2022-04-26 04:00Financial Performance - The adjusted profit before tax decreased by $1.6 billion to $4.7 billion compared to Q1 2021, reflecting expected credit losses and a decline in revenue [3]. - Total revenue decreased by 4% to $12.5 billion, primarily due to reduced income from wealth management and personal banking [3]. - The reported revenue for Q1 2022 was $12,464 million, an increase from $11,989 million in Q1 2021, representing a growth of 4% [5]. - Adjusted pre-tax profit for Q1 2022 reached $4,706 million, up from $3,945 million in Q1 2021, marking a 19% increase [5]. - The reported baseline profit after tax was $3.4 billion, a decrease of $1.1 billion or 25% compared to Q1 2021 [20]. - Profit attributable to ordinary shareholders was $2,803 million in Q1 2022, compared to $1,788 million in Q1 2021, marking a 56.7% increase [16]. - The effective tax rate for Q1 2022 was 17.4%, down from 21% in Q1 2021, due to changes in UK banking sector tax legislation [24]. Credit Losses and Provisions - The expected credit loss provisions for Q1 2022 were $600 million, compared to a reversal of $400 million in Q1 2021, reflecting the economic impact of the Russia-Ukraine war [3]. - The expected credit losses increased to $(642) million in Q1 2022 from $435 million in Q1 2021, indicating a significant rise in provisions [19]. - The expected credit loss provision included an additional $250 million management judgment adjustment to reflect increased uncertainty from various risks, including prolonged economic growth slowdown and geopolitical risks [66]. - The expected credit loss provisions included $300 million from wholesale loans, with $300 million also from personal loans, reflecting the impact of the economic environment [66]. Capital and Ratios - The common equity tier 1 capital ratio decreased to 14.1%, down 1.7 percentage points from Q4 2021, due to a reduction in common equity tier 1 capital and an increase in risk-weighted assets [3]. - The common equity tier 1 capital decreased to $121,447 million from $132,565 million, resulting in a common equity tier 1 ratio of 14.1%, down from 15.8% [126]. - The leverage ratio improved to 5.7% as of March 31, 2022, compared to 5.2% on December 31, 2021 [126]. - The total capital ratio decreased to 18.3% from 20.0% in the previous quarter [126]. Operating Expenses - The total operating expenses decreased to $(8,307) million in Q1 2022 from $(8,933) million in Q1 2021, reflecting a reduction of 7% [19]. - Adjusted operating expenses target for 2022 remains consistent with 2021 levels [10]. - The adjusted operating expenses were $7.9 billion, a decrease of $100 million or 2%, benefiting from cost-saving measures of $600 million [28]. Customer Loans and Assets - Customer loans increased by $9 billion on a reported basis, with a significant rise in mortgage balances contributing $5.8 billion [3]. - Total assets as of March 31, 2022, were $3,021,512 million, up from $2,957,939 million a year earlier [6]. - Customer loans net amount reached $1,055,307 million, slightly up from $1,045,814 million in Q1 2021 [6]. - The total customer loans measured at amortized cost amounted to $1,057,231 million, with a slight increase in expected credit loss coverage ratios across different risk levels [69]. Strategic Initiatives - HSBC aims to accelerate digital transformation and enhance customer service through increased technology investment [9]. - The company is committed to achieving net zero carbon emissions and assisting clients in transitioning to a net zero future [9]. - The company completed a $2 billion share buyback program on April 20, 2022, and plans to initiate an additional buyback of up to $1 billion after the annual general meeting [3]. - The company plans to continue investing in technology, including $200 million in digital banking services, despite the overall reduction in operating expenses [23]. Market and Economic Conditions - The company expects loan growth in the mid-single digits for 2022, driven by improving market conditions [4]. - Geopolitical tensions and macroeconomic risks have disrupted global supply chains, potentially impacting the group significantly [62]. - The ongoing conflict in Ukraine has led to substantial sanctions against Russia, affecting the group's operations and client base in the region [62]. - The anticipated tightening of monetary policies by central banks in response to rising inflation may lead to economic slowdowns [62]. Environmental and Governance Commitments - The company is committed to achieving net-zero emissions in its own operations and supply chain by the end of 2030, and for its customer portfolio by 2050 [64]. - The company plans to release a climate transition plan in 2023, committing to a phased reduction of fossil fuel financing [64]. - HSBC's commitment to effective risk management is crucial for navigating operational, legal, and regulatory challenges [114].