2,335	-
- of which: net interest income/(expense)⁴	10,299	8,375	3,546	(3,956)	18,264
Change in expected credit losses and other credit impairment charges	(502)	(704)	(136)	(3)	(1,345)
Net operating income/(expense)	15,698	11,512	8,365	(44)	35,531
Total operating expenses	(7,141)	(3,572)	(4,785)	41	(15,457)
Operating profit/(loss)	8,557	7,940	3,580	(3)	20,074
Share of profit/(loss) in associates and joint ventures	35	(1)	-	1,549	1,583
Constant currency profit before tax	8,592	7,939	3,580	1,546	21,657
	%	%	%	%	%
Share of HSBC's constant currency profit before tax	39.7	36.7	16.5	7.1	100.0
Constant currency cost efficiency ratio	44.1	29.2	56.3	100.0	41.9
Constant currency balance sheet data	$m	$m	$m	$m	$m
Loans and advances to customers (net)	463,836	319,246	176,182	294	959,558
Interests in associates and joint ventures	555	24	107	28,860	29,546
Total external assets	900,370	654,474	1,342,110	144,522	3,041,476
Customer accounts	809,864	472,146	313,126	633	1,595,769

	Half-year to 30 Jun 2022¹
Net operating income/(expense) before change in expected credit losses and other credit impairment charges²	10,058	7,055	7,459	(925)	23,647
- external	9,665	7,199	8,357	(1,574)	23,647
- inter-segment	393	(144)	(898)	649	-
- of which: net interest income/(expense)⁴	6,493	4,817	2,009	(473)	12,846
Change in expected credit losses and other credit impairment charges	(584)	(278)	(210)	(2)	(1,074)
Net operating income/(expense)	9,474	6,777	7,249	(927)	22,573
Total operating expenses	(6,995)	(3,345)	(4,557)	(635)	(15,532)
Operating profit/(loss)	2,479	3,432	2,692	(1,562)	7,041
Share of profit in associates and joint ventures	8	-	-	1,355	1,363
Constant currency profit/(loss) before tax	2,487	3,432	2,692	(207)	8,404
	%	%	%	%	%
Share of HSBC's constant currency profit before tax	29.6	40.8	32.0	(2.4)	100.0
Constant currency cost efficiency ratio	69.5	47.4	61.1	(68.6)	65.7
Constant currency balance sheet data	$m	$m	$m	$m	$m
Loans and advances to customers (net)	482,962	354,273	200,082	557	1,037,874
Interests in associates and joint ventures	487	31	104	27,468	28,090
Total external assets	884,333	628,040	1,330,747	167,390	3,010,510
Customer accounts	846,974	491,115	332,473	589	1,671,151

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

3 In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers' respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.

4 Net interest expense recognised in the Corporate Centre includes $3.8bn (1H22: $0.4bn) of interest expense in relation to the internal cost to fund trading and fair value net assets; and the funding cost of foreign exchange swaps in our Markets Treasury function. During 2Q23 we implemented a consistent reporting approach across the 14 most material entities that contribute to our trading and fair value net assets, which resulted in an increase to the 1H23 associated funding costs reported through the intersegment elimination in Corporate Centre of approximately $0.4bn, recognised in 2Q23.

Reported external net operating income is attributed to countries and territories on the basis of the location of the branch responsible for reporting the results or advancing the funds:

	Half-year to¹
	30 Jun 2023	30 Jun 2022
	$m	$m
Reported external net operating income by country/territory²	36,876	24,545
- UK	6,762	6,547
- Hong Kong	10,325	6,471
- US	2,112	1,964
- France	4,107	950
- other countries/territories	13,570	8,613

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

Constant currency results reconciliation
	30 Jun 2023	30 Jun 2022¹
	Reported and constant currency	Constant currency	Currency translation	Reported
	$m	$m	$m	$m
Revenue²	36,876	23,647	(898)	24,545
ECL	(1,345)	(1,074)	13	(1,087)
Operating expenses	(15,457)	(15,532)	595	(16,127)
Share of profit in associates and joint ventures	1,583	1,363	(86)	1,449
Profit before tax	21,657	8,404	(376)	8,780

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

Constant currency balance sheet reconciliation
	At 30 Jun 2023	At 30 June 2022¹			At 31 Dec 2022¹
	Reported and constant currency	Constant currency	Currency translation	Reported	Constant currency	Currency translation	Reported
	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers (net)	959,558	1,037,874	10,853	1,027,021	936,613	13,052	923,561
Interests in associates and joint ventures	29,546	28,090	(1,356)	29,446	28,384	(870)	29,254
Total external assets	3,041,476	3,010,510	40,029	2,970,481	2,995,590	46,304	2,949,286
Customer accounts	1,595,769	1,671,151	19,850	1,651,301	1,592,396	22,093	1,570,303

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

Notable items
	Half-year to
	30 Jun 2023	30 Jun 2022
	$m	$m
Notable items
Revenue
Disposals, acquisitions and related costs^1,2	3,321	(288)
Fair value movements on financial instruments³	15	(371)
Restructuring and other related costs⁴	-	68
Operating expenses
Disposals, acquisitions and related costs	(118)	-
Restructuring and other related costs⁵	47	(1,040)

1 Includes the reversal of a $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.

2 Includes the provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.

3 Fair value movements on non-qualifying hedges in HSBC Holdings.

4 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.

5 In 2Q23, we recognised $47m of reversals relating to restructuring provisions recognised during 2022.

6	Fair values of financial instruments carried at fair value

The accounting policies, control framework and hierarchy used to determine fair values at 30 June 2023 are consistent with those applied for the Annual Report and Accounts 2022.

Financial instruments carried at fair value and bases of valuation
		Valuation techniques
	Quoted market price Level 1	Using observable inputs Level 2	With significant unobservable inputs Level 3	Total
Recurring fair value measurements	$m	$m	$m	$m
At 30 Jun 2023
Assets
Trading assets	177,730	73,585	4,072	255,387
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	25,199	60,724	18,380	104,303
Derivatives	2,434	268,389	1,772	272,595
Financial investments	198,345	75,332	3,006	276,683
Liabilities
Trading liabilities	55,039	25,738	451	81,228
Financial liabilities designated at fair value	1,210	128,259	10,149	139,618
Derivatives	2,856	264,389	2,315	269,560

At 31 Dec 2022¹
Assets
Trading assets	148,592	64,684	4,817	218,093
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	23,146	59,548	17,407	100,101
Derivatives	2,917	279,278	1,964	284,159
Financial investments	181,659	71,040	2,961	255,660
Liabilities
Trading liabilities	44,787	27,092	474	72,353
Financial liabilities designated at fair value	1,125	115,764	10,432	127,321
Derivatives	2,399	280,443	2,920	285,762

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

The table below provides the fair value levelling of assets held for sale and liabilities of disposal groups that have been classified as held for sale in accordance with IFRS 5. For further details, see Note 15.

Financial instruments carried at fair value and bases of valuation - assets and liabilities held for sale
		Valuation techniques
	Quoted market price Level 1	Using observable inputs Level 2	With significant unobservable inputs Level 3	Total
Recurring fair value measurements	$m	$m	$m	$m
At 30 Jun 2023
Assets
Trading assets	2,152	127	-	2,279
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	-	15	-	15
Derivatives	-	585	-	585
Financial investments	11,599	520	-	12,119
Liabilities
Trading liabilities	1,750	155	-	1,905
Financial liabilities designated at fair value	-	-	-	-
Derivatives	-	788	-	788

At 31 Dec 2022
Assets
Trading assets	2,932	244	-	3,176
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	-	14	47	61
Derivatives	-	866	-	866
Financial investments	11,184	-	-	11,184
Liabilities
Trading liabilities	2,572	182	-	2,754
Financial liabilities designated at fair value	-	3,523	-	3,523
Derivatives	-	813	-	813

Transfers between Level 1 and Level 2 fair values
	Assets				Liabilities
	Financial investments	Trading assets	Designated and otherwise mandatorily measured at fair value	Derivatives	Trading liabilities	Designated at fair value	Derivatives
	$m	$m	$m	$m	$m	$m	$m
At 30 Jun 2023
Transfers from Level 1 to Level 2	5,667	4,139	801	-	41	-	-
Transfers from Level 2 to Level 1	2,432	2,495	1,197	-	147	-	-

At 31 Dec 2022
Transfers from Level 1 to Level 2	4,721	5,284	2,565	-	113	-	-
Transfers from Level 2 to Level 1	8,208	5,964	3,340	-	233	-	-

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

Fair value adjustments

We adopt the use of fair value adjustments when we take into consideration additional factors not incorporated within the valuation model that would otherwise be considered by a market participant. We classify fair value adjustments as either 'risk-related' or 'model-related'. The majority of these adjustments relate to GBM. Movements in the level of fair value adjustments do not necessarily result in the recognition of profits or losses within the income statement. For example, as models are enhanced, fair value adjustments may no longer be required. Similarly, fair value adjustments will decrease when the related positions are unwound, but this may not result in profit or loss.

Global Banking and Markets fair value adjustments
	At 30 Jun 2023		At 31 Dec 2022
	GBM	Corporate Centre	GBM	Corporate Centre
	$m	$m	$m	$m
Type of adjustment
Risk-related	626	50	650	40
- bid-offer	400	-	426	-
- uncertainty	72	2	86	-
- credit valuation adjustment	195	45	245	35
- debit valuation adjustment	(103)	-	(175)	-
- funding fair value adjustment	62	3	68	5
- other	-	-	-	-
Model-related	74	-	61	-
- model limitation	74	-	61	-
- other	-	-	-	-
Inception profit (Day 1 P&L reserves)¹	84	-	97	-
Total	784	50	808	40

1 See Note 9 on the interim condensed financial statements on page 128.

The reduction in fair value adjustments was predominantly driven by changes to exposure, and tightening of credit and liquidity market spreads, with the reduction in the debit valuation adjustment including a consideration of the overlap with the funding fair value adjustment.

Fair value valuation bases

Financial instruments measured at fair value using a valuation technique with significant unobservable inputs - Level 3
	Assets					Liabilities
	Financial investments	Trading assets	Designated and otherwise mandatorily measured at fair value through profit or loss	Derivatives	Total	Trading liabilities	Designated at fair value	Derivatives	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m
Private equity including strategic investments	679	69	16,644	-	17,392	128	-	-	128
Asset-backed securities	371	376	-	-	747	-	-	-	-
Structured notes	-	-	3	-	3	-	10,149	-	10,149
Other derivatives	-	-	-	1,772	1,772	-	-	2,315	2,315
Other portfolios	1,956	3,627	1,733	-	7,316	323	-	-	323
At 30 Jun 2023	3,006	4,072	18,380	1,772	27,230	451	10,149	2,315	12,915

Private equity including strategic investments	647	19	15,653	-	16,319	92	-	-	92
Asset-backed securities	438	208	95	-	741	-	-	-	-
Structured notes	-	-	-	-	-	-	10,432	-	10,432
Other derivatives	-	-	-	1,964	1,964	-	-	2,920	2,920
Other portfolios	1,876	4,590	1,659	-	8,125	382	-	-	382
At 31 Dec 2022	2,961	4,817	17,407	1,964	27,149	474	10,432	2,920	13,826

The basis for determining the fair value of the financial instruments in the table above is explained on page 366 of the Annual Report and Accounts 2022.

Reconciliation of fair value measurements in Level 3 of the fair value hierarchy

Movement in Level 3 financial instruments
	Assets				Liabilities
	Financial investments	Trading assets	Designated and otherwise mandatorily measured at fair value through profit or loss	Derivatives	Trading liabilities	Designated at fair value	Derivatives
	$m	$m	$m	$m	$m	$m	$m
At 1 Jan 2023	2,961	4,817	17,407	1,964	474	10,432	2,920
Total gains or losses recognised in profit or loss	(15)	65	706	237	25	60	478
- net income or losses from financial instruments held for trading or managed on a fair value basis	-	65	-	237	25	-	478
- changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	-	-	706	-	-	60	-
- gains less losses from financial investments held at fair value through other comprehensive income	(15)	-	-	-	-	-	-
Total gains or losses recognised in other comprehensive income ('OCI')	138	92	11	75	21	323	98
- financial investments: fair value gains or losses	83	-	-	-	-	234	-
- exchange differences	55	92	11	75	21	89	98
Purchases	215	761	1,660	-	115	-	-
New issuances	-	-	-	-	2	2,313	-
Sales	(122)	(1,353)	(303)	-	(181)	(2)	-
Settlements	(202)	(487)	(963)	(517)	(9)	(1,479)	(1,164)
Transfers out	(108)	(377)	(140)	(85)	(32)	(1,821)	(138)
Transfers in	139	554	2	98	36	323	121
At 30 Jun 2023	3,006	4,072	18,380	1,772	451	10,149	2,315
Unrealised gains or losses recognised in profit or loss relating to assets and liabilities held at 30 Jun 2023	-	(58)	232	734	(4)	(189)	(560)
- net income or losses from financial instruments held for trading or managed on a fair value basis	-	(58)	-	734	(4)	-	(560)
- changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	-	-	232	-	-	(189)	-

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

Effect of changes in significant unobservable assumptions to reasonably possible alternatives

The following table shows the sensitivity of Level 3 fair values to reasonably possible alternative assumptions:

Sensitivity of fair values to reasonably possible alternative assumptions
	Reflected in profit or loss		Reflected in OCI
	Favourable changes	Unfavourable changes	Favourable changes	Unfavourable changes
	$m	$m	$m	$m
Derivatives, trading assets and trading liabilities¹	332	(434)	-	-
Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss	1,009	(1,009)	-	-
Financial investments	10	(10)	61	(63)
At 30 Jun 2023	1,351	(1,453)	61	(63)

Derivatives, trading assets and trading liabilities¹	172	(179)	-	-
Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss	1,049	(1,047)	-	-
Financial investments	12	(6)	140	(141)
At 30 Jun 2022	1,233	(1,232)	140	(141)

Derivatives, trading assets and trading liabilities¹	264	(291)	-	-
Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss	981	(978)	-	-
Financial investments	11	(11)	65	(55)
At 31 Dec 2022	1,256	(1,280)	65	(55)

1 'Derivatives, trading assets and trading liabilities' is presented as one category to reflect the manner in which these financial instruments are risk-managed.

The sensitivity analysis aims to measure a range of fair values consistent with the application of a 95% confidence interval. Methodologies take account of the nature of the valuation technique employed, as well as the availability and reliability of observable proxy and historical data.

When the fair value of a financial instrument is affected by more than one unobservable assumption, the table above reflects the most favourable or the most unfavourable change from varying the assumptions individually.

Key unobservable inputs to Level 3 financial instruments

The following table lists key unobservable inputs to Level 3 financial instruments and provides the range of those inputs at 30 June 2023. There has been no change to the key unobservable inputs to Level 3 financial instruments and inter-relationships therein, which are detailed on pages 368 and 369 of the Annual Report and Accounts 2022.

Quantitative information about significant unobservable inputs in Level 3 valuations
	Fair value		Valuation techniques	Key unobservable inputs	30 Jun 2023		31 Dec 2022
	Assets	Liabilities			Full range of inputs		Full range of inputs
	$m	$m			Lower	Higher	Lower	Higher
Private equity including strategic investments	17,392	128	See footnote 1	See footnote 1
Asset-backed securities ('ABS')	747	-
- collateralised loan/debt obligation	76	-
- collateralised loan/debt obligation	76	-	Market proxy	Bid quotes	-	89	-	92
- other ABSs	671	-	Market proxy	Bid quotes	-	98	-	99
Structured notes	3	10,149
- equity-linked notes	3	6,281	Model - Option model	Equity volatility	6%	95%	6%	142%
- equity-linked notes	3	6,281	Model - Option model	Equity correlation	22%	99%	32%	99%
- Foreign exchange ('FX')-linked notes	-	2,778	Model - Option model	FX volatility	2%	36%	3%	37%
- other²	-	1,090
Other derivatives	1,772	2,315
- interest rate derivatives	511	718
securitisation swaps	114	160	Model - Discounted cash flow	Prepayment rate	5%	10%	5%	10%
long-dated swaptions	64	75	Model - Option model	Interest rate volatility	9%	34%	8%	53%
other²	333	483
- FX derivatives	308	388
FX options	271	318	Model - Option model	FX volatility	2%	44%	1%	46%
other²	37	70
- equity derivatives	737	941
long-dated single stock options	520	713	Model - Option model	Equity volatility	7%	77%	7%	153%
other²	217	228
- credit derivatives	216	268
other²	216	268
Other portfolios	7,316	323
- repurchase agreements	763	295	Model - Discounted cash flow	Interest rate curve	0%	10%	1%	9%
- other²	6,553	28
At 30 Jun 2023	27,230	12,915

1 Given the bespoke nature of the analysis in respect of each private equity holding, it is not practical to quote a range of key unobservable inputs.

2 'Other' includes a range of smaller holdings with multiple inputs.

7	Fair values of financial instruments not carried at fair value

The bases for measuring the fair values of loans and advances to banks and customers, financial investments, deposits by banks, customer accounts, debt securities in issue, subordinated liabilities and non-trading repurchase and reverse repurchase agreements are explained on pages 370 and 371 of the Annual Report and Accounts 2022.

Fair values of financial instruments not carried at fair value on the balance sheet
	At 30 Jun 2023		At 31 Dec 2022¹
	Carrying amount	Fair value	Carrying amount	Fair value
	$m	$m	$m	$m
Assets
Loans and advances to banks	100,921	100,939	104,475	104,459
Loans and advances to customers	959,558	944,187	923,561	911,898
Reverse repurchase agreements - non-trading	258,056	258,050	253,754	253,668
Financial investments - at amortised cost	131,250	127,779	109,066	106,412
Liabilities
Deposits by banks	68,709	68,733	66,722	66,831
Customer accounts	1,595,769	1,595,379	1,570,303	1,570,209
Repurchase agreements - non-trading	170,110	170,123	127,747	127,500
Debt securities in issue	85,471	84,966	78,149	77,021
Subordinated liabilities	23,286	24,784	22,290	22,723

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

Fair values of financial instruments not carried at fair value on the balance sheet - assets and disposal groups held for sale
	At 30 Jun 2023		At 31 Dec 2022
	Carrying amount	Fair value	Carrying amount	Fair value
	$m	$m	$m	$m
Assets
Loans and advances to banks	1,149	1,151	253	257
Loans and advances to customers	59,869	59,126	80,687	78,159
Reverse repurchase agreements - non-trading	3,379	3,379	4,646	4,646
Financial investments - at amortised cost	6,744	6,577	6,165	6,042
Liabilities
Deposits by banks	253	253	64	64
Customer accounts	66,154	66,543	85,274	85,303
Repurchase agreements - non-trading	2,615	2,615	3,266	3,266
Debt securities in issue	9,127	8,794	12,928	12,575
Subordinated liabilities	8	7	8	7

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

8	Derivatives

Notional contract amounts and fair values of derivatives by product contract type held by HSBC
	Notional contract amount		Fair value amount
	Assets and liabilities		Assets			Liabilities
	Trading	Hedging	Trading	Hedging	Total	Trading	Hedging	Total
	$m	$m	$m	$m	$m	$m	$m	$m
Foreign exchange	9,257,418	55,396	104,136	1,211	105,347	96,805	184	96,989
Interest rate	15,641,544	344,757	297,598	5,297	302,895	302,192	4,546	306,738
Equities	697,994	-	15,580	-	15,580	17,563	-	17,563
Credit	162,699	-	1,466	-	1,466	1,614	-	1,614
Commodity and other	85,366	-	1,976	-	1,976	1,325	-	1,325
Gross total fair values	25,845,021	400,153	420,756	6,508	427,264	419,499	4,730	424,229
Offset					(154,669)			(154,669)
At 30 Jun 2023	25,845,021	400,153	420,756	6,508	272,595	419,499	4,730	269,560

Foreign exchange	8,434,453	38,924	122,206	525	122,731	123,088	166	123,254
Interest rate	15,213,232	276,589	285,449	5,066	290,515	287,876	3,501	291,377
Equities	570,410	-	9,325	-	9,325	9,176	-	9,176
Credit	183,995	-	1,091	-	1,091	1,264	-	1,264
Commodity and other	78,414	-	1,484	-	1,484	1,678	-	1,678
Gross total fair values	24,480,504	315,513	419,555	5,591	425,146	423,082	3,667	426,749
Offset					(140,987)			(140,987)
At 31 Dec 2022¹	24,480,504	315,513	419,555	5,591	284,159	423,082	3,667	285,762

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

The notional contract amounts of derivatives held for trading purposes and derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk. Derivative assets and liabilities decreased during 1H23, reflecting changes in yield curves and the market environment.

Derivatives valued using models with unobservable inputs

The following table shows the difference between the fair value at initial recognition, which is the transaction price, and the value that would have been derived had valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases.

Unamortised balance of derivatives valued using models with significant unobservable inputs
	Half-year to
	30 Jun	30 Jun
	2023	2022
	$m	$m
Unamortised balance at beginning of period	97	106
Deferral on new transactions	84	100
Recognised in the income statement during the period	(100)	(99)
- amortisation	(53)	(61)
- subsequent to unobservable inputs becoming observable	(10)	-
- maturity, termination or offsetting derivative	(37)	(38)
Exchange differences	3	(8)
Unamortised balance at end of period¹	84	99

1 This amount is yet to be recognised in the consolidated income statement.

Hedge accounting derivatives

The notional contract amounts of derivatives held for hedge accounting purposes indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk.

Notional contract amounts of derivatives held for hedging purposes by product type
	At 30 Jun 2023		At 31 Dec 2022
	Cash flow hedges	Fair value hedges	Cash flow hedges	Fair value hedges
	$m	$m	$m	$m
Foreign exchange	20,927	-	8,781	-
Interest rate	166,589	178,168	114,527	162,062
Total	187,516	178,168	123,308	162,062

The Group applies hedge accounting in respect of certain consolidated net investments. Hedging is undertaken using forward foreign exchange contracts or by financing with foreign currency borrowings. At 30 June 2023, the notional contract values of outstanding financial instruments designated as hedges of net investments in foreign operations were $34,469m (31 December 2022: $30,143m).

Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39 'Financial Instruments'

HSBC has applied both the first set of amendments ('Phase 1') and the second set of amendments ('Phase 2') to IFRS 9 and IAS 39 applicable to hedge accounting. The items in hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the balance sheet as 'Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income', 'Loans and advances to customers', 'Debt securities in issue' and 'Deposits by banks'. The notional value of the derivatives impacted by the Ibor reform, including those designated in hedge accounting relationships, is disclosed on page 63 in the section 'Financial instruments impacted by Ibor reform'. For further details on Ibor transition, see 'Ibor transition' under 'Areas of special interest' on page 62.

During 2023, the Group transitioned all of its hedging instruments referencing US dollar Libor. This transition did not necessitate any new approaches compared with the mechanisms used so far for transition, and it will not be necessary to change the transition risk management strategy.

For some of the Ibors included under the 'Other' header in the table below, judgement has been needed to establish whether a transition is required. This is because there are Ibor benchmarks subject to computation improvements and insertion of fallback provisions where their administrators have yet to provide full clarity on whether or when these Ibor benchmarks will be demised.

The notional amounts of interest rate derivatives designated in hedge accounting relationships do not represent the extent of the risk exposure managed by the Group but they are expected to be directly affected by market-wide Ibor reform and in scope of Phase 1 amendments and are shown in the table below. The cross-currency swaps designated in hedge accounting relationships and affected by Ibor reform are not significant and have not been presented below:

Hedging instrument impacted by Ibor reform
	Hedging instrument
	Impacted by Ibor reform				Not impacted by Ibor reform	Notional amount³
	€¹	$	Other²	Total	Not impacted by Ibor reform	Notional amount³
	$m	$m	$m	$m	$m	$m
Fair value hedges	18,019	-	11,804	29,823	148,345	178,168
Cash flow hedges	11,157	-	30,469	41,626	124,963	166,589
At 30 Jun 2023	29,176	-	42,273	71,449	273,308	344,757

Fair value hedges	12,756	2,015	12,643	27,414	134,648	162,062
Cash flow hedges	8,865	-	27,830	36,695	77,832	114,527
At 31 Dec 2022	21,621	2,015	40,473	64,109	212,480	276,589

1 The notional contract amounts of euro interest rate derivatives impacted by Ibor reform mainly comprise hedges with a Euribor benchmark, which are 'Fair value hedges' of $18,019m (31 December 2022: $12,756m) and 'Cash flow hedges' of $11,157m (31 December 2022: $8,865m).

2 Other benchmarks impacted by Ibor reform comprise mainly of Canadian dollar offered rate ('CDOR'), Hong Kong interbank offered rate ('HIBOR') and Mexican interbank equilibrium interest rate ('TIIE')-related derivatives.

3 The notional contract amounts of interest rate derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date. They do not represent amounts at risk.

9	Financial investments

Carrying amounts of financial investments
	30 Jun	31 Dec¹
	2023	2022
	$m	$m
Financial investments measured at fair value through other comprehensive income	276,683	255,660
- treasury and other eligible bills	102,704	86,749
- debt securities	172,280	167,107
- equity securities	1,606	1,696
- other instruments	93	108
Debt instruments measured at amortised cost	131,250	109,066
- treasury and other eligible bills	30,627	34,507
- debt securities	100,623	74,559
At the end of the period	407,933	364,726

1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

10	Interests in associates and joint ventures

At 30 June 2023, the carrying amount of HSBC's interests in associates and joint ventures was $29,546m (31 December 2022: $29,254m).

Principal associates of HSBC
	At 30 Jun 2023		At 31 Dec 2022
	Carrying amount	Fair value¹	Carrying amount	Fair value¹
	$m	$m	$m	$m
Bank of Communications Co., Limited	23,344	9,363	23,307	8,141
Saudi Awwal Bank	4,704	6,479	4,494	6,602

1 Principal associates are listed on recognised stock exchanges. The fair values are based on the quoted market prices of the shares held (Level 1 in the fair value hierarchy).

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

Bank of Communications Co., Limited

The Group's investment in Bank of Communications Co., Limited ('BoCom') is classified as an associate. Significant influence in BoCom was established with consideration of all relevant factors, including representation on BoCom's Board of Directors and participation in a resource and experience sharing agreement ('RES'). Under the RES, HSBC staff have been seconded to assist in the maintenance of BoCom's financial and operating policies. Investments in associates are recognised using the equity method of accounting in accordance with IAS 28 'Investments in Associates and Joint Ventures', whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Group's share of BoCom's net assets. An impairment test is required if there is any indication of impairment.

Impairment testing

At 30 June 2023, the fair value of the Group's investment in BoCom had been below the carrying amount for approximately 11 years. As a result, the Group performed an impairment test on the carrying amount, which confirmed that there was no impairment at 30 June 2023 as the recoverable amount as determined by a value-in-use ('VIU') calculation was higher than the carrying value.

	At 30 Jun 2023			At 31 Dec 2022
	VIU	Carrying value	Fair value	VIU	Carrying value	Fair value
	$bn	$bn	$bn	$bn	$bn	$bn
BoCom	23.9	23.3	9.4	23.5	23.3	8.1

The headroom, which is defined as the extent to which the VIU exceeds the carrying value, increased by $0.4bn compared with 31 December 2022. The increase in headroom was principally due to the movement in the discount rate which was market driven, partly offset by revisions to management's best estimates of BoCom's future earnings in the short to medium term.

In future periods, the VIU may increase or decrease depending on the effect of changes to model inputs. The main model inputs are described below and are based on factors observed at the period-end. The factors that could result in a change in the VIU and an impairment include a short-term underperformance by BoCom, a change in regulatory capital requirements, or an increase in uncertainty regarding the future performance of BoCom resulting in a downgrade of the forecast of future asset growth or profitability. An increase in the discount rate could also result in a reduction of VIU and an impairment.

If the Group did not have significant influence in BoCom, the investment would be carried at fair value rather than the current carrying value.

Basis of recoverable amount

The impairment test was performed by comparing the recoverable amount of BoCom, determined by a VIU calculation, with its carrying amount. The VIU calculation uses discounted cash flow projections based on management's best estimates of future earnings available to ordinary shareholders prepared in accordance with IAS 36 'Impairment of Assets'. Significant management judgement is required in arriving at the best estimate.

There are two main components to the VIU calculation. The first component is management's best estimate of BoCom's earnings. Forecast earnings growth over the short to medium term are lower than recent (within the last five years) historical actual growth and reflect the uncertainty arising from the current economic outlook. Reflecting management's intent to continue to retain its investment, earnings beyond the short to medium term are then extrapolated into perpetuity using a long-term growth rate to derive a terminal value, which comprises the majority of the VIU. The second component is the capital maintenance charge ('CMC'), which is management's forecast of the earnings that need to be withheld in order for BoCom to meet capital requirements over the forecast period, meaning that CMC is deducted when arriving at management's estimate of future earnings available to ordinary shareholders. The principal inputs to the CMC calculation include estimates of asset growth, the ratio of risk-weighted assets to total assets and the expected capital requirements. An increase in the CMC as a result of a change to these principal inputs would reduce VIU. Additionally, management considers other qualitative factors, to ensure that the inputs to the VIU calculation remain appropriate.

Key assumptions in value-in-use calculation

We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:

- Long-term profit growth rate: 3% (31 December 2022: 3%) for periods after 2026, which does not exceed forecast GDP growth in mainland China and is similar to forecasts by external analysts.

- Long-term asset growth rate: 3% (31 December 2022: 3%) for periods after 2026, which is the rate that assets are expected to grow to achieve long-term profit growth of 3%.

- Discount rate: 9.80% (31 December 2022: 10.04%), which is based on a capital asset pricing model ('CAPM'), using market data. The discount rate used is within the range of 8.0% to 9.8% (31 December 2022: 8.4% to 10.4%) indicated by the CAPM, and decreased as a consequence of a market driven reduction in beta. While the CAPM range sits at the lower end of the range adopted by selected external analysts of 8.8% to 13.5% (31 December 2022: 8.8%% to 13.5%), we continue to regard the CAPM range as the most appropriate basis for determining this assumption.

- Expected credit losses ('ECL') as a percentage of customer advances: ranges from 0.87% to 0.94% (31 December 2022: 0.99% to 1.05%) in the short to medium term, reflecting reported credit experience through the recovery from the Covid-19 pandemic in mainland China. For periods after 2026, the ratio is 0.97% (31 December 2022: 0.97%), which is higher than BoCom's average ECL as a percentage of customer advances in recent years prior to the pandemic.

- Risk-weighted assets as a percentage of total assets: ranges from 61.0% to 63.7% (31 December 2022: 61.0% to 64.4%) in the short to medium term, reflecting higher risk-weights in the short term followed by an expected reversion to recent historical levels. For periods after 2026, the ratio is 61.0% (31 December 2022: 61.0%), which is similar to BoCom's actual results in recent years.

- Operating income growth rate: ranges from 1.7% to 9.4% (31 December 2022: 1.9% to 7.7%) in the short to medium term, which is similar to BoCom's actual results in recent years, and is heavily influenced by projections of net interest income in future periods. This reflects BoCom's most recent actual results, global trade tensions and industry developments in mainland China.

- Cost-income ratio: ranges from 35.5% to 36.8% (31 December 2022: 35.5% to 36.3%) in the short to medium term. These ratios are similar to BoCom's actual results in recent years and forecasts disclosed by external analysts.

- Effective tax rate: ranges from 5.3% to 15.0% (31 December 2022: 4.4% to 15.0%) in the short to medium term, reflecting BoCom's actual results and an expected increase towards the long-term assumption through the forecast period. For periods after 2026, the rate is 15.0% (31 December 2022: 15.0%), which is higher than the recent historical average, and aligned to the minimum tax rate as proposed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

- Capital requirements: capital adequacy ratio of 12.5% (31 December 2022: 12.5%) and tier 1 capital adequacy ratio of 9.5% (31 December 2022: 9.5%), based on BoCom's capital risk appetite and capital requirements respectively.

The following table shows the change to each key assumption in the VIU calculation that on its own would reduce the headroom to nil:

Key assumption	Changes to key assumption to reduce headroom to nil
- Long-term profit growth rate	Decrease by 13 basis points
- Long-term asset growth rate	Increase by 11 basis points
- Discount rate	Increase by 17 basis points
- Expected credit losses as a percentage of customer advances	Increase by 2 basis points
- Risk-weighted assets as a percentage of total assets	Increase by 90 basis points
- Operating income growth rate	Decrease by 24 basis points
- Cost-income ratio	Increase by 53 basis points
- Long-term effective tax rate	Increase by 153 basis points
- Capital requirements - capital adequacy ratio	Increase by 18 basis points
- Capital requirements - tier 1 capital adequacy ratio	Increase by 162 basis points

The following table further illustrates the impact on VIU of reasonably possible changes to key assumptions. This reflects the sensitivity of the VIU to each key assumption on its own and it is possible that more than one favourable and/or unfavourable change may occur at the same time. The selected rates of reasonably possible changes to key assumptions are based on external analysts' forecasts, statutory requirements and other relevant external data sources, which can change period to period.

Sensitivity of VIU to reasonably possible changes in key assumptions
	Favourable change			Unfavourable change
		Increase in VIU	VIU		Decrease in VIU	VIU
	bps	$bn	$bn	bps	$bn	$bn
At 30 Jun 2023
Long-term profit growth rate¹	62	3.1	27.0	(72)	(3.0)	20.9
Long-term asset growth rate¹	(72)	3.4	27.3	62	(3.6)	20.3
Discount rate	(180)	8.2	32.1	210	(5.3)	18.6
Expected credit losses as a percentage of customer advances	2023 to 2026: 83 2027 onwards: 91	2.0	25.9	2023 to 2026: 120 2027 onwards: 104	(3.6)	20.3
Risk-weighted assets as a percentage of total assets	(77)	0.1	24.0	280	(2.2)	21.7
Operating income growth rate	56	1.4	25.3	(116)	(2.9)	21.0
Cost-income ratio	(131)	0.9	24.8	164	(2.3)	21.6
Long-term effective tax rate	(426)	1.6	25.5	1,000	(3.7)	20.2
Capital requirements - capital adequacy ratio	-	-	23.9	229	(7.8)	16.1
Capital requirements - tier 1 capital adequacy ratio	-	-	23.9	257	(3.9)	20.0

At 31 Dec 2022
Long-term profit growth rate¹	75	3.6	27.1	(71)	(2.7)	20.8
Long-term asset growth rate¹	(71)	3.1	26.6	75	(4.1)	19.4
Discount rate	(164)	6.9	30.4	136	(3.7)	19.8
Expected credit losses as a percentage of customer advances	2022 to 2026: 95 2027 onwards: 91	1.9	25.4	2022 to 2026: 120 2027 onwards: 104	(2.9)	20.6
Risk-weighted assets as a percentage of total assets	(118)	0.1	23.6	239	(2.3)	21.2
Operating income growth rate	44	1.3	24.8	(83)	(2.5)	21.0
Cost-income ratio	(122)	1.0	24.5	174	(2.1)	21.4
Long-term effective tax rate	(426)	1.5	25.0	1,000	(3.6)	19.9
Capital requirements - capital adequacy ratio	-	-	23.5	191	(6.3)	17.2
Capital requirements - tier 1 capital adequacy ratio	-	-	23.5	266	(3.2)	20.3

1 The reasonably possible ranges of the long-term profit growth rate and long-term asset growth rate assumptions reflect the close relationship between these assumptions, which would result in offsetting changes to each assumption.

Considering the interrelationship of the changes set out in the table above, management estimates that the reasonably possible range of VIU is $16.2bn to $29.3bn (31 December 2022: $16.9bn to $28.7bn). The range is based on impacts set out in the table above arising from the favourable/unfavourable change in the earnings in the short to medium term, the long-term expected credit losses as a percentage of customer advances and a 50bps increase/decrease in the discount rate. All other long-term assumptions, and the basis of the CMC have been kept unchanged when determining the reasonably possible range of the VIU. Impairment, if determined, would be recognised in the income statement. The impact on the Group's CET1 ratio is expected to be minimal in the event of an impairment, as the adverse impact on CET1 capital from the impairment would be offset by the favourable impact from a lower carrying value.

Saudi Awwal Bank

The Group's investment in Saudi Awwal Bank ('SAB') is classified as an associate. HSBC is the largest shareholder in SAB with a shareholding of 31%. Significant influence in SAB is established via representation on the Board of Directors. Investments in associates are recognised using the equity method of accounting in accordance with IAS 28, as described previously for BoCom.

Impairment testing

There were no indicators of impairment at 30 June 2023. The fair value of the Group's investment in SAB of $6.5bn was above the carrying amount of $4.7bn.

11	Provisions

	Restructuring costs	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
	$m	$m	$m	$m	$m
Provisions (excluding contractual commitments)
At 31 Dec 2022	445	409	195	397	1,446
Additions	152	78	9	86	325
Amounts utilised	(147)	(171)	(35)	(34)	(387)
Unused amounts reversed	(45)	(19)	(34)	(49)	(147)
Exchange and other movements	23	(6)	8	6	31
At 30 Jun 2023	428	291	143	406	1,268
Contractual commitments¹
At 31 Dec 2022					512
Net change in expected credit loss provision and other movements					(58)
At 30 Jun 2023					454
Total provisions
At 31 Dec 2022					1,958
At 30 Jun 2023					1,722

1 Contractual commitments include the expected credit loss provision in relation to off-balance sheet financial guarantee contracts and commitments where HSBC has become party to an irrevocable commitment, as defined under IFRS 9 'Financial Instruments'; and provisions for performance and other guarantee contracts.

Further details of 'Legal proceedings and regulatory matters' are set out in Note 13. Legal proceedings include civil court, arbitration or tribunal proceedings brought against HSBC companies (whether by way of claim or counterclaim); or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings. 'Regulatory matters' refers to investigations, reviews and other actions carried out by, or in response to, the actions of regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC.

Customer remediation refers to HSBC's activities to compensate customers for losses or damages associated with a failure to comply with regulations or to treat customers fairly. Customer remediation is often initiated by HSBC in response to customer complaints and/or industry developments in sales practices, and is not necessarily initiated by regulatory action.

For further details of the impact of IFRS 9 on undrawn loan commitments and financial guarantees, presented in 'Contractual commitments', see Note 12. Further analysis of the movement in the expected credit loss provision is disclosed within the 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' table on page 78.

Brazil PIS and COFINS tax matters

Beginning in the late 1990s, HSBC Bank Brasil S.A. - Banco Múltiplo ('HSBC Brazil') and other financial services firms brought legal proceedings in Brazil challenging the assessment of PIS and COFINS taxes, which are federal taxes imposed on gross revenues earned by legal entities in Brazil. The Supreme Court of Brazil selected three cases - one involving an insurer, in 2007, and two involving other banks, in 2011 - to set standards that would apply to all of these proceedings. In June 2023, the court ruled against the financial services firms in all three cases. The standards set by the court in this ruling have not yet been applied to HSBC Brazil's legacy cases, liability for which remained with HSBC after the sale of HSBC's operations in Brazil to Bradesco in 2016. There are many factors that may affect the range of outcomes and any resulting financial impact for HSBC. Based upon the information currently available, a provision was recognised in respect of one legacy case. The remaining additional tax liability subject to challenge on all legacy PIS and COFINS cases is up to $0.4bn.

12	Contingent liabilities, contractual commitments and guarantees

	At
	30 Jun	31 Dec
	2023	2022
	$m	$m
Guarantees and other contingent liabilities:
- financial guarantees	18,882	18,783
- performance and other guarantees	89,758	88,240
- other contingent liabilities	590	676
At the end of the period	109,230	107,699
Commitments:¹
- documentary credits and short-term trade-related transactions	7,698	8,241
- forward asset purchases and forward deposits placed	72,340	50,852
- standby facilities, credit lines and other commitments to lend	793,256	768,761
At the end of the period	873,294	827,854

1 Includes $649,526m of commitments at 30 June 2023 (31 December 2022: $618,788m), to which the impairment requirements in IFRS 9 are applied where HSBC has become party to an irrevocable commitment.

The preceding table discloses the nominal principal amounts of off-balance sheet liabilities and commitments for the Group, which represent the maximum amounts at risk should the contracts be fully drawn upon and the clients default. As a significant portion of guarantees and commitments are expected to expire without being drawn upon, the total of the nominal principal amounts is not indicative of future liquidity requirements. The expected credit loss provision relating to guarantees and commitments under IFRS 9 is disclosed in Note 11. The majority of the guarantees have a term of less than one year, while guarantees with terms of more than one year are subject to HSBC's annual credit review process.

Contingent liabilities arising from legal proceedings and regulatory and other matters against Group companies are excluded from this note but are disclosed in Note 13.

13	Legal proceedings and regulatory matters

HSBC is party to legal proceedings and regulatory matters in a number of jurisdictions arising out of its normal business operations. Apart from the matters described below, HSBC considers that none of these matters are material. The recognition of provisions is determined in accordance with the accounting policies set out in Note 1 of the Annual Report and Accounts 2022. While the outcomes of legal proceedings and regulatory matters are inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of these matters as at 30 June 2023 (see Note 11). Where an individual provision is material, the fact that a provision has been made is stated and quantified, except to the extent that doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities.

Bernard L. Madoff Investment Securities LLC

Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US whose assets were invested with Bernard L. Madoff Investment Securities LLC ('Madoff Securities'). Based on information provided by Madoff Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4bn, including fictitious profits reported by Madoff. Based on information available to HSBC, the funds' actual transfers to Madoff Securities minus their actual withdrawals from Madoff Securities during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities' fraud.

US litigation: The Madoff Securities Trustee has brought lawsuits against various HSBC companies and others, seeking recovery of transfers from Madoff Securities to HSBC in an amount not specified, and these lawsuits remain pending in the US Bankruptcy Court for the Southern District of New York (the 'US Bankruptcy Court').

Certain Fairfield entities (together, 'Fairfield') (in liquidation since July 2009) have brought a lawsuit in the US against fund shareholders, including HSBC companies that acted as nominees for clients, seeking restitution of redemption payments. In August 2022, the US District Court for the Southern District of New York affirmed earlier decisions by the US Bankruptcy Court that dismissed the majority of the liquidators' claims (against most of the HSBC companies). In September 2022, the remaining defendants before the US Bankruptcy Court sought leave to appeal and the liquidators filed appeals to the US Court of Appeals for the Second Circuit, which are currently pending. Meanwhile, proceedings before the US Bankruptcy Court with respect to the remaining claims are ongoing.

UK litigation: The Madoff Securities Trustee has filed a claim against various HSBC companies in the High Court of England and Wales, seeking recovery of transfers from Madoff Securities to HSBC. The claim has not yet been served and the amount claimed has not been specified.

Cayman Islands litigation: In February 2013, Primeo Fund ('Primeo') (in liquidation since April 2009) brought an action against HSBC Securities Services Luxembourg ('HSSL') and Bank of Bermuda (Cayman) Limited (now known as HSBC Cayman Limited), alleging breach of contract and breach of fiduciary duty and claiming monetary damages. Following dismissal of Primeo's action by the lower and appellate courts in the Cayman Islands, in 2019, Primeo appealed to the UK Privy Council. During 2021, the UK Privy Council held two separate hearings in connection with Primeo's appeal. Judgment was given against HSBC in respect of the first hearing and judgment is pending in respect of the second hearing.

Luxembourg litigation: In April 2009, Herald Fund SPC ('Herald') (in liquidation since July 2013) brought an action against HSSL before the Luxembourg District Court, seeking restitution of cash and securities that Herald purportedly lost because of Madoff Securities' fraud, or money damages. The Luxembourg District Court dismissed Herald's securities restitution claim, but reserved Herald's cash restitution and money damages claims. Herald has appealed this judgment to the Luxembourg Court of Appeal, where the matter is pending. In late 2018, Herald brought additional claims against HSSL and HSBC Bank plc before the Luxembourg District Court, seeking further restitution and damages.

In October 2009, Alpha Prime Fund Limited ('Alpha Prime') brought an action against HSSL before the Luxembourg District Court, seeking the restitution of securities, or the cash equivalent, or money damages. In December 2018, Alpha Prime brought additional claims seeking damages against various HSBC companies. These matters are currently pending before the Luxembourg District Court.

In December 2014, Senator Fund SPC ('Senator') brought an action against HSSL before the Luxembourg District Court, seeking restitution of securities, or the cash equivalent, or money damages. In April 2015, Senator commenced a separate action against the Luxembourg branch of HSBC Bank plc asserting identical claims. In December 2018, Senator brought additional claims against HSSL and HSBC Bank plc Luxembourg branch, seeking restitution of Senator's securities or money damages. These matters are currently pending before the Luxembourg District Court.

There are many factors that may affect the range of possible outcomes, and any resulting financial impact, of the various Madoff-related proceedings described above, including but not limited to the multiple jurisdictions in which the proceedings have been brought. Based upon the information currently available, management's estimate of the possible aggregate damages that might arise as a result of all claims in the various Madoff-related proceedings is around $600m, excluding costs and interest. Due to uncertainties and limitations of this estimate, any possible damages that might ultimately arise could differ significantly from this amount.

Anti-money laundering and sanctions-related matters

Since November 2014, a number of lawsuits have been filed in federal courts in the US against various HSBC companies and others on behalf of plaintiffs who are, or are related to, victims of terrorist attacks in the Middle East. In each case, it is alleged that the defendants aided and abetted the unlawful conduct of various sanctioned parties in violation of the US Anti-Terrorism Act. Nine actions remain pending in federal courts and HSBC's motions to dismiss have been granted in five of these cases. In September 2022 and January 2023, respectively, the appellate courts affirmed the dismissals of two of the cases, and the plaintiffs are seeking review of these decisions by the US Supreme Court. The dismissals in the other cases are subject to appeal. The four remaining actions are at an early stage.

Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.

Interbank offered rates investigation and litigation

Euro interest rate derivatives: In December 2016, the European Commission ('EC') issued a decision finding that HSBC, among other banks, engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives, and the EC imposed a fine on HSBC based on a one-month infringement in 2007. The fine was annulled in 2019 and a lower fine was imposed in 2021. In January 2023, the European Court of Justice dismissed an appeal by HSBC and upheld the EC's findings on HSBC's liability. A separate appeal by HSBC concerning the amount of the fine remains pending before the General Court of the European Union.

US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of private lawsuits filed in federal and state courts in the US with respect to the setting of US dollar Libor. The complaints assert claims under various US federal and state laws, including antitrust and racketeering laws and the Commodity Exchange Act ('US CEA'). The lawsuits include individual and putative class actions, most of which have been transferred and/or consolidated for pre-trial purposes before the US District Court for the Southern District of New York. HSBC has reached class settlements with five groups of plaintiffs, and the court has approved these settlements. HSBC has also resolved several of the individual actions, although a number of other US dollar Libor-related actions remain pending.

Foreign exchange-related investigations and litigation

In December 2016, Brazil's Administrative Council of Economic Defense initiated an investigation into the onshore foreign exchange market and identified a number of banks, including HSBC, as subjects of its investigation, which remains ongoing.

In June 2020, the Competition Commission of South Africa, having initially referred a complaint for proceedings before the South African Competition Tribunal in February 2017, filed a revised complaint against 28 financial institutions, including HSBC Bank plc and HSBC Bank USA N.A. ('HSBC Bank USA'), for alleged anti-competitive behaviour in the South African foreign exchange market. In March 2023, HSBC Bank plc's and HSBC Bank USA's applications to dismiss the revised complaint were denied and, in April 2023, HSBC Bank plc and HSBC Bank USA appealed the decision to the South African Competition Appeal Court.

Beginning in 2013, various HSBC companies and other banks have been named as defendants in a number of putative class actions filed in, or transferred to, the US District Court for the Southern District of New York arising from allegations that the defendants conspired to manipulate foreign exchange rates. HSBC has reached class settlements with two groups of plaintiffs, including direct and indirect purchasers of foreign exchange products, and the court has granted final approval of these settlements. A putative class action by a group of retail customers of foreign exchange products remains pending.

In 2018, complaints alleging foreign exchange-related misconduct were filed in the US District Court for the Southern District of New York and the High Court of England and Wales against HSBC and other defendants by certain plaintiffs that opted out of the direct purchaser class action settlement in the US. HSBC has reached a settlement with the plaintiffs to resolve these claims. These matters are now closed. In January 2023, HSBC reached a settlement-in-principle with plaintiffs in Israel to resolve a class action filed in the local courts alleging foreign exchange-related misconduct. The settlement remains subject to the negotiation of definitive documentation and court approval. Lawsuits alleging foreign exchange-related misconduct remain pending against HSBC and other banks in courts in Brazil. It is possible that additional civil actions will be initiated against HSBC in relation to its historical foreign exchange activities.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of the pending matters, which could be significant.

Precious metals fix-related litigation

Gold: Since 2015, numerous putative class actions have been filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs allege that, among other things, from January 2004 to March 2014, the defendants conspired to manipulate the price of gold and gold derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.

Silver: HSBC and other members of The London Silver Market Fixing Limited are defending a class action pending in the US District Court for the Southern District of New York alleging that, from January 2007 to December 2013, the defendants conspired to manipulate the price of silver and silver derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. In May 2023, the court granted the defendants' motion to dismiss. The plaintiffs have appealed the dismissal, and this appeal remains pending.

In April 2016, two putative class actions were filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs in both actions allege that, from January 1999 to August 2014, the defendants conspired to manipulate the price of silver and silver derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.

Platinum and palladium: HSBC and other members of The London Platinum and Palladium Fixing Company Limited are defending a class action pending in the US District Court for the Southern District of New York alleging that, from January 2008 to November 2014, the defendants conspired to manipulate the price of platinum group metals and related financial products for their collective benefit in violation of US antitrust laws and the US CEA. In February 2023, the court reversed an earlier dismissal of the plaintiffs' third amended complaint, and this matter is proceeding.

Gilts trading investigation and litigation

Since 2018, the UK Competition and Markets Authority ('CMA') has been investigating HSBC and four other banks for suspected anti-competitive conduct in relation to the historical trading of gilts and related derivatives. In May 2023, the CMA announced its case against HSBC Bank plc and HSBC Holdings, and both HSBC companies are contesting the CMA's allegations.

In June 2023, HSBC Bank plc and HSBC Securities (USA) Inc., among other banks, were named as defendants in a putative class action filed in the US District Court for the Southern District of New York by plaintiffs alleging anti-competitive conduct in the gilts market. This matter is at an early stage. It is possible that additional civil actions will be initiated against HSBC in relation to its historical gilts trading activities.

Other regulatory investigations, reviews and litigation

HSBC Holdings and/or certain of its affiliates are subject to a number of other investigations and reviews by various regulators and competition and law enforcement authorities, as well as litigation, in connection with various matters relating to the firm's businesses and operations, including:

- an investigation by the PRA in connection with depositor protection arrangements in the UK;

- an investigation by the FCA in connection with collections and recoveries operations in the UK;

- investigations by prosecuting authorities in Germany and France in connection with the dividend withholding tax treatment of certain trading activities;

- an investigation by the US Commodity Futures Trading Commission ('CFTC') regarding interest rate swap transactions related to bond issuances, among other things. HSBC has reached a settlement with the CFTC to resolve this investigation, and this matter is now closed;

- investigations by the CFTC and the US Securities and Exchange Commission ('SEC') concerning compliance with records preservation requirements relating to the use of unapproved electronic messaging platforms for business communications. HSBC has reached settlements with the CFTC and SEC to resolve these investigations, and these matters are now closed;

- investigations by tax administration, regulatory and law enforcement authorities in various countries in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation;

- a lawsuit brought in the US District Court for the Northern District of California, by First-Citizens Bank & Trust Company ('First Citizens') against various HSBC companies and seven HSBC US employees who had previously worked for Silicon Valley Bank ('SVB') alleging, among other things, that HSBC conspired with the individual defendants to solicit employees from First Citizens and that the individual defendants took confidential information belonging to SVB and/or First Citizens;

- litigation brought against various HSBC companies in New York State court relating to residential mortgage-backed securities, based primarily on (a) claims brought against HSBC Bank USA in connection with its role as trustee on behalf of various securitisation trusts; and (b) claims against several HSBC companies seeking to have the defendants repurchase various mortgage loans;

- a putative class action brought in the US District Court for the Southern District of New York relating to the Mexican government bond market;

- claims issued by two separate investor groups against HSBC UK Bank plc (as successor to HSBC Private Bank (UK) Limited ('PBGB')) in the High Court of England and Wales in connection with PBGB's role in the development of Eclipse film finance schemes; and

- two group actions pending in federal courts in the US and a claim issued in the High Court of England and Wales in connection with HSBC Bank plc's role as a correspondent bank to Stanford International Bank Ltd from 2003 to 2009. HSBC Bank plc has reached settlements with the plaintiffs in the US and UK to resolve these claims. The US settlement is subject to court approval and the UK settlement has concluded.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of the pending matters, which could be significant.

14	Transactions with related parties

There were no changes in the related party transactions described in the Annual Report and Accounts 2022 that have had a material effect on the financial position or performance of HSBC in the half-year to 30 June 2023. All related party transactions that took place in the half-year to 30 June 2023 were similar in nature to those disclosed in the Annual Report and Accounts 2022.

15	Assets held for sale, liabilities of disposal groups held for sale and business acquisitions

	At
	30 Jun	31 Dec
	2023	2022
	$m	$m
Disposal groups	94,995	118,055
Unallocated impairment losses¹	(298)	(2,385)
Non-current assets held for sale²	783	249
Assets held for sale	95,480	115,919
Liabilities of disposal groups held for sale	87,241	114,597

1 This represents impairment losses in excess of the carrying value of the non-current assets included in the measurement scope of IFRS 5.

2 Includes $0.5bn of US commercial real estate loans classified as held for sale at 30 June 2023.

Disposal groups

Planned sale of our retail banking operations in France

On 25 November 2021, HSBC Continental Europe signed a framework agreement with Promontoria MMB SAS ('My Money Group') and its subsidiary Banque des Caraïbes SA, regarding the planned sale of HSBC Continental Europe's retail banking operations in France. The sale, which is subject to information and consultation processes with respective works councils, regulatory approvals and the satisfaction of other relevant conditions, included: HSBC Continental Europe's French retail banking operations; the Crédit Commercial de France ('CCF') brand; and HSBC Continental Europe's 100% ownership interest in HSBC SFH (France) and its 3% ownership interest in Crédit Logement.

During 1Q23, the completion of the planned transaction became less certain. This was due to a significant rise in interest rates in France, which is expected to increase the amount of capital required by the buyer on completion. Given the completion of the sale had become less certain, we were required by IFRS 5 to change the accounting classification of our retail banking operations in France to be no longer classified as held for sale, resulting in a $2.1bn reversal of the previously recognised impairment in respect of the sale. The related $0.4bn impairment of goodwill previously recognised was not reversed.

On 14 June 2023, HSBC Continental Europe signed a further memorandum of understanding with the buyer regarding certain potential changes to the terms of the sale, which are designed to enable the buyer to satisfy its future capital requirements and to obtain regulatory approval for the transaction. The potential changes foresee: the retention of $7.5bn of home and other loans by HSBC Continental Europe that were originally planned to transfer as part of the sale, the inclusion in the perimeter for sale of a cash amount equivalent to the carrying value of the retained portfolio of loans, and the setting of the net asset value of the transferred business by reference to relevant prevailing market rates at completion. In addition, depending on the prevailing market rates at completion, HSBC Continental Europe may receive a profit participation interest in exchange for investing capital into the top holding company of My Money Group, such that the aggregate of the actual net asset value delivered at completion and the investment made in the profit participation interest would not exceed €1.768bn. The potential changes also foresee the retention of the CCF brand, the entry into a long-term agreement to license it to the buyer and certain enhancements to the insurance and asset management distribution agreements with the buyer. The transaction remains subject to information and consultation processes with respective works councils and regulatory approvals, and the parties aim to complete on 1 January 2024.

Taking into account the potential changes, the transaction is expected to result in the recognition of a pre-tax loss on sale estimated up to €2.0bn ($2.2bn) upon reclassification of the business as held for sale. This is expected during the second half of 2023 provided sufficient progress is demonstrated to support the appropriate level of probability of successful completion. Once that threshold is achieved, the disposal group will be reclassified as held for sale and will be remeasured at the lower of carrying amount and fair value less costs to sell at each reporting period. Any remaining gains or losses not previously recognised and the reversal of any remaining deferred tax assets and liabilities, will be recognised on completion.

At 30 June 2023, a deferred tax liability of $0.4bn was recognised as a consequence of the temporary difference in tax and accounting treatment in respect of the provision for loss on disposal, which was deductible in the French tax return in 2021 but will be accounted for when the disposal group is classified as held for sale in accordance with IFRS 5, at which time the deferred tax liability will reverse.

Agreed sale of our banking business in Canada

On 29 November 2022, HSBC Holdings plc announced that its wholly-owned subsidiary, HSBC Overseas Holdings (UK) Limited, had entered into an agreement for the sale of its banking business in Canada to Royal Bank of Canada. Completion of the transaction is expected to occur in the first quarter of 2024, subject to regulatory and governmental approvals.

The majority of the estimated gain on sale of $5.3bn will be recognised on completion, reduced by earnings recognised by the Group in the period to completion. The estimated pre-tax profit on the sale will be recognised through a combination of the consolidation of HSBC Canada's results into the Group's financial statements (between the 30 June 2022 net asset reference date and until completion), and the remaining gain on sale recognised at completion. There would be no tax on the gain recognised at completion. At 30 June 2023, total assets of $87.2bn and total liabilities of $80.4bn met the criteria to be classified as held for sale in accordance with IFRS 5.

Planned sale of our branch operations in Greece

On 24 May 2022, HSBC Continental Europe signed a sale and purchase agreement for the sale of its branch operations in Greece to Pancreta Bank SA. In the second quarter of 2022, we recognised a loss of $0.1bn, including goodwill impairment, upon reclassification as held for sale in accordance with IFRS 5. At 30 June 2023, the disposal group included $0.3bn of loans and advances to customers and $1.5bn of customer accounts.

Planned sale of our business in Russia

On 30 June 2022, following a strategic review of our business in Russia, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc) entered into an agreement for the planned sale of its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company). Completion of the transaction is subject to regulatory and governmental approvals. In 2022, a $0.3bn loss on the planned sale was recognised, upon reclassification as held for sale in accordance with IFRS 5. Completion is currently expected to occur in the second half of 2023. At 30 June 2023, the business remained classified as held for sale.

Planned merger of our business Oman

On 15 November 2022, HSBC Bank Oman SAOG entered into a binding merger agreement with Sohar International Bank SAOG, under which the two banks agreed to take the necessary steps to implement a merger by incorporation, whereby HSBC Bank Oman would merge into Sohar International Bank. On 5 February 2023, HSBC Bank Oman received approval from the Central Bank of Oman for the proposed merger. On 20 June 2023, the merger was approved by the shareholders of HSBC Bank Oman and Sohar International Bank through their respective Extraordinary General Meetings. The merger is expected to be completed in the third quarter of 2023. Upon completion of the merger, all of the assets and liabilities of HSBC Bank Oman would be transferred to Sohar International Bank, and HSBC Bank Oman would be dissolved with the shareholders of HSBC Bank Oman entitled to receive consideration in cash and/or shares in Sohar International Bank. In addition, HSBC Bank Middle East Limited is planning to establish a new wholesale banking branch in Oman subject to regulatory approvals. At 30 June 2023, $6.0bn in assets and $5.3bn in liabilities were reclassified as held for sale in accordance with IFRS 5.

At 30 June 2023, the major classes of assets and associated liabilities of disposal groups held for sale, including allocated impairment losses, were as follows:

	Canada	Oman	Other	Total
	$m	$m	$m	$m
Assets of disposal groups held for sale
Cash and balances at central banks	3,541	576	1,109	5,226
Trading assets	2,273	-	6	2,279
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	15	-	-	15
Derivatives	584	-	1	585
Loans and advances to banks	76	891	182	1,149
Loans and advances to customers	55,932	2,975	303	59,210
Reverse repurchase agreements - non-trading	3,254	-	125	3,379
Financial investments¹	17,424	1,418	21	18,863
Goodwill	225	-	-	225
Prepayments, accrued income and other assets	3,913	128	23	4,064
Total assets at 30 Jun 2023	87,237	5,988	1,770	94,995

Liabilities of disposal groups held for sale
Trading liabilities	1,903	-	2	1,905
Deposits by banks	175	77	1	253
Customer accounts	59,813	4,878	1,463	66,154
Repurchase agreements - non-trading	2,615	-	-	2,615
Derivatives	788	-	-	788
Debt securities in issue	9,127	-	-	9,127
Subordinated liabilities	8	-	-	8
Accruals, deferred income and other liabilities	5,975	383	33	6,391
Total liabilities at 30 Jun 2023	80,404	5,338	1,499	87,241

Expected date of completion	First half of 2024	Second half of 2023
Operating segment	All global businesses	All global businesses

1 Includes financial investments measured at fair value through other comprehensive income of $12,119m and debt instruments measured at amortised cost of $6,744m.

Business acquisitions

Silicon Valley Bank UK Limited (now HSBC Innovation Bank Limited)

In March 2023, HSBC UK Bank plc acquired Silicon Valley Bank UK Limited ('SVB UK'), and in June 2023 changed its legal entity name to HSBC Innovation Bank Limited. The acquisition was funded from existing resources and brought the staff, assets and liabilities of SVB UK into the HSBC portfolio. On acquisition, we performed a preliminary assessment of the fair value of the assets and liabilities purchased. We established an opening balance sheet on 13 March 2023 and applied the result of the fair value assessment, which resulted in a reduction in net assets of $0.2bn. The provisional gain on acquisition of $1.5bn represents the difference between the consideration paid of £1 and the net assets acquired. This gain could change as further due diligence is performed within 12 months of the acquisition, as allowed by IFRS 3 'Business Combinations'.

HSBC Innovation Bank Limited contributed $146m of revenue and $66m to the Group profit after tax for the period from the 13 March 2023 to 30 June 2023. As per the disclosure requirement set out in IFRS 3 'Business Combinations', if HSBC Innovation Bank Limited had been acquired on 1 January 2023 and included in the Group results, management estimates that for the six months to 30 June 2023 the Group consolidated revenue would have been $37,024m and the Group consolidated profit after tax would have been $18,149m. In determining these, management has assumed that the fair value adjustments that arose on acquisition would have been the same if the acquisition had occurred on 1 January 2023.

The details of the business combination are as follows:

	At
	13 March
	2023
	$m
Fair value of assets acquired	11,291
Fair value of liabilities acquired	(9,784)
Fair value of net assets acquired	1,507

Provisional gain on acquisition	1,507
Consideration transferred settled in cash	-
Cash and cash equivalents acquired	1,243
Net cash inflow on acquisition	1,243

16	Effects of adoption of IFRS 17

On 1 January 2023, the Group adopted IFRS 17 'Insurance Contracts', and as required by the standard applied the requirements retrospectively, with comparatives restated from the transition date, 1 January 2022. Under IFRS 17 there is no PVIF intangible asset recognised. Instead, the measurement of the insurance contract liability is based on groups of insurance contracts and includes fulfilment cash flows, as well as the CSM unearned profit. The impact of transitioning to IFRS 17 on the consolidated financial statements of the Group was a reduction to total equity of $10,459m at 1 January 2022. In contrast to the Group's IFRS 4 accounting where profits are recognised upfront, under IFRS 17 they are deferred within the CSM which is systematically recognised in revenue as services are provided over the expected coverage period of groups of insurance contracts. Losses resulting from the recognition of onerous contracts are not deferred but recognised in the income statement as they arise. The impact on the Group's consolidated balance sheet, income statement and other comprehensive income are set out in the tables below.

Further information about the effect of the adoption of IFRS 17 is provided in Note 1 'Basis of preparation of material accounting policies' on page 115 and in the Report on Transition to IFRS 17 'Insurance Contracts' issued on 2 May 2023.

IFRS 17 transition impact on the Group consolidated balance sheet at 1 January 2022

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

Transition drivers

Removal of PVIF and IFRS 4 balances

The PVIF intangible asset of $9,453m previously reported under IFRS 4 within 'Goodwill and intangible assets' arose from the upfront recognition of future profits associated with in-force insurance contracts. The PVIF intangible asset is no longer reported following the transition to IFRS 17, as future profits are deferred within the CSM. Other IFRS 4 insurance contract assets (shown above within 'All other assets') and insurance contract liabilities are removed on transition, to be replaced with IFRS 17 balances.

IFRS 9 asset re-designation

Loans and advances of $1,849m and debt securities of $53,201m, both supporting associated insurance liabilities, were re-designated from an amortised cost classification to fair value through profit and loss. Debt securities supporting the associated insurance liabilities of $1,068m were reclassified from fair value through other comprehensive income to fair value through profit or loss. The re-designations were made in order to more closely align the asset accounting with the valuation of the associated insurance liabilities. The re-designation of amortised cost assets generated a net increase to assets of $4,873m because the fair value measurement on transition was higher than the previous amortised cost carrying amount.

Recognition of the IFRS 17 fulfilment cash flows

The measurement of the insurance contracts liabilities under IFRS 17 is based on groups of insurance contracts and includes a liability for fulfilling the insurance contracts, such as premiums, expenses, insurance benefits and claims including policyholder returns and the cost of guarantees. These are recorded within the fulfilment cash flow component of the insurance contract liability, together with the risk adjustment for non-financial risk.

Recognition of the IFRS 17 CSM

The CSM is a component of the insurance contract liability and represents the future unearned profit associated with insurance contracts which will be released to the profit and loss over the expected coverage period.

Tax effect

The removal of deferred tax liabilities primarily results from the removal of the associated PVIF intangible asset, and new deferred tax assets are reported, where appropriate, on temporary differences between the new IFRS 17 accounting balances and their associated tax bases.

IFRS 17 transition impact on the reported Group consolidated income statement for the 6 months ended 30 June 2022

	IFRS 4	Removal of PVIF and IFRS 4	Remeasure-ment effect of IFRS 9 re-designations	Insurance finance income/expense	IFRS 17 CSM	Onerous contracts	Experience variance and other	Attribut- able expenses	Tax effect	IFRS 17
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Net interest income	14,451	-	(1,066)	-	-	-	-	-	-	13,385
Net fee income	6,064	-	-	-	-	-	-	164	-	6,228
Net income from financial instruments held for trading or managed on a fair value basis	4,921	-	(65)	-	-	-	-	-	-	4,856
Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss	(3,051)	-	(8,798)	-	-	-	-	-	-	(11,849)
Net insurance premium income	7,646	(7,646)	-	-	-	-	-	-	-	-
Insurance finance income/(expense)	-	-	-	11,773				-	-	11,773
Insurance service result	-	-	-	-	459	(120)	31	-	-	370
- insurance revenue	-	-	-	-	459		521	-	-	980
- insurance service expense	-	-	-	-		(120)	(490)	-	-	(610)
Other operating income/(loss)	654	(892)		52			(32)			(218)
Total operating income	30,685	(8,538)	(9,929)	11,825	459	(120)	(1)	164	-	24,545
Net insurance claims and benefits paid and movement in liabilities to policyholders	(5,449)	5,449	-	-	-	-	-	-	-	-
Net operating income before change in expected credit losses and other credit impairment charges	25,236	(3,089)	(9,929)	11,825	459	(120)	(1)	164	-	24,545
Change in expected credit losses and other credit impairment charges	(1,090)	-	3	-	-	-	-	-	-	(1,087)
Net operating income	24,146	(3,089)	(9,926)	11,825	459	(120)	(1)	164	-	23,458
Total operating expenses	(16,419)		-	-	-	-	-	292	-	(16,127)
Operating profit	7,727	(3,089)	(9,926)	11,825	459	(120)	(1)	456	-	7,331
Share of profit in associates and joint ventures	1,449	-	-	-	-	-	-	-	-	1,449
Profit before tax	9,176	(3,089)	(9,926)	11,825	459	(120)	(1)	456	-	8,780
Tax expense	39	-	-	-	-	-	-	-	112	151
Profit for the period	9,215	(3,089)	(9,926)	11,825	459	(120)	(1)	456	112	8,931

Transition drivers

Removal of IFRS 4-based revenue items

As a result of the removal of the PVIF intangible asset and IFRS 4 results, the associated revenue of $892m for the six months to 30 June 2022 that was previously reported within 'Other operating income' is no longer reported under IFRS 17. This includes the removal of the value of new business and changes to PVIF intangible asset from valuation adjustments and experience variances.

On the implementation of IFRS 17, new income statement line items associated with insurance contract accounting were introduced. Consequently, the previously reported IFRS 4 line items 'Net insurance premium income' and 'Net insurance claims and benefits paid and movement in liabilities to policyholders' were also removed.

IFRS 9 re-designations

Following the re-designation of financial assets supporting associated insurance liabilities to fair value through profit or loss classification, the related income statement reporting also changed. Under our previous IFRS 4-based reporting convention, these assets generated interest income of $1,066m for the six months to 30 June 2022, which is no longer reported in 'Net interest income' under IFRS 17. To the extent that this interest income was shared with policyholders, the corresponding policyholder sharing obligation was previously included within the 'net insurance claims and benefits paid and movement in liabilities to policyholders' line.

Following re-designation to fair value through profit or loss, gains and losses from changes in the fair value of underlying assets, together with interest income earned, are both reported within 'Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss'. Similar to an IFRS 4 basis, IFRS 17 accounting provides for an offset. While this offset was reported within the claims line under IFRS 4, under IFRS 17 it is reported within the 'Insurance finance income/(expense)' line described below.

Introduction of IFRS 17 income statement

Insurance finance income/(expense)

Insurance finance income/(expense) of $11,773m for the six months to 30 June 2022 represents the change in the carrying amount of insurance contracts arising from the effect of, and changes in, the time value of money and financial risk. For variable fee approach contracts, which represent more than 90% of HSBC's insurance contracts, the insurance finance income/(expense) includes the changes in the fair value of underlying items (excluding additions and withdrawals). It therefore has an offsetting impact to investment income earned on underlying assets supporting insurance contracts. This includes an offsetting impact to the gains and losses on assets re-designated on transition to fair value through profit or loss, and which is now included in 'Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss'.

CSM

Revenue is recognised for the release of the CSM associated with the in-force business, which was allocated at a rate of approximately 9% during 2022. The CSM release is largely impacted by the constant measure allocation approach for investment services, but may vary over time primarily due to changes in the total amount of CSM reported on the balance sheet from factors such as new business written, changes to levels of actual returns earned on underlying assets, or changes to assumptions.

Onerous contracts

Losses on onerous contracts are taken to the income statement as incurred.

Experience variance and other

'Experience variance and other' represents the expected expenses, claims and recovery of acquisition cash flows, which are reported as part of the insurance revenue. This is offset with the actual expenses and claims incurred in the period and amortisation of acquisition cash flows, which are reported as part of insurance service expense.

Attributable expenses

Directly attributable expenses are the costs associated with originating and fulfilling an identified portfolio of insurance contracts. These costs include distribution fees paid to third parties as part of originating insurance contracts together with appropriate allocations of fixed and variable overheads, which are included within the fulfilment cash flows and are no longer shown on the operating expenses line.

IFRS 17 transition impact on the Group comprehensive income

	Half year to
	31 Dec	31 Dec	30 Jun	30 Jun
	2022	2022	2022	2022
	IFRS 17	IFRS 4	IFRS 17	IFRS 4
	$m	$m	$m	$m
Opening total equity for the period	186,105	196,690	196,318	206,777
of which
- retained earnings	140,860	150,417	135,236	144,458
- financial assets at FVOCI reserve	(6,011)	(5,354)	49	(634)
- insurance finance reserve	664	-	(696)	-
Profit for the period	7,318	7,455	8,931	9,215
Debt instruments at fair value through other comprehensive income	(986)	(561)	(6,246)	(4,907)
Equity instruments designated at fair value through other comprehensive income	(51)	(51)	158	158
Insurance finance income recognised in other comprehensive income	415	-	1,360	-
Other comprehensive expense for the period, net of tax	(4,090)	(3,990)	(7,801)	(7,950)
Total comprehensive (expense)/income for the period	2,606	2,853	(3,598)	(3,484)
Other movements	(3,514)	(3,515)	(6,615)	(6,603)
Closing total equity for the period	185,197	196,028	186,105	196,690

Transition drivers

Insurance finance reserve

The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in France. Underlying assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only the amount that matches income or expenses recognised in profit or loss on underlying items is included in finance income or expenses, resulting in the elimination of income statement accounting mismatches. The remaining amount of finance income or expenses for these insurance contracts is recognised in OCI. At the transition date an insurance finance reserve of $696m was recognised and following transition, gains net of tax of $1,360m were recorded in the six months to 30 June 2022 and $415m for the six-month period to 31 December 2022. An offsetting fair value through other comprehensive income reserve of $683m recorded on transition represents the accumulated fair value movements on assets supporting these insurance liabilities, with associated losses net of tax of $1,439m recorded within the fair value through other comprehensive income reserve for the six months to 30 June 2022 and $459m for the six months to 31 December 2022.

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

17	Events after the balance sheet date

On 28 July 2023, HSBC Continental Europe completed the sale of its branch operations in Greece to Pancreta Bank SA. A loss of $0.1bn, including goodwill impairment, was recognised upon reclassification to held for sale, in accordance with IFRS 5 in the second quarter of 2022.

A second interim dividend for 2023 of $0.10 per ordinary share in respect of the financial year ending 31 December 2023 was approved by the Directors on 1 August 2023, as described in Note 3. On 1 August 2023, HSBC Holdings announced a share buy-back programme to purchase its ordinary shares up to a maximum consideration of $2.0bn, which is expected to commence shortly and complete within three months.

18	Interim Report 2023 and statutory accounts

The information in this Interim Report 2023 is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This Interim Report 2023 was approved by the Board of Directors on 1 August 2023. The unaudited interim condensed financial statements included in the Interim Report 2023 have been reviewed by the Group's auditor, PwC, in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom. The statutory accounts of HSBC Holdings plc for the year ended 31 December 2022 have been delivered to the Registrar of Companies in England and Wales in accordance with section 447 of the Companies Act 2006. The Group's auditor PricewaterhouseCoopers LLP ('PwC') has reported on those accounts. Its report was unqualified, did not include a reference to any matters to which PwC drew attention by way of emphasis without qualifying its report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Shareholder information

Contents
141	1	Directors' interests	147	10	Earnings release
143	2	Employee share plans	147	11	Final results
145	3	Share buy-back	147	12	Corporate governance
146	4	Other equity instruments	148	13	Changes in Directors' details
146	5	Notifiable interests in share capital	148	14	Going concern basis
146	6	Dealings in HSBC Holdings listed securities	148	15	Telephone and online share dealing service
147	7	Second interim dividend for 2023	148	16	Stock symbols
147	8	Dividend on preference share	148	17	Copies of the Interim Report 2023 and shareholder enquiries and communications
147	9	Proposed interim dividends for 2023	148	17

1	Directors' interests

According to the register of Directors' interests maintained by HSBC Holdings pursuant to section 352 of the Securities and Futures Ordinance of Hong Kong, at 30 June 2023 the Directors of HSBC Holdings had the following interests, all beneficial unless otherwise stated, in the shares or debentures of HSBC Holdings and its associated corporations:

Directors' interests - shares and debentures
	At 1 Jan 2023 or date of appointment, if later	At 30 Jun 2023 or date of retirement, if earlier
	Total interests	Beneficial owner	Child under 18 or spouse	Jointly with another person	Trustee	Total interests
HSBC Holdings ordinary shares
Geraldine Buckingham¹	15,000	15,000	-	-	-	15,000
Rachel Duan¹	15,000	15,000	-	-	-	15,000
Georges Elhedery² (appointed to the Board on 1 Jan 2023)	572,575	689,181	-	-	-	689,181
Dame Carolyn Fairbairn	15,000	15,000	-	-	-	15,000
James Forese¹	115,000	115,000	-	-	-	115,000
Steven Guggenheimer¹	15,000	-	-	15,000	-	15,000
José Antonio Meade Kuribreña¹	15,000	15,000	-	-	-	15,000
Kalpana Morparia (appointed to the Board on 1 Mar 2023)	-	-	-	-	-	-
Eileen Murray¹	75,000	75,000	-	-	-	75,000
David Nish	50,000	-	50,000	-	-	50,000
Noel Quinn²	1,422,650	1,620,739	-	-	-	1,620,739
Jackson Tai^1,3 (retired on 5 May 2023)	66,515	32,800	11,965	21,750	-	66,515
Mark Tucker	307,352	307,352	-	-	-	307,352

1 Geraldine Buckingham has an interest in 3,000, Rachel Duan in 3,000, James Forese in 23,000, Steven Guggenheimer in 3,000, José Antonio Meade Kuribreña in 3,000, Eileen Murray in 15,000 and Jackson Tai had an interest in 13,303 listed American Depositary Shares ('ADSs'), which are categorised as equity derivatives under Part XV of the Securities and Futures Ordinance of Hong Kong. Each ADS represents five HSBC Holdings ordinary shares.

2 Executive Directors' other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the HSBC Share Plan 2011 are set out on the following pages. At 30 June 2023, the aggregate interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee share plans, were: Noel Quinn - 4,892,153 and Georges Elhedery - 1,878,652. Each Director's total interests represents approximately 0.02% of the shares in issue and 0.01% of the shares in issue excluding treasury shares.

3 Jackson Tai's holding included a non-beneficial interest in 11,965 shares of which he is custodian.

HSBC Holdings Savings-Related Share Option Plan (UK)

Currently no executive Directors participate in a Savings-Related Share Option Plan. For further details of the Savings-Related Share Option Plan, see page 143.

HSBC Share Plan 2011

Conditional awards of deferred shares

Vesting of deferred share awards is normally subject to the Director remaining an employee on the vesting date. The awards may vest at an earlier date in certain circumstances. Under the Securities and Futures Ordinance of Hong Kong, interests in conditional share awards are categorised as the interests of the beneficial owner.

Deferred share awards
			HSBC Holdings ordinary shares
	Date of award	Year in which awards may vest	Awards held at	Awards made during the period to 30 Jun 2023		Awards vested during the period to 30 Jun 2023		Awards held at
			1 Jan 2023	Number	Monetary value	Number	Monetary value	30 Jun 2023
					£000		£000
Noel Quinn	27/2/2017¹	2020-2024	37,086	-	-	19,097	110	19,375²
	26/2/2018³	2021-2025	64,515	-	-	21,504	122	43,011
	25/2/2019⁴	2022-2026	112,468	-	-	28,117	161	84,351
	24/2/2020⁵	2023-2027	201,702	-	-	40,340	231	161,362
	27/2/2023⁶	2023	-	170,206	1,077	170,206	1,077	-
Georges Elhedery (appointed 1 Jan 2023)	25/2/2019⁷	2020-2024	34,386	-	-	17,193	99	17,193
	24/2/2020⁵	2023-2027	147,661	-	-	29,532	169	118,129
	01/3/2021⁸	2024-2028	305,523	-	-	-	-	305,523
	28/2/2022⁹	2025-2029	273,163	-	-	-	-	273,163
	27/2/2023⁶	2023	-	112,568	712	112,568	712	-

1 At the date of the award (27 February 2017), the market value per share was £6.5030. The award will vest in five equal annual tranches. The fourth tranche vested on 13 March 2023 at a market value of £5.7362. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for six months from the vesting date. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.

2 Includes any additional shares arising from dividend equivalents.

3 At the date of the award (26 February 2018), the market value per share was £7.2340. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The third tranche vested on 14 March 2023 at a market value of £5.6710. The closing price of the shares immediately before the date on which the awards were vested was £5.6810.

4 At the date of the award (25 February 2019), the market value per share was £6.2350. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The second tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.

5 At the date of the award (24 February 2020), the market value per share was £5.6220. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The first tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.

6 The non-deferred award vested immediately on 27 February 2023 and was based on the market value of £6.3277. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The closing price of the shares immediately before 27 February 2023 on which the awards were granted was £6.3570. The fair value of the awards granted on 27 February 2023 was £6.3180 based on IFRS 2 accounting standards. The closing price of the shares immediately before the date on which the awards were vested was £6.3570.

7 At the date of the award (25 February 2019), the market value per share was £6.2350. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for six months from the vesting date. The award will vest in five equal annual tranches. The fourth tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.

8 At the date of the award (1 March 2021), the market value per share was £4.2620. The award will vest in five equal annual tranches commencing in 2024. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date.

9 At the date of the award (28 February 2022), the market value per share was £5.3800. The award will vest in five equal annual tranches commencing in 2025. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date.

Long-term incentive awards

The long-term incentive award is an award of shares with a three-year performance period. At the end of this performance period and subject to the award terms, the number of shares that vest will be determined based on an assessment against financial and non-financial measures. Subject to that assessment, the shares will vest in five equal annual instalments. On vesting, awards are subject to a retention period of up to one year. Under the Securities and Futures Ordinance of Hong Kong, interests in share awards are categorised as interests of the beneficial owner.

Long-term incentive awards
			HSBC Holdings ordinary shares
	Date of award	Year in which awards may vest	Awards held at	Awards made during the period to 30 Jun 2023		Awards vested during the period to 30 Jun 2023		Awards held at
			1 Jan 2023	Number	Monetary value	Number	Monetary value	30 Jun 2023
					£000		£000
Noel Quinn	1 Mar 2021¹	2024-2028	1,118,554	-	-	-	-	1,118,554
	28 Feb 2022¹	2025-2029	983,339	-	-	-	-	983,339
	27 Feb 2023²	2026-2030	-	861,422	5,451	-	-	861,422
Georges Elhedery	28 Feb 2022¹	2025-2029	223,989	-	-	-	-	223,989
Georges Elhedery	27 Feb 2023²	2026-2030	-	251,474	1,591	-	-	251,474

1 Awards made on 1 March 2021 were based on the market value of £4.2620, awards made on 28 February 2022 were based on the market value of £5.3800 and awards made on 27 February 2023 were based on the market value of £6.357.

2 The closing price of the shares on the day before the grant date was £6.357. The fair value of the awards was £4.6930 based on IFRS 2 accounting standards.

No Directors held any short position (as defined in the Securities and Futures Ordinance of Hong Kong) in the shares or debentures of HSBC Holdings and its associated corporations. Save as stated in the tables above, none of the Directors had an interest in any shares or debentures of HSBC Holdings or any associates at the beginning or at the end of the period, and none of the Directors or members of their immediate families were awarded or exercised any right to subscribe for any shares or debentures in any HSBC corporation during the period.

There have been no changes in the shares or debentures of the Directors from 30 June 2023 to the date of this report.

2	Employee share plans

Share options and discretionary awards of shares are granted under HSBC share plans to help align the interests of employees with those of shareholders. The following are particulars of share options and share awards, including those held by, or to be granted to, employees working under employment contracts that are regarded as 'continuous contracts' for the purposes of the Hong Kong Employment Ordinance, or former employees. The options and share awards were granted for nil consideration. No options or share awards have been granted to substantial shareholders, suppliers of goods or services, or those with an amount in excess of the 1% individual limit for each share plan. No options or share awards were cancelled by HSBC during the six months to 30 June 2023. The options and share awards were granted only to employees. Particulars of options and share awards held by Directors of HSBC Holdings are set out on page 141.

The number of shares available for the grant of options or share awards under each limit set out in the HSBC share plans at the beginning of 1H23 were 1,038,335,768 and 290,981,959. At the end of 1H23, the number of shares available were 1,017,612,461 and 272,087,852 under each limit. The number of shares that may be issued in respect of options or awards granted under all HSBC share plans divided by the weighted average number of shares of the relevant class in issue for 1H23 is 5.02% and 1.34% under each limit set out in the HSBC share plans.

Summaries of the total number of options and share awards granted, exercised/vested or lapsed during 1H23 are shown in the tables below. Further details required to be disclosed pursuant to Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited are available on our website at www.hsbc.com, and on the website of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk. Copies may be obtained upon request from the Group Company Secretary and Chief Governance Officer, 8 Canada Square, London E14 5HQ.

All-employee share plans

The HSBC Holdings Savings-Related Share Option Plan (UK) is an all-employee share option plan under which eligible employees have been granted options to acquire HSBC Holdings ordinary shares. The HSBC International Employee Share Purchase Plan was introduced in 2013 and now includes employees based in 31 jurisdictions. No options are granted under this plan but matching share awards are granted in the form of conditional awards that vest after three years. During 2022, approximately 189,000 employees were offered participation in these plans. During 1H23, no employee was offered participation in the plans. No options or awards under these plans are subject to performance targets.

For options granted under the HSBC Holdings Savings-Related Share Option Plan (UK) employees may make contributions of up to £500 each month over a period of three or five years. The contributions may be used within six months following the third or fifth anniversary of the commencement of the relevant savings contract, at the employee's election, to exercise the options. Alternatively, the employee may elect to have the savings, plus (where applicable) any interest or bonus, repaid in cash. In the case of redundancy, ceasing employment on grounds of injury or disability, retirement, death, the transfer of the employing business to another party, or a change of control of the employing company, options may be exercised before completion of the relevant savings contract. In certain circumstances, the exercise period of options awarded under the all-employee share option plans may be extended; for example, on the death of a participant, the executors may exercise the option up to six months beyond the normal exercise period or, if a participant has chosen to defer up to 12 contributions, the start of the normal exercise period will be delayed by up to 12 months.

Under the HSBC Holdings Savings-Related Share Option Plan (UK) the option exercise price is determined by reference to the average market value of the HSBC Holdings ordinary shares on the five business days immediately preceding the invitation date, then applying a discount of 20%. The HSBC Holdings Savings-Related Share Option Plan (UK) has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.

Under the HSBC International Employee Share Purchase Plan, shares are purchased on behalf of participants (using their own funds) in the market each quarter up to a maximum annual value of £3,000, or equivalent in local currency, per participant. No options are granted under the HSBC International Employee Share Purchase Plan. However, matching awards in the form of conditional share awards are granted to participants for nil consideration at a ratio of one free share for every three purchased. Matching awards vest subject to continued employment and the retention by the participant of the purchased shares for a maximum period of two years and nine months. The HSBC International Employee Share Purchase Plan has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.

HSBC Holdings Savings-Related Share Option Plan (UK)
						HSBC Holdings ordinary share options
Dates of award		Exercise price (£)		Usually exercisable		1 Jan 2023	Granted in period	Exercised in period¹	Lapsed in period	Cancelled in period	30 Jun 2023
from	to	from	to	from	to
21 Sep 2017	27 Sep 2022	(£) 2.6270	(£) 5.9640	1 Nov 2020	28 April 2028	115,650,723	-	2,773,354	3,680,465	-	109,196,904

1 The weighted average closing price of the shares immediately before the dates on which options were exercised was £5.9183.

HSBC International Employee Share Purchase Plan - awards of matching shares
						HSBC Holdings ordinary shares under award
Dates of award		Purchase price		Usually vesting		1 Jan 2023	Granted in period	Vested in period	Lapsed in period	Cancelled in period	30 Jun 2023
from	to			from	to	1 Jan 2023	Granted in period	Vested in period	Lapsed in period	Cancelled in period	30 Jun 2023
2020	2022	£0		2023	2025	2,347,806	-	-	85,841	-	2,261,965
2020	2022		HK$0	2023	2025	2,854,482	-	-	75,227	-	2,779,255
	11 Jan 2023¹		£0			-	288,546	-	13,386	-	275,160
	11 Jan 2023²		HK$0			-	301,397	-	8,149	-	293,248
	14 Mar 2023³		£0			-	42	-	-	-	42
	13 Apr 2023⁴		£0			-	277,730	-	7,422	-	270,308
	13 Apr 2023⁵		HK$0			-	284,890	-	4,079	-	280,811

1 The closing price of the shares on the day before the grant date was £5.6410. The fair value of the awards granted was £5.0580 based on IFRS 2 accounting standards.

2 The closing price of the shares on the day before the grant date was HK$53.30. The fair value of the awards granted was £5.0580 based on IFRS 2 accounting standards.

3 The closing price of the shares on the day before the grant date was £5.6810. The fair value of the awards granted was £5.1237 based on IFRS 2 accounting standards.

4 The closing price of the shares on the day before the grant date was £5.6160. The fair value of the awards granted was £4.9941 based on IFRS 2 accounting standards.

5 The closing price of the shares on the day before the grant date was HK$54.75. The fair value of the awards granted was £5.0376 based on IFRS 2 accounting standards.

Awards under HSBC Share Plan 2011

Conditional share awards may be granted on a discretionary basis to employees and former employees. A conditional award of deferred shares defines the number of shares to which the employee will become entitled, which is generally up to three, four, five or seven years from the date of the award, and normally subject to the individual remaining in employment. In some cases, the employee's entitlement depends upon the satisfaction of a performance condition. The long-term incentive awards and fixed pay allowances are incorporated in the HSBC Share Plan 2011. The maximum value of awards or options that may be granted to an employee in any one year under the HSBC Share Plan 2011 is 600% of the employee's annual salary. For the purpose of the limit, any deferred share awards made on or shortly after the commencement of employment or in substitution for all or any part of any bonus to which the employee would otherwise have been entitled, are excluded. Participants do not need to pay any consideration for the grant or vesting of an award. The HSBC Share Plan 2011 has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.

HSBC Share Plan 2011 - particulars of awards
					HSBC Holdings ordinary shares under award.
Dates of award		Purchase price (£)	Usually vesting		1 Jan 2023	Granted in period	Vested in period¹	Lapsed in period	Cancelled in period	30 Jun 2023
from	to		from	to	1 Jan 2023	Granted in period	Vested in period¹	Lapsed in period	Cancelled in period	30 Jun 2023
1 Jan 2013	31 Dec 2022	0	1 Mar 2023	30 Mar 2030	119,879,459	-	43,913,965	2,003,869	-	73,961,625
	27 Feb 2023²	0	27 Feb 2023	30 Mar 2030	-	59,835,210	19,477,610	159,369	7,612	40,190,619
	27 Feb 2023³	0	27 Feb 2023	30 Mar 2030	-	3,800,403	-	-	-	3,800,403
	20 Mar 2023⁴	0	20 Mar 2023	30 Mar 2030	-	2,486,251	760,095	-	-	1,726,156
	15 May 2023⁵	0	15 May 2023	30 Mar 2029	-	1,283,921	391,767	1,662	-	890,492
	15 May 2023⁶	0	15 May 2023	30 May 2028	-	50,946	-	5,738	-	45,208
	1 Mar 2023⁷	0	1 Mar 2023	31 Aug 2026	-	644,298	344,620	1,869	-	297,809

1 The weighted average closing price of the shares immediately before the dates on which the awards were vested was £5.9679.

2 The closing price on the day before the grant date was £6.3570. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.3180, £5.4370, £5.3450, £5.3110, £5.2410, £5.1860, £5.1300, £5.1050, £5.0570, £4.9310, £4.9210 and £4.6930.

3 The closing price on the day before the grant date was £6.3570. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.3180 and £4.6930. Vesting of these awards, which are made up of LTI awards and retention awards, are subject to satisfaction of performance conditions. LTI awards are subject to a combination of financial and non-financial metrics that are detailed in the Directors' remuneration report in the Annual Report and Accounts. Retention awards are subject to the completion of a strategically important project.

4 The closing price on the day before the grant date was £5.4210. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £5.4170, £4.6650, £4.6620, £4.5830, £4.5540, £4.4480, £4.4460 and £4.0230.

5 The closing price on the day before the grant date was £5.9970. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.1100, £5.5310, £5.2720, £5.2600, £5.1710, £5.1380, £5.0160 and £5.0110.

6 The closing price on the day before the grant date was £5.9970. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair value of the awards is £6.1100. Vesting of these awards, which relate to retention awards, are subject to the satisfaction of performance conditions. These retention awards are subject to the completion of a strategically important project.

7 Relates to the allocation of dividend equivalent shares in relation to eligible awards.

3	Share buy-back

On 10 May 2023, HSBC Holdings commenced a share buy-back programme to purchase its ordinary shares up to a maximum consideration of $2.0bn. As part of the buy-back programme, shares were repurchased on UK trading venues, including London Stock Exchange, Turquoise, Aquis Exchange and Cboe Europe Limited through the BXE and CXE order books, as well as The Stock Exchange of Hong Kong Limited. The purpose of the buy-back programme is to reduce HSBC's number of outstanding ordinary shares.

At 30 June 2023, 83,545,603 ordinary shares had been purchased and cancelled from the UK register, representing a nominal value of $41,772,802 and an aggregate consideration paid by HSBC of £507,452,886. The shares cancelled represented 0.415% of the shares in issue and 0.421% of the shares in issue, excluding treasury shares.

At 30 June 2023, 88,400,000 ordinary shares had been purchased from the Hong Kong register, representing a nominal value of $44,200,000 and an aggregate consideration paid by HSBC of HK$5,269,455,949. The shares purchased represented 0.439% of the shares in issue and 0.446% of the shares in issue, excluding treasury shares. The shares purchased are cancelled in batches, with 74,000,000 shares cancelled at 30 June 2023.

At 30 June 2023, the Company held 325,273,407 shares in treasury which were repurchased during the 2016 buy-back and were not cancelled at the time. All shares repurchased pursuant to subsequent buy-backs have been cancelled. The Board intends to consider the cancellation of the treasury shares in due course.

The table that follows outlines details of the shares purchased and cancelled on a monthly basis during 2023.

Share buy-back - UK venues
	Number of shares purchased and cancelled	Highest price paid per share	Lowest price paid per share	Average price paid per share	Aggregate price paid
	Number of shares purchased and cancelled	£	£	£	£
May 2023	31,169,005	6.2000	5.8710	6.0716	189,244,725
Jun 2023	52,376,598	6.1900	5.8810	6.0754	318,208,161
Total	83,545,603				507,452,886

Share buy-back - Hong Kong venues
	Number of shares purchased	Highest price paid per share	Lowest price paid per share	Average price paid per share	Aggregate price paid
	Number of shares purchased	HK$	HK$	HK$	HK$
May 2023	37,500,000	59.9500	57.2000	59.0377	2,213,913,666
Jun 2023	50,900,000	61.4500	57.1000	60.0303	3,055,542,283
Total	88,400,000				5,269,455,949

4	Other equity instruments

Additional tier 1 capital - contingent convertible securities

HSBC Holdings continues to issue contingent convertible securities that are included in its capital base as fully CRR II-compliant additional tier 1 capital securities on an end point basis. These securities are marketed principally and subsequently allotted to corporate investors and fund managers. The net proceeds of the issuances are typically used for HSBC Holdings' general corporate purposes and to further strengthen its capital base to meet requirements under CRR II. These securities bear a fixed rate of interest until their initial call dates. After the initial call dates, if they are not redeemed, the securities will bear interest at rates fixed periodically in advance for five-year periods based on credit spreads, fixed at issuance, above prevailing market rates. Interest on the contingent convertible securities will be due and payable only at the sole discretion of HSBC Holdings, and HSBC Holdings has sole and absolute discretion at all times to cancel for any reason (in whole or part) any interest payment that would otherwise be payable on any payment date. Distributions will not be paid if they are prohibited under UK banking regulations or if the Group has insufficient reserves or fails to meet the solvency conditions defined in the securities' terms.

The contingent convertible securities are undated and are repayable at the option of HSBC Holdings in whole typically at the initial call date or on any fifth anniversary after this date. In addition, the securities are repayable at the option of HSBC Holdings in whole for certain regulatory or tax reasons. Any repayments require the prior consent of the PRA. These securities rank pari passu with HSBC Holdings' sterling preference share and therefore rank ahead of ordinary shares. The contingent convertible securities will be converted into fully paid ordinary shares of HSBC Holdings at a predetermined price, should HSBC's consolidated non-transitional CET1 ratio fall below 7.0%. Therefore, in accordance with the terms of the securities, if HSBC's non-transitional CET1 ratio breaches the 7.0% trigger, the securities will convert into ordinary shares at the fixed contractual conversion prices in the issuance currencies of the relevant securities, equivalent to £2.70 at the prevailing rate of exchange on the issuance date, subject to anti-dilution adjustments. During the first half of 2023, HSBC Holdings issued $2,000m contingent convertible securities and called and repaid $2,350m contingent convertible securities.

5	Notifiable interests in share capital

Between 1 January 2023 and 30 June 2023, HSBC Holdings did not receive any notification of major holdings of voting rights pursuant to the requirements of Rule 5 of the Disclosure, Guidance and Transparency Rules, which had not been amended or withdrawn. No further notifications had been received between 30 June 2023 and 20 July 2023.

Previous notifications received, which have not been amended or withdrawn, are as follows:

- BlackRock, Inc. gave notice on 3 March 2020 that on 2 March 2020 it had the following: an indirect interest in HSBC Holdings ordinary shares of 1,235,558,490; qualifying financial instruments with 7,294,459 voting rights that may be acquired if the instruments are exercised or converted; and financial instruments with a similar economic effect to qualifying financial instruments, which refer to 2,441,397 voting rights, representing 6.07%, 0.03% and 0.01%, respectively, of the total voting rights at 2 March 2020.

- Ping An Asset Management Co., Ltd. gave notice on 6 December 2017 that on 4 December 2017 it had an indirect interest in HSBC Holdings ordinary shares of 1,007,946,172, representing 5.04% of the total voting rights at that date.

At 30 June 2023, according to the register maintained by HSBC Holdings pursuant to section 336 of the Securities and Futures Ordinance of Hong Kong, the following notifications of major holdings have been made to HSBC Holdings and have not been amended or withdrawn:

- BlackRock, Inc. gave notice on 9 March 2022 that on 4 March 2022 it had the following interests in HSBC Holdings ordinary shares: a long position of 1,701,656,169 shares and a short position of 19,262,061 shares, representing 8.27% and 0.09%, respectively, of the ordinary shares in issue at that date.

- Ping An Asset Management Co., Ltd. gave notice on 25 September 2020 that on 23 September 2020 it had a long position of 1,655,479,531 in HSBC Holdings ordinary shares, representing 8.00% of the ordinary shares in issue at that date.

6	Dealings in HSBC Holdings listed securities

HSBC has policies and procedures that, except where permitted by statute and regulation, prohibit it undertaking specified transactions in respect of its securities listed on The Stock Exchange of Hong Kong Limited ('HKEx'). Except for dealings as intermediaries or as trustees by subsidiaries of HSBC Holdings, or in relation to the HSBC Holdings ordinary share buy-back, neither HSBC Holdings nor any of its subsidiaries has purchased, sold or redeemed any of its securities listed on HKEx during the half-year ended 30 June 2023.

7	Second interim dividend for 2023

On 1 August 2023, the Directors approved a second interim dividend in respect of the financial year ending 31 December 2023 of $0.10 per ordinary share, a distribution of approximately $1.974bn. The dividend will be payable on 21 September 2023 to holders on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 11 August 2023.

The dividend will be payable in US dollars, or in pounds sterling or Hong Kong dollars at the forward exchange rates quoted by HSBC Bank plc in London at or about 11.00am on 11 September 2023. Particulars of these arrangements will be sent to shareholders on or about 18 August 2023 and changes to currency elections must be received by 7 September 2023. The ordinary shares in London, Hong Kong and Bermuda, and American Depositary Shares ('ADSs') in New York will be quoted ex-dividend on 10 August 2023.

The dividend will be payable on ADSs, each of which represents five ordinary shares, on 21 September 2023 to holders of record on 11 August 2023. The dividend of $0.50 per ADS will be payable by the depositary in US dollars. Alternatively, the cash dividend may be invested in additional ADSs by participants in the dividend reinvestment plan operated by the depositary. Elections must be received by 1 September 2023.

Any person who has acquired ordinary shares registered on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register but who has not lodged the share transfer with the Principal Registrar in the UK, Hong Kong Overseas Branch Registrar or Bermuda Overseas Branch Registrar should do so before 4.00pm local time on 11 August 2023 in order to receive the dividend.

Ordinary shares may not be removed from or transferred to the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 11 August 2023. Any person wishing to remove ordinary shares to or from each register must do so before 4.00pm local time on 10 August 2023.

Transfer of ADSs must be lodged with the depositary by 11.00am on 11 August 2023 in order to receive the dividend. ADS holders who receive a cash dividend will be charged a fee, which will be deducted by the depositary, of $0.005 per ADS per cash dividend.

8	Dividend on preference share

A quarterly dividend of £0.01 per Series A sterling preference share is payable on 15 March, 15 June, 15 September and 15 December 2023 for the quarter then ended at the sole and absolute discretion of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC Holdings plc has approved a quarterly dividend to be payable on 15 September 2023 to holders of record on 31 August 2023.

9	Proposed interim dividends for 2023

As previously communicated, given our current returns trajectory, we have established a dividend payout ratio of 50% of reported earnings per share for 2023 and 2024, excluding material significant items (including the planned sale of our retail banking operations in France and the agreed sale of our banking business in Canada). The Group has reverted to a policy of paying quarterly dividends from the first quarter of 2023. The dividend policy has the flexibility to adjust reported earnings per ordinary share ('EPS') for material significant items such as goodwill or intangibles impairments and may be supplemented from time to time by buy-backs or special dividends, should the Group find itself in an excess capital position absent compelling investment opportunities to deploy that excess.

Dividends are declared in US dollars and, at the election of the shareholder, paid in cash in one of US dollars, pounds sterling or Hong Kong dollars.

10	Earnings release

An earnings release for the three-month period ending 30 September 2023 is expected to be issued on 30 October 2023.

11	Final results

The results for the year to 31 December 2023 are expected to be announced on 21 February 2024.

12	Corporate governance

We are subject to corporate governance requirements in both the UK and Hong Kong. Throughout the six months ended 30 June 2023, we complied with the applicable provisions of the UK Corporate Governance Code, and also the requirements of the Hong Kong Corporate Governance Code. The UK Corporate Governance Code is available at www.frc.org.uk and the Hong Kong Corporate Governance Code is available at www.hkex.com.hk.

Under the Hong Kong Code, the Group Audit Committee should be responsible for the oversight of all risk management and internal control systems, unless expressly addressed by a separate risk committee. Our Group Risk Committee is responsible for oversight of internal control, other than internal financial controls, and risk management systems.

The Board has codified obligations for transactions in Group securities in accordance with the requirements of the Market Abuse Regulation and the rules governing the listing of securities on the HKEx, save that the HKEx has granted waivers from strict compliance with the rules that take into account accepted practices in the UK, particularly in respect of employee share plans.

Following specific enquiries all Directors have confirmed that they have complied with their obligations in respect of transacting in Group securities throughout the period.

There have been no material changes to the information disclosed in the Annual Report and Accounts 2022 in respect of the remuneration of employees, remuneration policies, bonus and share option plans and training schemes. Details of the number of employees are provided on page 33 of the Interim Report 2023.

13	Changes in Directors' details

Changes in current Directors' details since the date of the Annual Report and Accounts 2022, which are required to be disclosed pursuant to Rule 13.51(2) and Rule 13.51B(1) of the Hong Kong Listing Rules, are set out below.

Georges Elhedery

Appointed to the Board on 1 January 2023.

James Anthony Forese

Appointed Chair of the Group Risk Committee and to the Group Audit Committee on 5 May 2023. He also stepped down from the Group Remuneration Committee.

Kalpana Morparia

Appointed to the Board, Group Risk Committee and Nomination & Corporate Governance Committee on 1 March 2023.

Eileen K Murray

Appointed to the Group Remuneration Committee on 5 May 2023.

Jackson Tai

Retired from the Board, Group Risk Committee, Nomination & Corporate Governance Committee and Group Audit Committee on 5 May 2023.

14	Going concern basis

As mentioned in Note 1 'Basis of preparation and material accounting policies' on page 115, the financial statements are prepared on a going concern basis as the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include high interest and inflationary stress scenarios that reflect the intensification of ongoing global energy supply issues, the impact of the Russia-Ukraine war, structural changes from the Covid-19 pandemic, and ongoing vulnerabilities in China, as well as the potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.

In particular, HSBC's principal activities, business and operating models, strategic direction, and top and emerging risks are addressed in the Overview section. A financial summary, including a review of the consolidated income statement and consolidated balance sheet, is provided in the 'Interim management report' section. HSBC's objectives, policies and processes for managing credit, liquidity and market risk are described in the 'Risk review' section of the Annual Report and Accounts 2022. HSBC's approach to capital management and allocation is described in the 'Treasury risk' section of the Annual Report and Accounts 2022.

15	Telephone and online share dealing service

For shareholders on the Principal Register who are resident in the UK, with a UK postal address, and who hold an HSBC Bank plc personal current account, the HSBC InvestDirect share dealing service is available for buying and selling HSBC Holdings plc ordinary shares. Details are available from: HSBC InvestDirect, Forum 1, Parkway, Whiteley PO15 7PA; or UK telephone: +44 (0) 3456 080848, or from an overseas telephone: +44 (0) 1226 261090; or website: www.hsbc.co.uk/investments/products-and-services/invest-direct.

16	Stock symbols

HSBC Holdings plc ordinary shares trade under the following stock symbols:

London Stock Exchange	HSBA
Hong Kong Stock Exchange	5
New York Stock Exchange (ADS)	HSBC
Bermuda Stock Exchange	HSBC.BH

17	Copies of the Interim Report 2023 and shareholder enquiries and communications

Further copies of the Interim Report 2023 may be obtained from Global Communications, HSBC Holdings plc, 8 Canada Square, London E14 5HQ, United Kingdom; from Communications (Asia), The Hongkong and Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong Kong; or from US Communications, HSBC Bank USA, N.A., 1 West 39th Street, 9th Floor, New York, NY 10018, USA. The Interim Report 2023 may also be downloaded from the HSBC website, www.hsbc.com.

Shareholders may at any time choose to receive corporate communications in printed form or to receive notifications of their availability on HSBC's website. To receive notifications of the availability of a corporate communication on HSBC's website by email, or to revoke or amend an instruction to receive such notifications by email, go to www.hsbc.com/ecomms. If you provide an email address to receive electronic communications from HSBC, we will also send notifications of any future dividend entitlements by email. If you received a notification of the availability of this document on HSBC's website and would like to receive a printed copy or, if you would like to receive future corporate communications in printed form, please write or send an email (quoting your shareholder reference number) to the appropriate Registrar at the address given below. Printed copies will be provided without charge.

Any enquiries relating to your shareholdings on the share register (for example transfers of shares, change of name or address, lost share certificates or dividend cheques) should be sent to the Registrar at the address given below. The Registrars offer an online facility, Investor Centre, which enables shareholders to manage their shareholding electronically.

Principal Register

Hong Kong Overseas Branch Register

Bermuda Overseas Branch Register

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol BS99 6ZZ

United Kingdom

Computershare Hong Kong Investor

Services Limited

Rooms 1712-1716, 17th Floor

Hopewell Centre

183 Queen's Road East

Hong Kong

Investor Relations Team

HSBC Bank Bermuda Limited

37 Front Street

Hamilton HM 11

Bermuda

Telephone: +44 (0) 370 702 0137

Email: [email protected]

Web: www.investorcentre.co.uk/contactus

Telephone: +852 2862 8555

Email: [email protected]

Web: www.investorcentre.com/hk

Email: [email protected]

Web: www.investorcentre.com/bm

Any enquiries relating to ADSs should be sent to the depositary at:

The Bank of New York Mellon

Shareowner Services

P.O. Box 43006

Providence RI 02940-3078

USA

Telephone (US): +1 877 283 5786

Telephone (international): +1 201 680 6825

Email: [email protected]

Web: www.mybnymdr.com

A Chinese translation of this and future documents may be obtained on request from the Registrar. Please also contact the Registrar if you have received a Chinese translation of this document and do not wish to receive such translations in future.

Persons whose shares are held on their behalf by another person may have been nominated to receive communications from HSBC pursuant to section 146 of the UK Companies Act 2006 ('nominated person'). The main point of contact for a nominated person remains the registered shareholder (for example your stockbroker, investment manager, custodian or other person who manages the investment on your behalf). Any changes or queries relating to a nominated person's personal details and holding (including any administration thereof) must continue to be directed to the registered shareholder and not HSBC's Registrar. The only exception is where HSBC, in exercising one of its powers under the UK Companies Act 2006, writes to nominated persons directly for a response.

本中期業績報告及日後的相關文件均備有中譯本，如有需要，請向適當的股份登記處索取。股東如收到本報告的中譯本，但不希望再收取此等中譯本，亦請聯絡股份登記處。

Cautionary statement regarding forward-looking statements

This Interim Report 2023 contains certain forward-looking statements with respect to HSBC's: financial condition; results of operations and business, including the strategic priorities; financial, investment and capital targets; and ESG targets, commitments and ambitions described herein.

Statements that are not historical facts, including statements about HSBC's beliefs and expectations, are forward-looking statements. Words such as 'may', 'will', 'should', 'expects', 'targets', 'anticipates', 'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', or the negative thereof, other variations thereon or similar expressions are intended to identify forward-looking statements. These statements are based on current plans, information, data, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.

Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC's Directors, officers or employees to third parties, including financial analysts.

Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement.

These include, but are not limited to:

- changes in general economic conditions in the markets in which we operate, such as new, continuing or deepening recessions, prolonged inflationary pressures and fluctuations in employment levels and the creditworthiness of customers beyond those factored into consensus forecasts (including, without limitation, as a result of the Russia-Ukraine war); the Russia-Ukraine war and its impact on global economies and the markets where HSBC operates, which could have a material adverse effect on (among other things) our financial condition, results of operations, prospects, liquidity, capital position and credit ratings; deviations from the market and economic assumptions that form the basis for our ECL measurements (including, without limitation, as a result of the Russia-Ukraine war and inflationary pressures); potential changes in HSBC's dividend policy; changes and volatility in foreign exchange rates and interest rates levels, including the accounting impact resulting from financial reporting in respect of hyperinflationary economies; volatility in equity markets; lack of liquidity in wholesale funding or capital markets, which may affect our ability to meet our obligations under financing facilities or to fund new loans, investments and businesses; geopolitical tensions or diplomatic developments producing social instability or legal uncertainty, such as the Russia-Ukraine war (including the continuation and escalation thereof) and the related imposition of sanctions and trade restrictions, supply chain restrictions and disruptions, sustained increases in energy prices and key commodity prices, claims of human rights violations, diplomatic tensions, including between China and the US, the UK, the EU, India and other countries, and developments in Hong Kong and Taiwan, alongside other potential areas of tension, which may adversely affect HSBC by creating regulatory, reputational and market risks; the efficacy of government, customer and HSBC's actions in managing and mitigating ESG risks, in particular climate risk, nature-related risks and human rights risks, and in supporting the global transition to net zero carbon emissions, each of which can impact HSBC both directly and indirectly through our customers and which may result in potential financial and non-financial impacts; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks' policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; societal shifts in customer financing and investment needs, including consumer perception as to the continuing availability of credit; exposure to counterparty risk, including third parties using us as a conduit for illegal activities without our knowledge; the discontinuation of certain key Ibors and the development of near risk-free benchmark rates, as well as the transition of legacy Ibor contracts to near risk-free benchmark rates, which continues to expose HSBC to execution risks, including in relation to the effectiveness of its Ibor remediation strategy, and increases some financial and non-financial risks; and price competition in the market segments we serve;

- changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities in the principal markets in which we operate and the consequences thereof (including, without limitation, actions taken as a result of the impact of the Russia-Ukraine war on inflation); initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks, which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; changes to tax laws and tax rates applicable to HSBC, including the imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; the UK's relationship with the EU, which continues to be characterised by uncertainty and political disagreement, particularly with respect to the regulation of financial services, despite the signing of the Trade and Cooperation Agreement between the UK and the EU; changes in UK macroeconomic and fiscal policy, which may result in fluctuations in the value of the pound sterling; general changes in government policy that may significantly influence investor decisions; the costs, effects and outcomes of regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies; and

- factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques); our ability to achieve our financial, investment, capital and ESG targets, commitments and ambitions (including with respect to the commitments set forth in our thermal coal phase-out policy and our energy policy and our targets to reduce our on-balance sheet financed emissions in eight high-emitting sectors), which may result in our failure to achieve any of the expected benefits of our strategic priorities; model limitations or failure, including, without limitation, the impact that high inflationary pressures and rising interest rates have had on the performance and usage of financial models, which may require us to hold additional capital, incur losses and/or use compensating controls, such as judgemental post-model adjustments, to address model limitations; changes to the judgements, estimates and assumptions we base our financial statements on; changes in our ability to meet the requirements of regulatory stress tests; a reduction in the credit ratings assigned to us or any of our subsidiaries, which could increase the cost or decrease the availability of our funding and affect our liquidity position and net interest margin; changes to the reliability and security of our data management, data privacy, information and technology infrastructure, including threats from cyber-attacks, which may impact our ability to service clients and may result in financial loss, business disruption and/or loss of customer services and data; the accuracy and effective use of data, including internal management information that may not have been independently verified; changes in insurance customer behaviour and insurance claim rates; our dependence on loan payments and dividends from subsidiaries to meet our obligations; changes in our reporting frameworks and accounting standards, which have had and may continue to have a material impact on the way we prepare our financial statements; our success in adequately integrating SVB UK into our CMB business; changes in our ability to manage third-party, fraud and reputational risks inherent in our operations; employee misconduct, which may result in regulatory sanctions and/or reputational or financial harm; changes in skill requirements, ways of working and talent shortages, which may affect our ability to recruit and retain senior management and diverse and skilled personnel; and changes in our ability to develop sustainable finance and climate-related products consistent with the evolving expectations of our regulators, and our capacity to measure the climate impact from our financing activity (including as a result of data limitations and changes in methodologies), which may affect our ability to achieve our climate ambition, our targets to reduce financed emissions in our high-emitting sectors portfolio and the commitments set forth in our thermal coal phase-out policy and our energy policy, and increase the risk of greenwashing. Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in 'Areas of Special Interest' on pages 61 to 63 of this Interim Report 2023.

Additional detailed information concerning important factors, including but not limited to ESG-related factors, that could cause actual results to differ materially from those anticipated or implied in any forward-looking statement in this Interim Report 2023 is available in our Annual Report and Accounts for the fiscal year ended 31 December 2022 which was filed with the SEC on Form 20-F on 22 February 2023.

Certain defined terms

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

Abbreviations

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

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

This document comprises the Interim Report 2023 and information herein has been filed on Form 6-K with the US Securities and Exchange Commission for HSBC Holdings plc and its subsidiary and associated undertakings.

HSBC Holdings plc

Incorporated in England with limited liability. Registered in England: number 617987

Registered Office and Group Head Office

8 Canada Square, London E14 5HQ, United Kingdom

Web: www.hsbc.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Holdings plc.

Published by Global Finance, HSBC Holdings plc, London

Designed by Superunion, London (cover and 'Overview' section) and by Global Finance, HSBC Holdings plc, London (rest of the Interim Report 2023)

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

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END

IR FIFFTTDILIIV

TIDM	HSBA
Share Price	1,578.60p0.95%
Market Cap	£281.24bn

Date	1 Aug 2023
Time	16:30:07
Category	Results
ID	9039H

TIDM	HSBA
Share Price	1,578.60p0.95%
Market Cap	£281.24bn

Date	1 Aug 2023
Time	16:30:07
Category	Results
ID	9039H

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Half Year Report - 2023 Interim Report - Part 4