HSBC Bank plc
Annual Report and Accounts 2017
HSBC Bank plc Annual Report and Accounts 2017 1
Purpose and strategy
Products and services
How we do business
Key performance indicators
Economic background and outlook
Report of the Directors
– Our conservative risk appetite
– Top and emerging risks
– Areas of special interest
– Risk management
– Other material risks
– Key developments and risk profile
– Capital management
– Capital overview
Corporate Governance Report
– Company Secretary
– Board of Directors
– Directors‘ emoluments
– Board committees
– Internal control
– Conflicts of interest and indemnification of directors
– Statement on going concern
– Disclosure of information to the auditor
– Statement of Directors’ Responsibilities
Independent Auditors’ Report
Financial Statements 75
Notes on the Financial Statements 84
Presentation of Information
This document comprises the Annual Report and Accounts 2017
for HSBC Bank plc (‘the bank’) and its subsidiaries (together ‘the
group’). ’We’, ‘us’ and ‘our’ refer to HSBC Bank plc together with
its subsidiaries. It contains the Strategic Report, the Report of the
Directors, the Statement of Directors’ Responsibilities and
Financial Statements, together with the Independent Auditors’
Report, as required by the UK Companies Act 2006. References to
‘HSBC’ or ‘the Group’ within this document mean HSBC Holdings
plc together with its subsidiaries.
HSBC Bank plc is exempt from publishing information required by
The Capital Requirements Country-by-Country Reporting
Regulations 2013, as this information is published by its parent,
HSBC Holdings plc. This information will be available in June 2018
on HSBC’s website: www.hsbc.com.
Pillar 3 disclosures for the group are also available on
www.hsbc.com, under Investor Relations.
All narrative disclosures, tables and graphs within the Strategic
Report and Report of the Directors are unaudited unless otherwise
Our reporting currency is £ sterling.
Unless otherwise specified, all $ symbols represent US dollars.
Cautionary Statement Regarding Forward-
This Annual Report and Accounts 2017 contains certain forward-
looking statements with respect to the financial condition, results
of operations and business of the group.
Statements that are not historical facts, including statements
about the group’s beliefs and expectations, are forward-looking
statements. Words such as ‘expects’, ‘anticipates’, ‘intends’,
‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably
possible’, variations of these words and similar expressions are
intended to identify forward-looking statements. These statements
are based on current plans, estimates and projections, and
therefore undue reliance should not be placed on them. Forward-
looking statements speak only as of the date they are made. HSBC
Bank plc makes no commitment to revise or update any forward-
looking statements to reflect events or circumstances occurring or
existing after the date of any forward-looking statement.
Forward-looking statements involve inherent risks and
uncertainties. Readers are cautioned that a number of factors
could cause actual results to differ, in some instances materially,
from those anticipated or implied in any forward-looking
Strategic Report | Highlights
2 HSBC Bank plc Annual Report and Accounts 2017
Footnotes 2017 2016
For the year (£m)
Profit before tax (reported basis) 2,370 874
Profit before tax (adjusted basis) 1 3,832 4,234
Net operating income before loan impairment charges and other credit risk provisions 2 13,052 13,305
Profit/(loss) attributable to shareholders of the parent company 1,809 (212)
At year-end (£m)
Total equity attributable to shareholders of the parent company 43,462 39,930
Total assets 818,868 816,829
Risk-weighted assets 233,073 245,237
Loans and advances to customers (net of impairment allowances) 280,402 272,760
Customer accounts 381,546 375,252
Capital ratios (%) 3
Common equity tier 1 11.8 10.2
Tier 1 13.8 12.3
Total capital 16.9 15.7
Performance, efficiency and other ratios (annualised %)
Return on average ordinary shareholders’ equity 4 4.2 (1.2)
Return on average risk-weighted assets 1.0 0.4
Adjusted return on average risk-weighted assets 1.6 1.7
Cost efficiency ratio (reported basis) 5 78.2 90.3
Cost efficiency ratio (adjusted basis) 5 67.5 63.9
Jaws (adjusted basis) 6 (5.8) 0.4
Ratio of customer advances to customer accounts 73.5 72.7
1 Adjusted performance is computed by adjusting reported results for the effect of significant items as detailed on pages 10 to 12.
2 Net operating income before loan impairment charges and other credit risk provisions is also referred to as revenue.
3 Capital ratios as detailed on the capital section on pages 56 to 58.
4 The return on average ordinary shareholders’ equity is defined as profit attributable to shareholders of the parent company divided by the average total shareholders’ equity.
5 Reported cost efficiency ratio is defined as total operating expenses (reported) divided by net operating income before loan impairment charges and other credit risk provisions
(reported), while adjusted cost efficiency ratio is defined as total operating expenses (adjusted) divided by net operating income before loan impairment charges and other credit risk
provisions (adjusted). Net operating income before loan impairment charges and other credit risk provisions (adjusted) is also referred to as revenue (adjusted).
6 Adjusted jaws measures the difference between adjusted revenue and adjusted cost growth rates.
HSBC Bank plc Annual Report and Accounts 2017 3
Purpose and strategy
The purpose of HSBC Bank plc is to connect customers to
opportunities, enable businesses to thrive and economies to
prosper and ultimately help people to fulfil their hopes and realise
In the group, we operate in 18 countries. Our operating entities
represent the group to customers, regulators, employees and
other stakeholders. Our priority markets are the UK, France and
As at 31 December 2017, the bank had 625 branches in the United
Kingdom, and 13 located in the Isle of Man and the Channel
Islands. The bank and its subsidiaries had further banks, branches
and offices in Armenia, Belgium, Czech Republic, France,
Germany, Greece, Ireland, Israel, Italy, Luxembourg, Malta, The
Netherlands, Poland, Russia, South Africa, Spain and Switzerland.
On 29 June 2017, HSBC Bank plc transferred its shareholding in
HSBC Bank A.S. to HSBC Middle East Holdings B.V. (89.99%) and
HSBC Bank Middle East Limited (10.01%). The transfer was made
as a dividend in-specie to HSBC Holdings plc.
The results of HSBC Bank A.S. for the period up to the transfer are
included in the group results. To the date of transfer, HSBC Bank
A.S. contributed £116m operating income (2016: £356m), and
incurred £10m in loan impairment and other charges
(2016: £108m) and £86m in operating expenses (2016: £324m).
HSBC Bank A.S.'s contribution to the group’s profit before tax in
the year up the date of its transfer was £20m (2016: £76m loss).
As a result of the transfer, the total assets excluding goodwill of
the group reduced by £4,831m and the total liabilities reduced by
£4,265m. Total risk-weighted assets reduced by £4,080m and the
common equity tier 1 reduced by £530m.
The transfer passes through equity as a dividend in-specie that
reduces reserves by £643m. This comprises HSBC Bank A.S.’s net
asset value of £566m plus attributable goodwill of £77m.
There was no gain or loss recognised in the group as a result of
The group is part of HSBC, which has approximately 229,000
employees working around the world to provide more than
37 million customers with a broad range of banking products and
services to meet their financial needs.
HSBC values define who we are as an organisation and what
makes us distinctive.
• We are open to different ideas and cultures and value diverse
• We are connected to our customers, communities, regulators
and each other, caring about individuals and their progress.
• We are dependable, standing firm for what is right and
delivering on commitments.
Our role in society
How we do business is as important as what we do. Our
responsibilities to our customers, employees and shareholders as