HSBC’s ratings are based on the group’s very diverse and unique business franchise as well as management’s conservative risk appetite. While not immune to challenging operating conditions, the group generates solid and sustainable earnings across credit cycles. In addition, the group maintains consistently reassuring liquidity, funding and capital positions.

For FY2016, the group reported a profit before tax of USD 7.1bn while on an adjusted basis profit before tax was USD 19.3bn, almost unchanged from the prior year with asset quality remaining stable. The reported figure was impacted by several significant items, including a USD 3.2bn goodwill write-off related to the private banking business in Europe, USD 3.3bn in “costs to achieve”, and the impact of the sale of operations in Brazil. As of end-2016, the group’s fully loaded CET1 ratio was 13.6%.

Scope notes that management is implementing various actions to further simplify the business, improve profitability and strengthen risk management and controls. Nevertheless, the group’s size and complexity means that it is more vulnerable to operational, governance and internal control risks. With its broad-based focus on emerging markets and the ambition to facilitate international trade and capital flows, HSBC is also more exposed to the potential volatility inherent in these markets and to growing protectionist policies that may reduce global and regional trade flows.

Download the updated rating report on HSBC