Interim Report March 2014

for the expansion of the Global Banking & Markets business. We are expecting a slight increase in revenues for 2014, although w e rst have to compensa...

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Interim Report as at 31 March 2014

Financial Highlights of the HSBC Trinkaus & Burkhardt Group 01.01. – 31.03.2014

01.01. – 31.03.2013

Change in %

174.3

170.7

2.1 >100

Income statement in €m Operating revenues Net loan impairment and other credit risk provisions Administrative expenses Pre-tax profit

– 0.8

– 0.1

126.6

117.1

8.1

57.0

58.8

– 3.1

Tax expenses

18.7

19.4

– 3.6

Net profit

38.3

39.4

– 2.8

Cost efficiency ratio of usual business activity in %

69.2

66.6



Return on equity before tax in % (projected for the full year)

16.3

17.9



Net fee income in % of operating revenues

53.5

59.6



2,572

2,520

2.1

Average number of shares in circulation in million

28.1

28.1

0.0

Earnings per share in €

1.36

1.40

– 2.8

Share price at the reporting date in €

83.0

88.0

– 5.7

2,332

2,473

– 5.7

31.03.2014 31.12.2013

Change in %

Ratios

No. of employees at the reporting date Share information

Market capitalisation at the reporting date in €m

Balance sheet figures in €m Total assets Shareholders’ equity

20,917

19,810

5.6

1,496

1,454

2.9

Regulatory ratios* Tier 1 in €m

1,197

1,304

– 8.2

Regulatory capital in €m

1,469

1,639

– 10.3

12,077

11,125

8.6

9.9

11.7



12.2

14.7



Risk-weighted assets in €m Tier 1 ratio in % Regulatory capital ratio in %

*Preliminary figures (cf. explanations in the section ‘The financial position’)

Letter from the Management Board Ladies and Gentlemen, After a difficult year in 2013, the economy in the Eurozone is starting to regain its stride. The recovery is based on a slight export revival and a less restrictive fiscal policy. While the economic environment within the Eurozone is still characterised by a low propensity to invest and high unemployment, which suggest only weak growth in consumption, the starting situation in Germany is far more positive. Germany is likely to take on a pioneering role as far as growth is concerned supported by an upturn in capital investments and in the construction sector, a further improvement in the situation on the labour market and solid private consumption as a result. As the inflation rate in the Eurozone is likely to clearly exceed the European Central Bank‘s target this and next year, monetary policy will remain extremely relaxed for the foreseeable future and therefore provide considerable support for German economic activity. The general economic setting in the emerging markets has clouded over slightly, due partly to home-made structural problems and partly to capital outflows – owing to a less expansive monetary policy on the part of the US central bank. However, other than in the Asian crisis in 1997/1998, the central banks generally have substantial currency reserves, exchange rates are more flexible and many countries are in a comfortable current account position. The foundations for a moderate economic trend in 2014 are therefore likely to have been laid on balance. The implementation of the new regulatory requirements along with stagnating revenue potential is still presenting the financial sector with major challenges. Against this backdrop, HSBC Trinkaus generated a slightly lower pre-tax profit of €57.0 million in the first quarter of 2014 (Q1 2013: €58.8 million). The contribution to the consolidated result made by the Luxembourg-based units in the

first quarter of 2013 could not be compensated in full. Net profit of €38.3 million was generated after €39.4 million for the period ending 31 March 2013. Adjusted for the withdrawal from Luxembourg, operating revenues increased by 9.0% to €174.3 million (Q1 2013 ­adjusted: €159.9 million). As part of our growth initiative we are broadening HSBC Trinkaus‘ business model, comprising the Global Banking & Markets, Commercial Banking, Global Private Banking as well as Asset Management divisions, by positioning ourselves far more strongly in the corporate banking business as ‘Leading International Bank’ in Germany. This is being carried out by extending our product offer for internationally operating MMEs as well as international corporations. Profitability The earnings components are as follows: WW

Net interest income grew by €2.6 million, despite the withdrawal from Luxembourg, from €39.3 million in the comparable prior-year period to €41.9 million. This was due above all to an increase in net interest income from the client lending business on account of higher volumes. Interest income from financial assets continued to decline, however, as maturing bonds could only be replaced by bonds offering a comparable risk profile with far lower coupons in the current market environment.

WW

Loan impairment and other credit risk provisions recorded a net release of €0.8 million in the first quarter after €0.1 million in the comparable period of 2013. Our conservative orientation is unchanged in relation to the assessment of risk provisions.

WW

The share of profit in associates was unchanged at €0.1 million.

WW

Net fee income was down by €8.6 million to €93.2 million (Q1 2013: €101.8 million). Net fee income from securities transactions came under pressure from the withdrawal

from Luxembourg on the one hand. On the other, revenues in the fixed income business with institutional clients were significantly lower than in the previous year as low returns mean that our clients’ medium-term investment goals are not being met. Net fee income from the foreign exchange and derivatives business improved, however, by €3.5 million to €19.9 million (Q1 2013: €16.4 million). Net fee income in the lending business declined from €7.5 million to €5.9 million. The growth in net fee income from the issuing and structuring business of €0.3 million to €3.4 million shows the still active role played by the bank in a leading position with respect to new issues. WW

Net trading income rose by a favourable €8.9 million to €35.2 million (Q1 2013: €26.3 million). There was a significant improvement in net income from trading with bonds and interest rate derivatives as well as equities and equity / index derivatives. In contrast to the previous quarters, client demand for trading-oriented retail products and ­certificates increased again. Foreign exchange trading ­recorded a lower result of € – 0.1 million (Q1 2013: €1.7 million) while the result from trading with derivatives held in the banking book improved to €0.2 million (Q1 2013: € – 1.2 million).

WW

Administrative expenses increased by €9.5 million, from €117.1 million to €126.6 million, due mainly to the consis­ tent implementation of our growth initiative. Personnel expenses were up by €2.9 million. The €6.5 million increase in other administrative expenses is attributable essentially to higher expenses for advertising and third-party services. The cost efficiency ratio therefore came to 69.2% in the first three months (Q1 2013: 66.6%).

WW

Income from financial assets improved from €6.3 million to €8.3 million and is mainly the result, as in the comparable prior-year period, of gains realised on the disposal of financial assets, in particular in the area of corporate bonds where credit spreads narrowed further.

WW

Net other income rose by €2.1 million to €4.1 million. This item includes rental income from a property abroad, which

is set against interest expenses for refinancing. Income from the reversal of provisions no longer required also arose in the first quarter. The asset situation HSBC Trinkaus’ total assets increased compared to the end of 2013 by €1.1 billion to €20.9 billion. Customer accounts of €12.2 billion (31 December 2013: €12.2 billion) are still our most important source of refinancing. We continue to regard this as a clear commitment on the part of the Bank’s clients to our solid business policy and high credit standing. As part of the HSBC Group, HSBC Trinkaus is still the highest rated private commercial bank in Germany with an ‘AA–(Stable)’ Fitch rating. Loans and advances to banks increased from €1.6 billion to €1.9 billion, which was balance sheet date related. The favourable increase in loans and advances to customers, from €4.9 billion to €5.4 billion, shows further successes with the implementation of our growth strategy in the business with internationally-oriented corporate clients alongside balance sheet date-related effects. Trading assets increased compared to the end of 2013 by €0.2 billion to €7.0 billion. The increase was brought about above all by equities and other non-fixed-income securities. Shareholders’ equity of €1,496.2 million is €42.5 million higher than the level as at 31 December 2013 (€1,453.7 million). The valuation reserve for financial instruments increased by €5.4 million to €138.0 million while the valuation reserve for the remeasurement of the net pension obligation declined by €4.9 million to € – 63.5 million. This is due essentially to the reduction of the technical interest rate used for the valuation of our pension commitments. The financial position The Bank’s financial position is still characterised by excellent liquidity. We continue to invest a substantial part of our surplus liquidity in eligible bonds issued by German federal states. From 2014, we are reporting the regulatory capital

r­ atios based on the provisions of the Capital Requirements Regulation (CRR). Accordingly, the regulatory capital ratio stood at 12.2% and the tier 1 ratio at 9.9% as at 31 March 2014. We therefore fulfil the regulatory capital requirements and also have sufficient capital for the planned business expansion. As the report to the (European) Banking Authority will not be submitted until after the publication of the Interim Report, these are preliminary figures. Outlook The 2014 financial year will be characterised by the further implementation of the growth initiative, which focuses on the business with MME corporate clients, but also provides for the expansion of the Global Banking & Markets business. We are expecting a slight increase in revenues for 2014, ­although we first have to compensate for the decline in ­revenues on account of our withdrawal from Luxembourg, which will affect above all Global Private Banking and is likely to lead to a lower result in this business segment. The expected slight increase in revenues will be set against higher up-front expenses due to an increase in the workforce within the scope of the expansion of business activities and additional project and IT costs for expanding the product offer. We are also planning to open four additional branches. This will result in significantly higher costs, which will be accompanied by a rising cost efficiency ratio. Our forecast therefore envisages a single-digit percentage ­decline in the result for the year.

Düsseldorf, May 2014 The Management Board

Andreas Schmitz

Norbert Reis

Paul Hagen

Carola Gräfin v. Schmettow

Consolidated Balance Sheet Assets in €m

Note

Cash reserve

31.03.2014

31.12.2013 Change in %

759.1

1,133.7

– 33.0

Loans and ­advances to banks

(8)

1,861.0

1,643.8

13.2

Loans and advances to customers

(9)

5,414.5

4,857.6

11.5

(10)

– 33.2

– 33.4

– 0.6

Net loan impairment provision Trading assets

(11)

7,013.5

6,753.6

3.8

Financial assets

(12)

5,500.4

5,124.8

7.3 – 0.9

Interests in associates

54.0

54.5

Property, plant and equipment

87.1

83.8

3.9

Intangible assets

14.0

15.9

– 11.9

Taxation recoverable

14.9

10.9

36.7

of which current

5.2

5.2

0.0

of which deferred

9.7

5.7

70.2

Other assets

231.9

164.5

41.0

Total assets

20,917.2

19,809.7

5.6

Note

31.03.2014

Deposits by banks

Liabilities in €m

(13)

2,058.8

1,269.4

62.2

Customer accounts

(14)

12,230.1

12,219.1

0.1

10.0

10.0

0.0

(15)

4,335.5

4,099.9

5.7

137.7

142.7

– 3.5

Certificated ­liabilities Trading liabilities Provisions Taxation

31.12.2013 Change in %

51.1

39.9

28.1

of which current

51.1

39.9

28.1

of which deferred

0.0

0.0

0.0

Other liabilities

272.1

229.3

18.7

Subordinated ­capital

325.7

345.7

– 5.8

Shareholders’ ­equity

1,496.2

1,453.7

2.9

Subscribed ­capital

75.4

75.4

0.0

Capital reserve

367.7

365.8

0.5

Retained ­earnings

783.0

781.9

0.1

Valuation reserve for financial ­instruments

138.0

132.6

4.1

Valuation reserve for the remea­ surement of the net pension obligation

– 63.5

– 58.6

8.4

Valuation reserve from currency conversion

2.0

1.3

53.8

193.6

155.3

24.7

20,917.2

19,809.7

5.6

Net profit ­including profit brought forward Total equity and liabilities

Consolidated Statement of Comprehensive Income HSBC Trinkaus & Burkhardt Consolidated income statement in €m

01.01. – Note 31.03.2014

01.01. – 31.03.2013 Change in %

Interest income

57.8

57.2

1.0

Interest expense

15.9

17.9

– 11.2

Net interest income

(1)

41.9

39.3

6.6

Net loan impairment and other credit risk provisions

(2)

– 0.8

– 0.1

> 100

0.1

0.1

0.0

175.1

183.6

– 4.6

Share of profit in associates Fee income Fee expenses Net fee income

(3)

81.9

81.8

0.1

93.2

101.8

– 8.4

Net trading income

(4)

35.2

26.3

33.8

Administrative expenses

(5)

126.6

117.1

8.1

8.3

6.3

31.7 > 100

Income from financial assets Net other income

4.1

2.0

Pre-tax profit

(6)

57.0

58.8

– 3.1

Tax expenses

18.7

19.4

– 3.6

Net profit

38.3

39.4

– 2.8

Reconciliation from net income to comprehensive income in €m Net profit

01.01. – 31.03.2014

01.01. – 31.03.2013

38.3

39.4

Gains / losses after tax to be reclassified to the income statement

6.1

– 7.3

of which from financial instruments

5.4

– 11.0

of which from currency conversion

0.7

3.7

– 4.9

7.2

Gains / losses after tax not to be reclassified to the income statement of which from the remeasurement of the net pension obligation Total

– 4.9

7.2

39.5

39.3

Earnings per share in €

01.01. – 31.03.2014

01.01. – 31.03.2013 Change in %

Undiluted earnings per share

1.36

1.40

– 2.8

Diluted earnings per share

1.36

1.40

– 2.8

Consolidated statement of changes in equity in €m Consolidated shareholders’ equity as at 01.01.

2014

2013

1,453.7

1,385.0

Distribution

0

0

Capital increase

0

0

38.3

39.4

Gains / losses not recognised in the income statement

Net profit

1.2

– 0.1

Other changes

3.0

0.0

1,496.2

1,424.3

Consolidated shareholders’ equity as at 31.03.

Consolidated cash flow statement 2014

2013

Cash and cash equivalents as at 01.01.

in €m

1,133.7

265.0

Cash flow from operating activities

– 350.3

283.8 – 9.0

Cash flow from investing activities

– 4.3

Cash flow from financing activities

– 20.0

0.0

Cash and cash equivalents as at 31.03.

759.1

539.8

The cash flow statement calculated according to the indirect method shows the position and movements in cash and cash equivalents of the HSBC Trinkaus Group. Reported cash and cash equivalents correspond to the ‘Cash reserve’ ­balance sheet item, which comprises cash in hand plus ­balances at central banks.

Notes to the Consolidated Income Statement and the Consolidated Balance Sheet This Interim Report for the HSBC Trinkaus Group as at 31 March 2014 was drawn up in accordance with International Financial Reporting Standards (IFRS) as they are to be applied in the European Union. Furthermore, the report takes into consideration the requirement of an interim management statement pursuant to Section 37x German Securities Trading Act (WpHG). No review of the Interim Report was carried out by external auditors. When drawing up this Interim Report including the comparable figures for the prior-year periods we applied the same accounting and valuation methods as in the 2013 consolidated financial statements, apart from the following exceptions. IFRS 10, IFRS 11 as well as IFRS 12 are to be applied in the EU for the first time in the 2014 financial year as a result of the consolidated project of the International Accounting Standards Board (IASB). Their first-time application resulted in no changes in the group of consolidated companies or in accounting for HSBC Trinkaus. IFRS 10 centres on the introduction of a single consolidation model for all companies that is based on the parent company having control of the subsidiary. This is to be applied to parent-subsidiary relationships that are based on voting rights as well as parent-subsidiary relationships arising from other contractual agreements. Hence, special purpose entities that have been consolidated according to the risk and reward concept of SIC-12 so far must also be assessed in this manner. The IFRS 10 control concept comprises the three following elements that must be cumulatively fulfilled: WW

power of disposition

WW

variable returns

WW

the ability to influence the variable returns by exercising the power of disposition.

All changes to further standards and interpretations, the early application of which we have dispensed with, are of no or only minor significance for our consolidated financial statements with the exception of IFRS 9 ‘Financial instruments’. Assuming it is endorsed by the EU, IFRS 9 is obligatory for financial years that start on or after 1 January 2018. We are currently examining the possible impact of the implementation of IFRS 9 on our consolidated financial statements. The changes are likely to have a material effect on our accounting. The preparation of IFRS financial statements requires the management to provide assessments, assumptions and estimates. Areas in which this is necessary are the determination of the fair value of financial instruments, the classification into levels 1 – 3, impairment of financial instruments and other assets and the accounting of provisions as well as ­other obligations. These assumptions, estimates and assessments influence the reported amounts of assets and liabilities, as well as the income and expenses of the reporting period. The actual results may deviate from the management’s assessment. For greater clarity we basically report all amounts in € million. The figures have been rounded commercially, which may ­result in marginal deviations in this Interim Report within the scope of generating figures and calculating percentages.

1  Net interest income 01.01. – 31.03.2014

01.01. – 31.03.2013

57.8

57.2

4.0

4.1

Money market transactions

2.5

3.1

Other interest-bearing receivables

1.5

1.0

from loans and advances to customers

27.0

23.9

in €m Interest income from loans and advances to banks

Money market transactions

2.0

2.2

25.0

21.7

from financial assets

26.8

29.2

Interest income

26.3

28.9

Dividend income

0.0

0.0

Income from subsidiaries

0.5

0.3

15.9

17.9

Other interest-bearing receivables

Interest expense from deposits by banks

5.7

5.5

Money market transactions 

0.1

0.4

Other interest-bearing deposits

5.6

5.1

5.2

5.1

from customer accounts Money market transactions

0.8

1.6

Other interest-bearing deposits

4.4

3.5

from securitised liabilities

0.1

0.1

from subordinated capital

4.1

4.4

Other Net interest income

0.8

2.8

41.9

39.3

01.01. – 31.03.2014

01.01. – 31.03.2013

2 Net loan impairment and other credit risk provisions in €m Additions

0.0

0.1

Reversals

0.8

0.1

Direct write-offs

0.0

0.0

Recoveries on loans and advances previously written off Total

0.0

0.1

– 0.8

– 0.1

3  Net fee income 01.01. – 31.03.2014

01.01. – 31.03.2013

Securities transactions

51.0

63.0

Foreign exchange transactions and derivatives

19.9

16.4

in €m

Lending

5.9

7.5

Investment banking

3.6

3.2

Issuing and structuring business

3.4

3.1

Payments

2.5

3.4

Foreign business

2.2

2.3

Alternative investments

1.0

0.4

Other fee-based business Total

3.7

2.5

93.2

101.8

4  Net trading income in €m

01.01. – 31.03.2014

01.01. – 31.03.2013

Bonds and interest rate derivatives

20.1

16.6

Equities and equity / index derivatives

15.0

9.2

Foreign exchange

– 0.1

1.7

0.2

– 1.2

35.2

26.3

Derivatives held in the banking book Total

Interest and dividend income attributable to trading activities – shown as the difference between the interest and dividend revenues of trading positions and the corresponding ­refinancing interest – is included in trading profit.

5  Administrative expenses in €m Staff expenses Wages and salaries Social security costs Expenses for retirement pensions and other employee benefits Other administrative expenses Depreciation of property, plant and equipment and amortization of intangible assets Total

01.01. – 31.03.2014

01.01. – 31.03.2013

74.7

71.8

62.8

59.8

7.6

7.2

4.3

4.8

45.6

39.1

6.3

6.2

126.6

117.1

01.01. – 31.03.2014

01.01. – 31.03.2013

6  Net other income in €m Other operating income

6.2

4.1

Other operating expenses

2.1

2.1

Other operating income / expenses

4.1

2.0

Other income

0.1

0.0

Other expenses

0.1

0.0

Other net income

0.0

0.0

Net other income

4.1

2.0

7  Customer groups GPB

CMB

GB & M

AM

Central /  Consoli­ dation

in €m

Total

Net interest income 31.03.2014

3.9

19.7

17.4

0.9

0.0

41.9

31.03.2013

4.7

16.3

16.6

1.4

0.3

39.3

Net loan impairment and other credit risk provisions 31.03.2014

0.0

0.0

0.0

0.0

– 0.8

– 0.8

31.03.2013

0.0

– 0.1

0.1

0.0

– 0.1

– 0.1

Net interest income after net loan impairment and other credit risk provisions 31.03.2014

3.9

19.7

17.4

0.9

0.8

42.7

31.03.2013

4.7

16.4

16.5

1.4

0.4

39.4

Share of profit in associates 31.03.2014

0.0

0.0

0.1

0.0

0.0

0.1

31.03.2013

0.0

0.0

0.1

0.0

0.0

0.1

Net fee income 31.03.2014

13.7

11.9

58.7

8.9

0.0

93.2

31.03.2013

17.5

12.3

60.2

11.8

0.0

101.8

Operating trading income 31.03.2014

0.9

2.2

31.2

0.5

0.2

35.0

31.03.2013

1.3

1.7

23.7

0.8

0.0

27.5

Income after net loan impairment provision 31.03.2014

18.5

33.8

107.4

10.3

1.0

171.0

31.03.2013

23.5

30.4

100.5

14.0

0.4

168.8

Administrative expenses 31.03.2014

13.2

22.0

78.6

7.5

5.3

126.6

31.03.2013

18.2

18.0

74.1

8.6

– 1.8

117.1

of which depreciation and amortisation 31.03.2014

0.2

0.4

0.7

0.1

4.9

6.3

31.03.2013

0.2

0.2

0.5

0.1

5.2

6.2

Income from financial assets 31.03.2014

0.9

1.6

5.3

0.5

0.0

8.3

31.03.2013

0.9

1.2

3.7

0.5

0.0

6.3

Income from derivatives in the banking book 31.03.2014

0.0

0.0

0.0

0.0

0.2

0.2

31.03.2013

0.0

0.0

0.0

0.0

– 1.2

– 1.2

Net other income 31.03.2014

0.2

0.3

1.9

0.1

1.6

4.1

31.03.2013

0.4

0.5

1.3

0.2

– 0.4

2.0

31.03.2014

6.4

13.7

36.0

3.4

– 2.5

57.0

31.03.2013

6.6

14.1

31.4

6.1

0.6

58.8

Pre-tax profit

Taxation 31.03.2014

2.0

4.3

11.3

1.1

0.0

18.7

31.03.2013

2.0

4.4

9.9

1.9

1.2

19.4

31.03.2014

4.4

9.4

24.7

2.3

– 2.5

38.3

31.03.2013

4.6

9.7

21.5

4.2

– 0.6

39.4

Net profit

There are growing worries over a global rise in market interest rates in future as a result of the tightening of US monetary policy (tapering) as well as over the further economic trend on account of the Crimean crisis and the relatively weak economic data from China. These, together with the first defaults on bond repayments by Chinese issuers, have led to investors exercising significant restraint on the financial markets, in particular in the fixed income business. At the same time, our growth strategy is accompanied for the time being by start-up expenses in many areas of the Bank. The fact that net income declined only slightly compared to the same period of the previous year under these general conditions documents the Bank’s balanced business structure and stability of its client-oriented business model. The Global Private Banking and Commercial Banking segments were able to almost repeat their prior-year results. While Asset Management was not able to escape the unfavourable market environment and reported a lower result, Global Banking & Markets improved on the result generated in the first quarter of 2013. The item Central shows essentially only regulatory costs and the effects still resulting this year from the withdrawal of business activities from Luxembourg, which is almost completed. The decline in revenues and costs in the Global Private Banking segment was the result of the discontinuation of business with clients in Luxembourg. The positive impact of the growth strategy in Commercial Banking was seen in the mainly volume-based expansion of interest income in the lending business, although administrative expenses are also rising significantly as a result of the business expansion. The decline in net fee income in the fixed-income business was more than compensated by strong revenue growth in equity and equity derivatives trading as well as in the Treasury business in the Global Banking and Markets segment. Alongside the discontinuation of revenues in the mutual fund business as a result of the sale of the Luxembourg funds, the declines in revenues in Asset Management are mainly attributable to one-time effects in the first quarter of the previous year.

The cost-saving effects of the discontinuation of business activity in Luxembourg are exceeded appreciably by higher regulatory costs as well as cost-increasing measures to implement the growth initiative in the corporate banking business. This will continue over the further course of the year as well due among other things to the opening of the four new branches as well as to investments in the Bank’s Middle and Back Office areas to secure unchanged processing quality despite higher transaction volumes.

8  Loans and advances to banks in €m

31.03.2014

31.12.2013

Current accounts

794.0

519.2

Money market transactions

706.9

662.0

of which overnight money of which term deposits

13.5

46.4

693.4

615.6

Other loans and advances

199.2

259.4

Security in the derivatives business

160.9

203.2

1,861.0

1,643.8

Total of which domestic banks of which foreign banks

345.8

198.7

1,515.2

1,445.1

9  Loans and advances to customers in €m

31.03.2014

31.12.2013

1,580.9

1,229.6

Money market transactions

745.1

529.5

of which overnight money

32.6

63.6

712.5

465.9

2,938.3

2,865.5

136.4

163.2

Current accounts

of which term deposits Loan accounts Other loans and advances Security in the derivatives business

13.8

69.8

5,414.5

4,857.6

of which domestic customers

3,543.6

3,029.5

of which foreign customers

1,870.9

1,828.1

Total

10 Net loan impairment and other credit risk provisions in €m Net loan impairment provision

31.03.2014

31.12.2013

33.2

33.4

5.9

5.9

39.1

39.3

Provisions for credit risks Net loan impairment and other credit risk provisions

Impairments / provisions Individually assessed

Collectively assessed

in €m

2014

2013

2014

2013

2014

2013

As at 01.01.

15.7

12.9

23.6

16.4

39.3

29.3

Reversals

0.8

0.0

0.0

0.1

0.8

0.1

Utilisation

0.2

0.0

0.0

0.0

0.2

0.0

Additions

0.0

0.0

0.0

0.1

0.0

0.1

Currency translation / transfers As at 31.03.

Total

0.8

0.0

0.0

0.0

0.8

0.0

15.5

12.9

23.6

16.4

39.1

29.3

11 Trading assets in €m

31.03.2014

31.12.2013

Bonds and other fixed-income securities

2,387.8

2,484.0

Equities and other non-fixed-income securities

1,678.0

1,393.4

Tradable receivables

1,471.5

1,420.3

Positive market value of derivatives

1,475.5

1,449.9

Derivatives in hedging relationships Total

0.7

6.0

7,013.5

6,753.6

12  Financial assets in €m Bonds and other fixed-income securities

31.03.2014

31.12.2013

5,068.0

4,693.7

Equities and other non-fixed-income securities

12.6

29.9

Investment certificates

87.0

95.5

Promissory note loans

232.9

209.1

Investments Total

99.9

96.6

5,500.4

5,124.8

31.03.2014

31.12.2013

13  Deposits by banks in €m Current accounts

1,270.7

648.1

Money market transactions

479.9

270.8

of which overnight money

164.1

2.8

of which term deposits

315.8

268.0

Other liabilities

139.3

145.3

Security in the derivatives business

168.9

205.2

2,058.8

1,269.4

729.9

439.1

1,328.9

830.3

31.03.2014

31.12.2013

Total of which domestic banks of which foreign banks

14  Customer accounts in €m Current accounts

9,264.6

9,149.9

Money market transactions

2,587.9

2,642.4

of which overnight money of which term deposits Savings deposits Other liabilities Total of which domestic customers of which foreign customers

577.1

396.4

2,010.8

2,246.0

56.2

57.2

321.4

369.6

12,230.1

12,219.1

10,908.0

10,681.7

1,322.1

1,537.4

15 Trading liabilities 31.03.2014

31.12.2013

Negative market value of derivatives

in €m

1,902.1

1,881.3

Promissory note loans, bonds, certificates and warrants

2,372.1

2,114.5

Delivery obligations arising from securities sold short Derivatives in hedging relationships Derivatives held in the banking book Total

4.2

53.1

52.9

46.9

4.2

4.1

4,335.5

4,099.9

Other Notes 16  Derivatives business Nominal amounts with a residual maturity in €m

Up to 1 year

1–5 years

Over 5 years

Total

Positive market values

Interest rate transactions 31.03.2014

7,952

11,830

8,564

28,346

860

31.12.2013

8,263

12,514

8,022

28,799

784

Foreign exchange transactions 31.03.2014

30,474

2,714

318

33,506

299

31.12.2013

24,793

2,224

176

27,193

348

Equity / index-related transactions 31.03.2014

3,411

2,667

233

6,311

6

31.12.2013

3,543

2,477

295

6,315

9

Total 31.03.2014

41,837

17,211

9,115

68,163

1,165

31.12.2013

36,599

17,215

8,493

62,307

1,141

Deals with both positive and negative market values are ­taken into account in the determination of the nominal amounts. The stated positive market values of deals represent the replacement values that may arise in the event of the default of all OTC counterparties, regardless of their ­individual credit rating. The values consist of current interest, foreign currency and equity / index-related deals, which include a settlement risk as well as corresponding market price risks. No account is taken of netting agreements. As there is no counterparty risk on exchange-traded products and short positions, the market values of these products are not shown. We focus in the derivatives business on transactions with other HSBC units.

17  Market risk in €m

31.03.2014

31.12.2013

Interest rate risk

3.2

2.9

Credit spread risk

2.8

3.1

Currency risk

0.1

0.1

Equity / index risk

0.9

0.7

Commodities risk

0.0

0.0

Total potential market risk in the trading portfolio

4.3

3.6

The market risk potential is calculated for all market risk ­categories using a standardised internal model. We use a value-at-risk approach to measure market risks in our trading book under normal market conditions. We understand ­value-at-risk to be the potential loss that will, with 99% probability, not be exceeded within one trading day, assuming ­unaltered trading positions, in the event of an unfavourable market trend. By taking correlations into consideration the overall market risk potential is lower than the sum of the risks per risk category.

18  Contingent liabilities and other obligations in €m

31.03.2014

31.12.2013

Contingent liabilities on guarantees and indemnity agreements

1,579.0

1,621.4

Irrevocable loan commitments

6,305.0

6,109.4

Total

7,884.0

7,730.8

Key Dates 3 June 2014 Annual General Meeting 27 August 2014 Press conference on the Interim Report as at 30 June 2014 11 November 2014 Interim Report as at 30 September 2014

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