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1H20    First half of 2020         2Q20    Second quarter of 2020

2H19    Second half of 2019     1Q20    First quarter of 2020

1H19    First half of 2019         2Q19    Second quarter of 2019

1Q19    First quarter of 2019

•

changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment and creditworthy customers beyond those factored into consensus forecasts (including, without limitation, as a result of the Covid-19 outbreak); the Covid-19 outbreak, which will have adverse impacts on our income due to lower lending and transaction volumes, lower wealth and insurance manufacturing revenue, and lower or negative interest rates in markets where we operate, as well as, more generally, the potential for material adverse impacts on our financial condition, results of operations, prospects, liquidity, capital position and

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•

changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities in the principal markets in which we operate and the consequences thereof (including, without limitation, actions taken as a result of the Covid-19 outbreak); initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks, which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; the UK’s exit from the EU, which may result in a prolonged period of uncertainty, unstable economic conditions and market volatility, including currency fluctuations; passage of the Hong Kong national security law and restrictions on telecommunications, as well as the US Hong Kong Autonomy Act, which have caused tensions between China, the US and the UK; general changes in government policy that may significantly influence investor decisions; the costs, effects and outcomes of regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies; and

•

factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques); our ability to achieve our targets, which may result in our failure to achieve any of the expected benefits of our strategic initiatives; model limitations or failure, including, without limitation, the impact that the consequences of the Covid-19 outbreak 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 overlays and overrides, 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 rating assigned to us or any of our subsidiaries, which could increase the cost or decrease the availability of our funding and affect our liquidity position and net interest margin; changes to the reliability and security of our data management, data privacy, information and technology infrastructure, including threats from cyber-attacks, which may impact our ability to service clients and may result in financial loss, business disruption and/ or loss of customer services and data; changes in insurance customer behaviour and insurance claim rates; our dependence on loan payments and dividends from subsidiaries to meet our obligations; changes in accounting standards, which may have a material impact on the way we prepare our financial statements; changes in our ability to manage third-party, fraud and reputational risks inherent in our operations; employee misconduct, which may result in regulatory sanctions and/or reputational or financial harm; and changes in skill requirements, ways of working and talent shortages, which may affect our ability to recruit and retain senior management and diverse and skilled personnel. Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; and our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in ‘Top and emerging risks’ on pages 76 to 81 of the Annual Report and Accounts 2019.

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•	Reported profit after tax down 69% to $3.1bn and reported profit before tax down 65% to $4.3bn from higher ECL and lower revenue. Reported profit in 1H20 also included a $1.2bn impairment of software intangibles, mainly in Europe.

•	In Asia, we reported profit before tax of $7.4bn in 1H20, despite higher ECL, demonstrating the strength and continued resilience of our operations in the region and underlining the importance of Asia to the Group. Higher ECL charges materially impacted profitability in our markets across the rest of the world, notably in our operations throughout Europe.

•	Reported revenue down 9% to $26.7bn, reflecting the impact of interest rate reductions, as well as adverse market impacts in life insurance manufacturing and adverse valuation adjustments in GBM, notably in 1Q20. These factors more than offset higher revenue in Global Markets.

•	Net interest margin (‘NIM’) of 1.43% in 1H20, down 18 basis points (‘bps’) from 1H19. NIM in 2Q20 was 1.33%, down 21bps from 1Q20, primarily reflecting the initial impact of the reduction in interest rates due to the Covid-19 outbreak.

•

Reported ECL increased by $5.7bn to $6.9bn due to the impact of the Covid-19 outbreak and the forward economic outlook, and due to an increase in charges related to specific wholesale customers. ECL (annualised) as a percentage of average gross loans and advances to customers was 1.33% in 1H20, while allowance for ECL against loans and advances to customers increased from $8.7bn at 31 December 2019 to $13.2bn at 30 June 2020.

•	Reported operating expenses down 4%, despite a $1.2bn impairment of software intangibles. Adjusted operating expenses fell 5%, despite continued investment, due to lower performance-related pay and reduced discretionary costs.

•

In 1H20, lending decreased by $18bn on a reported basis. On a constant currency basis, lending increased by $12bn, reflecting corporate customers drawing on existing and new credit lines and re-depositing these to increase cash balances in 1Q20, which was partly offset by paydowns in 2Q20. Deposits grew by $93bn on a reported basis and $133bn on a constant currency basis, with growth in all global businesses, including through the depositing of loans from government-backed schemes.

•	Common equity tier 1 capital (‘CET1’) ratio of 15.0%, up 30bps from 4Q19, as higher CET1 capital, which included an increase from the cancellation of the 4Q19 dividend and the current suspension of dividends on ordinary shares, more than offset the impact of RWA growth.

•	Reported profit after tax down 88% to $0.6bn and reported profit before tax down 82% to $1.1bn due to higher ECL and lower revenue, which included the non-recurrence of a 2Q19 dilution gain of $0.8bn. This was partly offset by a reduction in operating expenses, despite a $1.2bn impairment of software intangibles.

•

Reported profit after tax down 75% to $0.6bn and reported profit before tax down 66% to $1.1bn, reflecting higher ECL, primarily in CMB, which reported a loss before tax in 2Q20. Lower revenue reflected the impact of interest rate reductions, with net interest margin falling by 21bps to 1.33%. This was partly offset by the partial reversal of the adverse market impacts in life insurance manufacturing and valuation adjustments in GBM recorded in 1Q20. Results in 2Q20 were also adversely impacted by a $1.2bn impairment of software intangibles.

•	We continue to face a wide range of potential economic outcomes for the second half of 2020 and into 2021, partly dependent on the extent of any potential impacts from new waves of Covid-19, the path to the development of a possible vaccine and market and consumer confidence levels. Heightened geopolitical risk could also impact a number of our markets, including Hong Kong and the UK.

•

Applying a range of weightings to our ECL sensitivity analysis, as disclosed on pages 60 to 66, could result in an ECL charge in the range of $8bn to $13bn for 2020. This range, which continues to be subject to a high degree of uncertainty due to Covid-19 and geopolitical tensions, is higher than at 1Q20 given the deterioration in consensus economic forecasts and actual loss experience during 2Q20.

•	Lower global interest rates and reduced customer activity have put increasing pressure on revenue, and are expected to continue to do so.

•	We intend to accelerate our transformation programme and execute additional cost actions to help mitigate pressures on revenue and create capacity for further investments in technology.

•	We expect mid-to-high single-digit percentage growth in RWAs in 2020, primarily from credit rating migration movements, which is expected to have an adverse impact on our CET1 ratio. We will continue to aim to reduce RWAs in low-returning areas, and improve efficiency to allow resources to be further and faster allocated to areas of competitive advantage, higher returns and growth.

•	Given the current high degree of uncertainty, we are continuing to monitor closely the implications on our business plan and medium-term financial targets, while also undertaking a review of our future dividend policy. We intend to provide an update on our medium-term financial targets and dividend policy at our year-end results for 2020.

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2	HSBC Holdings plc

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Key financial metrics

	Half-year to
Reported results	30 Jun 2020		30 Jun 2019		31 Dec 2019
Reported revenue ($m)	26,745		29,372		26,726
Reported profit before tax ($m)	4,318		12,407		940
Reported profit after tax ($m)	3,125		9,937		(1,229	)
Profit attributable to the ordinary shareholders of the parent company ($m)	1,977		8,507		(2,538	)
Cost efficiency ratio (%)	61.8		58.4		94.3
Basic earnings per share ($)	0.10		0.42		(0.13	)
Diluted earnings per share ($)	0.10		0.42		(0.13	)
Return on average ordinary shareholders’ equity (annualised) (%)	2.4		10.4		(3.0	)
Net interest margin (%)1	1.43		1.61		1.58
Alternative performance measures <>
Adjusted revenue ($m)	26,477		27,815		26,632
Adjusted profit before tax ($m)	5,635		12,273		9,660
Adjusted cost efficiency ratio (%)	56.4		56.6		61.8
Annualised expected credit losses and other credit impairment charges (‘ECL’) as a % of average gross loans and advances to customers (%)	1.33		0.22		0.30
Return on average tangible equity (annualised) (%)1,2	3.8		11.2		8.4
			At
Balance sheet	30 Jun 2020		30 Jun 2019		31 Dec 2019
Total assets ($m)	2,922,798		2,751,273		2,715,152
Net loans and advances to customers ($m)	1,018,681		1,021,632		1,036,743
Customer accounts ($m)	1,532,380		1,380,124		1,439,115
Average interest-earning assets ($m)1	2,034,939		1,912,708		1,922,822
Loans and advances to customers as % of customer accounts (%)	66.5		74.0		72.0
Total shareholders’ equity ($m)	187,036		192,676		183,955
Tangible ordinary shareholders’ equity ($m)	147,879		145,441		144,144
Net asset value per ordinary share at period end ($)3,4	8.17		8.35		8.00
Tangible net asset value per ordinary share at period end ($)4	7.34		7.19		7.13
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)5	15.0		14.3		14.7
Risk-weighted assets ($m)5	854,552		885,971		843,395
Total capital ratio (%)5	20.7		20.1		20.4
Leverage ratio (%)5	5.3		5.4		5.3
High-quality liquid assets (liquidity value) ($bn)	654		533		601
Liquidity coverage ratio (%)	148		136		150
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions)	20,162		20,221		20,206
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)	20,198		20,286		20,280
Average basic number of $0.50 ordinary shares outstanding (millions)	20,162		20,124		20,191
Dividend per ordinary share (in respect of the period) ($)1	—		0.20		0.30

1	For these metrics, half-year to 31 December 2019 is calculated on a full-year basis and not a 2H19 basis.

2	Annualised profit attributable to ordinary shareholders, excluding impairment of goodwill and other intangible assets and changes in present value of in-force insurance contracts (‘PVIF’) (net of tax), divided by average ordinary shareholders’ equity excluding goodwill, PVIF and other intangible assets (net of deferred tax).

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

4	Excludes impact of $0.10 per share dividend in 1Q19, following a June 2019 change in accounting practice on the recognition of interim dividends, from the date of declaration to the date of payment.

5

Unless otherwise stated, regulatory capital ratios and requirements are calculated in accordance with the transitional arrangements of the Capital Requirements Regulation in force in the EU at the time, including the regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’ in article 473a. The capital ratios and requirements at 31 December 2019 and 30 June 2020 are reported in accordance with the revised Capital Requirements Regulation and Directive (‘CRR II’), as

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	Our stakeholders	How we have engaged
	Customers	The Covid-19 outbreak has posed significant challenges for our customers worldwide. Our immediate priority is to do what we can to provide them with support and flexibility. This has included offering payment holidays and restructuring mortgage payments, as well as extending relief loans or temporary credit limit increases for borrowers. We are working across many markets to offer relief through market-wide and HSBC-led schemes. In the UK, we granted relief to our personal lending customers on 65,000 mortgage accounts and 153,000 personal loan and credit card accounts during the first half of the year. In Hong Kong, we initiated a simple digital and branch registration process to help customers gain access to government funds, following the launch of a government cash payout scheme. On the first day of the scheme, we received one million registrations. For our wholesale lending customers, we provided approximately $33bn of facilities through market-wide schemes and $19bn via HSBC-led schemes in the first half of the year, and helped them to navigate the current environment. For further details on our customer relief programmes, see page 70. We have taken steps to keep many of our branches open while protecting customers and employees. However, with customers doing more of their banking online, we have also deployed new technology to help enable them to engage with us in new ways, including video calls with personal and business relationship managers, and, in some markets, online capabilities for payment relief programmes.
	Employees	We moved quickly to protect our people. More than 230,000, or 85%, of our total workforce are now enabled to work from their homes if needed. We provided new and enhanced well-being support to employees during this challenging time. Our dedicated Covid-19 resources are accessible to everyone and include expert medical guidance, education on mental health awareness, training on how to lead remote teams, and advice on managing stress and working remotely. Our employee assistance programmes, which provide confidential counselling to employees, continue to provide clinical support. We have encouraged a culture of looking out for each other, and our employee networks have held regular support calls for those experiencing mental health challenges, and for those with caring responsibilities. Listening to employees is vital to ensure we provide the right support. More than 118,000 employees responded to our employee survey, helping us understand how Covid-19 is impacting them and their thoughts about the future. Overall, 89% of people said they were getting the information they needed and 86% reported they were getting the support they needed from their line manager. We continue to use this data and insight to shape our work.
	Communities	In the first half of the year, we committed more than $20m of donations for programmes and partners that support the medical response, relieve food insecurity and provide access to help for vulnerable people.
	Regulators and governments	We have engaged proactively with regulators and governments globally regarding the policy changes issued in response to Covid-19 to help our customers, to contribute to normalisation and recovery, and to manage the operational capacity at both banks and regulators.
	Suppliers	We made early payments to thousands of our suppliers during the first half of the year to support them through the pandemic.
	Investors	At this year’s Annual General Meeting (‘AGM’), it was unfortunately not possible for shareholders to attend due to the introduction of social distancing measures. Shareholders were instead encouraged to vote by proxy and submit questions in advance. After the AGM, responses to the most frequent questions across key themes were published on our website. HSBC, in line with all other large UK-based banks and at the direct request of the Group’s lead regulator (the UK Prudential Regulation Authority), cancelled the fourth interim dividend of 2019. We have also suspended dividend payments until the end of 2020. We profoundly regret the impact this will have on shareholders, their families and their businesses. The Board will review the position at the 2020 year-end results.

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Reported results

	Half-year to						Quarter ended
Reported results	30 Jun 2020 $m		30 Jun 2019  $m		31 Dec 2019 $m		30 Jun 2020 $m		30 Jun 2019  $m		31 Mar 2020  $m
Net operating income before change in expected credit losses and other credit impairment charges (‘revenue’)	26,745		29,372		26,726		13,059		14,944		13,686
ECL	(6,858	)	(1,140	)	(1,616	)	(3,832	)	(555	)	(3,026	)
Net operating income	19,887		28,232		25,110		9,227		14,389		10,660
Total operating expenses	(16,527	)	(17,149	)	(25,200	)	(8,675	)	(8,927	)	(7,852	)
Operating profit/(loss)	3,360		11,083		(90	)	552		5,462		2,808
Share of profit in associates and joint ventures	958		1,324		1,030		537		732		421
Profit before tax	4,318		12,407		940		1,089		6,194		3,229
Tax expense	(1,193	)	(2,470	)	(2,169	)	(472	)	(1,167	)	(721	)
Profit/(loss) after tax	3,125		9,937		(1,229	)	617		5,027		2,508

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•	a $1.0bn impairment of capitalised software related principally to businesses within HSBC Bank plc. This reflected underperformance and a deterioration in the future forecasts of these businesses, substantially relating to prior periods (for more information, see Note 11 on the interim condensed financial statements); and

•	higher restructuring and other related costs of $0.5bn, of which $116m related to severance and $0.2bn related to an impairment of software intangibles, compared with $0.3bn in 1H19.

•	customer redress programme costs in respect of payment protection insurance (‘PPI’) of $0.1bn in 1H20, compared with $0.6bn in 1H19.

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Adjusted results <>	Half-year to							1H20 vs 1H19
	30 Jun 2020 $m		30 Jun 2019  $m		31 Dec 2019  $m			$m		%
Revenue	26,477		27,815		26,632			(1,338	)	(5	)
ECL	(6,858	)	(1,088	)	(1,554	)		(5,770	)	>(100)
Total operating expenses	(14,942	)	(15,739	)	(16,448	)		797		5
Operating profit	4,677		10,988		8,630			(6,311	)	(57	)
Share of profit in associates and joint ventures	958		1,285		1,030			(327	)	(25	)
Profit before tax	5,635		12,273		9,660			(6,638	)	(54	)

	Half-year to
	30 Jun 2020 $m		30 Jun 2019 $m		31 Dec 2019 $m
Reported profit before tax	4,318		12,407		940
Currency translation			(215	)	9
Significant items:	1,317		81		8,711
– costs of structural reform	—		91		67
– customer redress programmes	24		610		834
– disposals, acquisitions and investment in new businesses	8		(827	)	59
– fair value movements on financial instruments	(299	)	(50	)	(34	)
– impairment of goodwill and other intangibles	1,025		—		7,349
– restructuring and other related costs	554		287		540
– settlements and provisions in connection with legal and regulatory matters	5		(2	)	(59	)
– currency translation on significant items	—		(28	)	(45	)
Adjusted profit before tax	5,635		12,273		9,660

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Management view of adjusted revenue <>	Half-year to							1H20 vs 1H19
	30 Jun 2020 $m		30 Jun 2019 $m		31 Dec 2019 $m			$m		%
Retail Banking	6,896		7,649		7,879			(753	)	(10	)
– net interest income	6,301		6,810		7,067			(509	)	(7	)
– non-interest income	595		839		812			(244	)	(29	)
Wealth Management	3,606		4,506		4,056			(900	)	(20	)
– investment distribution	1,602		1,696		1,554			(94	)	(6	)
– life insurance manufacturing	587		1,371		1,078			(784	)	(57	)
– Global Private Banking	921		925		927			(4	)	—
net interest income	372		441		439			(69	)	(16	)
non-interest income	549		484		488			65		13
– asset management	496		514		497			(18	)	(4	)
Other1	262		404		366			(142	)	(35	)
Balance Sheet Management, Holdings interest expense and Argentina hyperinflation	487		302		191			185		61
Net operating income2	11,251		12,861		12,492			(1,610	)	(13	)

•	Net interest income was $0.5bn lower due to narrower margins, notably in the second quarter, as global interest rates fell as a result of the Covid-19 outbreak. This reduction was partly offset by deposit balance growth of $57bn or 9%, particularly in Hong Kong and the UK, and lending balance growth of $14bn or 4% compared with 1H19.

•	Non-interest income declined by $0.2bn from lower fee income earned on unsecured lending products.

•

Life insurance manufacturing revenue reduced by $0.8bn or 57%, primarily from an adverse movement in market impacts of $482m (an adverse movement of $334m in 1H20, compared with a favourable movement of $148m in 1H19). The value of new business written fell by $0.3bn or 37% as the reduction in volumes resulting from the Covid-19 outbreak was in part mitigated by actions to support remote engagement with customers, including digital enhancements to sales processes.

•	Investment distribution revenue was $0.1bn or 6% lower reflecting adverse market conditions in Hong Kong, which resulted in lower mutual fund sales, partly offset by higher brokerage fees from increased transaction volumes.

•	Global Private Banking revenue was stable, as higher investment revenue from increased market volatility and a rise in fees from advisory and discretionary mandates was broadly offset by the impact of lower interest rates on deposit revenue.

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Management view of adjusted revenue <>	Half-year to							1H20 vs 1H19
	30 Jun 2020 $m		30 Jun 2019 $m		31 Dec 2019 $m			$m		%
Global Trade and Receivables Finance	892		920		890			(28	)	(3	)
Credit and Lending	2,741		2,685		2,674			56		2
Global Liquidity and Cash Management	2,347		2,986		2,909			(639	)	(21	)
Markets products, Insurance and Investments, and Other1	890		1,058		940			(168	)	(16	)
Balance Sheet Management, Holdings interest expense and Argentina hyperinflation	130		(2	)	(34	)		132		>100
Net operating income2	7,000		7,647		7,379			(647	)	(8	)

•	In GLCM, revenue decreased by $0.6bn or 21% due to the impact of the lower interest rate environment, mainly in Hong Kong and the UK. This was partly offset by an 11% increase in average deposit balances, which was across all regions, but mainly concentrated in the UK and the US.

•	In Global Trade and Receivables Finance, revenue decreased by $28m or 3% from lower fees and balances, notably in Hong Kong and the UK, reflecting a reduction in global trade volumes as a result of the Covid-19 crisis. This was partly offset by wider margins in Latin America and Asia.

•	In ‘Other’ products, revenue was $168m lower, reflecting a reduction in Insurance and Investments (down $29m), lower revaluation gains on shares (down $27m) and lower revenue from Global Markets products (down $19m). In addition, 1H19 included a disposal gain of $24m in Latin America.

•	In Credit and Lending, revenue increased by $56m or 2%, reflecting balance growth in all regions from increased customer drawdowns and government-backed lending schemes, partly offset by lower margins.

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Management view of adjusted revenue <>	Half-year to							1H20 vs 1H19
	30 Jun 2020 $m		30 Jun 2019 $m		31 Dec 2019 $m			$m		%
Global Markets	4,272		3,096		2,584			1,176		38
– FICC	3,913		2,493		2,204			1,420		57
Foreign Exchange	1,917		1,275		1,370			642		50
Rates	1,351		865		575			486		56
Credit	645		353		259			292		83
– Equities	359		603		380			(244	)	(40	)
Securities Services1	944		985		1,020			(41	)	(4	)
Global Banking1	1,944		1,887		1,953			57		3
Global Liquidity and Cash Management	1,094		1,357		1,349			(263	)	(19	)
Global Trade and Receivables Finance	393		398		394			(5	)	(1	)
Principal Investments	(12	)	120		138			(132	)	>(100)
Credit and funding valuation adjustments	(355	)	14		18			(369	)	>(100)
Other2	(300	)	(328	)	(333	)		28		9
Balance Sheet Management, Holdings interest expense and Argentina hyperinflation	198		61		(10	)		137		>100%
Net operating income3	8,178		7,590		7,113			588		8

•

In Global Markets, revenue increased by $1.2bn or 38%, as client activity increased due to higher volatility levels supporting an improved FICC performance across Foreign Exchange, Rates and Credit. By contrast, lower Equities revenue reflected a weaker performance in prime financing, which included the effect of dividend cancellation and reduced client activity, as well as the release of a historical provision in 1H19.

•	Global Banking revenue increased by $57m or 3% from higher capital markets revenue, increased corporate lending balances and the impact of widening credit spreads on portfolio hedges, partly offset by losses on legacy corporate restructuring positions.

•	In GLCM, revenue decreased $0.3bn or 19% due to the lower interest rate environment across most regions, although we grew average balances, notably in the UK and the US.

•	In Principal Investments, revenue fell by $132m, reflecting revaluation losses incurred in 1Q20 as a result of the Covid-19 outbreak, mainly in Europe, which were substantially reversed during 2Q20.

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Management view of adjusted revenue <>	Half-year to							1H20 vs 1H19
	30 Jun 2020 $m		30 Jun 2019 $m		31 Dec 2019 $m			$m		%
Central Treasury1, 2	201		138		41			63		46
Legacy portfolios	(48	)	(83	)	(28	)		35		42
Other	(105	)	(338	)	(365	)		233		69
Net operating income3	48		(283	)	(352	)		331		>100

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•	risks that we accept as part of doing business, such as credit risk, market risk, and capital and liquidity risk, which are controlled through both active risk management and our risk appetite;

•	risks that we incur as part of doing business, such as non-financial risks, which are actively managed to remain within an acceptable appetite; and

•	risks for which we have zero tolerance, such as knowingly engaging in activities where foreseeable reputational risk has not been appropriately considered.

Component	Measure	Risk appetite	1H20
Returns	Return on average tangible equity (‘RoTE’)	≥6.5%	3.8	%
Capital	CET1 ratio – end point basis	≥13.10%	15.0	%
Change in expected credit losses and other credit impairment charges	Change in expected credit losses and other credit impairment charges  as a % of advances: retail	≤0.50%	1.08%
	Change in expected credit losses and other credit impairment charges  as a % of advances: wholesale	≤0.45%	0.79%

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Risk	Trend	Mitigants
Externally driven
Geopolitical and macroeconomic risks	^	We monitor developments in geopolitical risk and assess what impacts these may have on our portfolios. The Covid-19 outbreak has resulted in an unprecedented global economic slowdown, with a significant increase in credit stress in the portfolio. Across the Group, we increased the frequency and depth of the monitoring activities on the portfolios. We performed stress tests and other sectoral reviews to identify portfolios or customers who were experiencing, or were likely to experience, financial difficulty as a result of the Covid-19 outbreak. We are increasing resources to help address the increased level of credit defaults in the current environment and are monitoring the impact of prolonged low interest rates.
Cyber threat and unauthorised access to systems	>	We endeavour to protect HSBC and our customers by strengthening our cyber defences, helping us to execute our business priorities safely and keep our customers’ information secure. Our data-driven approach, grounded in strong controls that mitigate advanced cyber threats, enhances our capability in threat detection, access controls and resiliency.
Regulatory developments including conduct, with adverse impact on business model and profitability	^	We monitor closely for regulatory developments and engage with regulators, as appropriate, to help ensure that new regulatory requirements, such as those in response to the Covid-19 outbreak, are implemented effectively and in a timely way.
Financial crime risk environment	>	During the first half of 2020, we continued to improve the effectiveness of our financial crime controls in accordance with our specific regulatory obligations. The application of both advanced analytics and artificial intelligence remain key elements of our next generation of tools to fight financial crime, and our investment in these areas is ongoing. As fraudulent activity is often more prevalent in times of crisis, we have put in place additional measures to help minimise and detect fraud.
Ibor transition	^	We are focused on developing RFRs alongside the supporting processes and systems to make them available to our customers. Our programme is concurrently developing the capability to transition, through repapering, outstanding Libor and Eonia contracts. We continue to engage with industry participants and the official sector to support an orderly transition.
Climate-related risks	^	We continue to improve how we identify, oversee and manage climate-related risk, both physical and transition. Our Board-approved risk appetite statement contains a qualitative statement, which will be further enhanced in 2020. Our risk management priorities are focusing on: assessing the physical and transition risk in our wholesale credit portfolio; reviewing retail mortgage exposures in respect of natural hazard risk; and developing scenarios internally for risk management, planning and stress testing. We continue to engage with our stakeholders, in particular with regard to how we compile related data and disclosures.
Internally driven
IT systems infrastructure and resilience	>	We actively monitor and improve service resilience across our technology infrastructure. We are enhancing our service management disciplines and change execution capabilities to minimise service disruption to our customers. Our IT systems have been resilient and we have further improved them to support both our customers and our people in new ways of operating during the Covid-19 outbreak.
Risks associated with workforce capability, capacity and environmental factors with potential impact on growth	^	We continue to monitor workforce capacity and capability requirements in line with our published growth strategy and any emerging issues in the markets in which we operate. We have also put in place measures to ensure that our people are properly supported and able to work safely during the Covid-19 outbreak. We are monitoring people risks that may arise due to business transformation to help ensure that we sensitively manage any redundancies and support impacted employees.
Risks arising from the receipt of services from third parties	>	We have set up a third-party risk management programme so we can better identify, understand, mitigate and manage the risks that arise from the outsourcing of services. The programme, due to conclude in the second half of 2020, aims to ensure adherence to our internal third-party risk policy and framework. We have worked closely with our third-party providers, which have faced constraints and enhanced oversight on their operations during the Covid-19 outbreak. There has been no major impact to our services during the period.
Enhanced model risk management expectations	^	We continue to strengthen our oversight of models and the second line of defence Model Risk Management function. We are embedding a new model risk policy across the Group, which includes updated controls around the monitoring and use of models. The impact of Covid-19 on model performance has highlighted the importance of the new policy, with several credit and risk models potentially requiring revisions to reflect the current extreme economic shocks and the various government support measures that are now in place.
Data management	>	We continue to enhance and advance our insights, data aggregation, reporting and decisions through ongoing improvement and investments in data governance, data quality, data privacy, data architecture, machine learning and artificial intelligence capabilities. We are continuing to work to modernise our data infrastructure, leveraging cloud technologies to increase flexibility and scalability and improve our fit-for-purpose data.

24	HSBC Holdings plc Interim Report 2020