Evaluation of Performance of the Hong Kong and Shanghai Banking Corporation Limited from Its Financial Statements

Bank Management and Financial Service: Class 1

Candidate name: Yan Wang

Tutor: Minggui Qu

Title of the project: Evaluation of performance of the Hong Kong and Shanghai Banking Corporation Limited from its financial statements

Word count: 1899

1. Introduction

The purpose of this report is to analyse HSBC's financial statements and evaluate its performance, according to HSBC's annual report, from 2013 to 2015. Firstly, the report introduces the basic situation of HSBC and the British economic environment. Then, I will analyze the HSBC's balance sheet and income statement in order to evaluate its financial situation and performance. In addition, I will illustrate the impact of media coverage on bank performance. Finally, this report will make a forecast for HSBC and give relevant recommendations.

2. Background

HSBC Holdings plc was founded in 1865 and is based in London, United Kingdom.^[1] It provides banking and financial products and services and operates through approximately 6,100 offices in Europe, Asia, the Middle East, North Africa, North America, and Latin America. ^[2]It operates through four businesses Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking.^[3] Diversification results in low earnings volatility for the group and through diverse business activities, it maintains a lower risk profile than our global and regional competitors. For example, in the first half of 2015, its loan impairment charges were only% of total loans and advances, unchanged from the first half of 2014.^[4] In the future, the HSBC outlined plans to redeploy resources to capture expected future growth opportunities and adapt to structural changes in the operating environment.

3. Economic environment

Economic environment will affect the performance of commercial banks. UK Real GDP growth picked up in the second quarter of 2015, it was 2.6% higher than the same quarter a year earlier. ^[5]The unemployment rate fell in the early part of this year, but ticked back up to 5.6% in the three months to May. ^[6]Wage growth continued to accelerate, Consumer spending remains the key driver of growth, supported by low inflation, high employment and rising real incomes. Headwinds come in the form of fiscal tightening, and uncertainty over the forthcoming EU referendum, which could weigh on investment growth. ^[7]The fall in energy prices has provided a significant boost to real wages, supporting consumption, whilst public consumption has also been supportive to growth also thanks to the electoral cycle in some countries. The ECB’s programme of asset purchases has also been positive for confidence, financial markets, bank lending and inflation expectations. It also helped keep the euro on a lower trajectory, which saw their exports improve particularly outside the eurozone despite sluggish world trade growth. Above economic issues happened would had influence on HSBC and even the whole economic market in UK.