#12534 LBS ++J2 Global Trade & Receivables Finance Webinar APRIL 2017 Noel Quinn - Group Managing Director and Chief Executive Officer, Global Commercial Banking HSBC ▶ Natalie Blyth - Global Head of Trade and Receivables Finance, Global Commercial Banking 1#2Agenda 1 Introduction 2 3 Our Leading Competitive Differentiators Performance Trends 4 Looking Ahead 2#3HSBC overview Our global footprint Home Diversified global businesses and regions Priority Network Rep office Revenue 70 markets 90% >45 4 Our network covers countries accounting for more than 90% of global GDP, trade and capital flows International network supports more than 45% of our client revenue Inter- connected global businesses share balance sheets and liquidity in addition to strong commercial links $50.2bn PBT $19.3bn RWAS $857bn Revenue by region² Europe Asia MENA NAM LAM $17.3bn $23.3bn Revenue by global business CMB GB&M RBWM GPB $12.9bn $14.9bn $18.6bn $1.7bn Metrics relate to 2016 and are on an adjusted basis unless otherwise stated, totals provided are for the Group and include Corporate Centre. Details of reported results and a reconciliation of reported to adjusted results are included in the Appendix 1. 2. Amounts are non-additive across regions due to intra-HSBC items 3#4HSBC's network is key to being the leading international bank HSBC covers 90% of global trade Geographic spread + Product breadth + Customer depth 100% 9% Non HSBC markets 31% Network markets Insurance & Investments Global Liquidity & Security Services Cash Management 60% Priority and Home markets Markets FY15 Global Merchandise Exports 1. Customer numbers exclude Hang Seng Global Trade & Receivables Finance Credit & Lending Global Banking Unique competitive position No. of customers1 --------------- c.1.6m c.37k c.7k c.4k Global Banking Large Corporates t/o $500m-5bn Mid Market Corporates t/o $50-500m Business Banking Upper t/o $5-50m Business Banking Mass t/o $0-5m Retail Business Banking CMB's differentiated proposition 4#5Trade is a key part of HSBC's leading transaction banking franchise Transaction Banking accounts for 29% Group adjusted revenues, of which 18% is GTRF FY16 adjusted revenue, % Transaction Banking revenue Other revenue $14.7bn HSS1 11% GLCM² 43% $35.6bn (71%) $14.7bn (29%) 12 1. HSS stands for HSBC Security Services 2. GLCM stands for Global Liquidity & Cash Management FX 28% $2.6bn 73% CMB GTRF 18% 27% GB&M 5#6Global trade is >USD20trn and underlying volumes are still growing Evolution of global goods and services exports Index - 2012 = 100 120 Goods & services export value1 Goods & services exports volumes² Since 2009, trade volumes have continued to increase 110 100 90 World trade values and volumes increased 80 almost every year until 2009 70 60 50 40 Trade value decreased in 2015 & 2016 as commodity prices declined 30 20 10 0 1980 1985 1990 1995 2000 2005 2010 2015 1. Goods & Services Export Value: 1980-2005 - UNCTAD BPM5; 2006-2015 - UNCTAD BMP6; 2016F - WTO Quarterly Goods & Services Data 2. Goods & Services Exports volume: 1980-2020 - Volume of world goods and services exports (IMF) 12 6#7Trade is a core part of HSBC and critical to world economy Trade in HSBC Founded in 1865 to finance Trade in Society ☐ Key to human progress Catalyst for global economic growth 1 billion people elevated out of poverty1 HSBC in Trade #1 Trade Bank in the world² Best Bank for Corporates³ #1 issuer of Documentary Credits globally4 #1 Receivables Finance funding provider in the UK5 international trade Serving our Multinationals to SMEs ☐ Footprint covering 90% of trade & capital flows Balance sheet strength What we do Safer and more efficient form of lending Solutions for our customers' trade finance and risk needs Trade is a cornerstone product and an essential service # RANKING Source: United Nations http://www.un.org/millenniumgoals/poverty.shtml Source: Coalition FY16. Peer group: Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Deutsche Bank, J.P. Morgan, Standard Charted, Société Générale and Wells Fargo. Coalition results are based upon HSBC's product taxonomy and includes all Corporate and Institutional clients 1. 2. 3. As awarded by Euromoney survey, 2016 4. Source: SWIFT, Dec 2016 5. As awarded by Business Money magazine, 2016 7#8What is trade finance? Seller seller wants payment before shipping ? Buyer buyer wants goods before paying Trusted Intermediary: Absorbs risks Bridges cash flow gaps Facilitates trade flows & settlements TRADITIONAL TRADE OPEN ACCOUNT Documentary Trade Guarantees Trade Loans Receivables Finance Supply Chain Finance 8#9Documentary credit (DC) Assures seller of payment by a trusted intermediary, provided they deliver the right goods; used when there is low familiarity with the buyer or in an uncertain economic environment 2 = Interest and Fee income earned across life cycle 3 5 3 2 HSBC HSBC ☑ 1 1 1 Buyer $ 4 1 Buyer requests for a DC specifying terms of the purchase; is issued favouring the Seller 2 Seller ships goods and presents title documents 3 Documents checked with DC conditions; Financing extended if required 4 Upon receipt of docs, issuing bank pays or accepts to pay on the due date 5 Buyer makes payment on the due date Seller 9#10Receivables finance (RF) - factoring & invoice discounting Used when seller/buyer relationship matures: seller raises cash against trade debtors; improves balance sheet and accelerates growth Buyer 2 1 = Interest and Fee income earned across life cycle 5 HSBC 3 Seller Factoring 4 5 Invoice discounting 1 Seller & HBSC sign Receivable Purchase Agreement 2 Seller ships goods / performs services and sends invoices to Buyer 3 Seller sends invoice data to HSBC 4 HSBC purchases receivables and funds (80% - 100%) credited to Seller Buyer pays HSBC on due date - Factoring 5 Buyer pays Seller on due date – who transfers funds to HSBC – Invoice discounting 10#11Agenda 1 Introduction 2 Our Leading Competitive Differentiators 3 Performance Trends 4 Looking Ahead 11#12Overview of GTRF by numbers $500,000,000,000 Trade facilitated annually1 Revenue4 FY16 $2.6bn Av. funded assets5 as at 4Q16 $71bn Total assets as at 4Q16 c.$165bn 6,000 Experts Guarantees Supply Chain 25% 2% Receivables Finance 1,500 Frontline staff in 56 markets 18% FY16 revenue4 25% 10% Traditional trade market share² Trade Loans Documentary Trade 30% 3 Service centres 3 Risk distribution centres #1 Trade Bank in the world³ Middle East & North Africa Europe 14% 25% North America 7% FY16 revenue4 4% Latin America Asia 50% Source: Coalition FY16. Peer group: Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Deutsche Bank, J.P. Morgan, Standard Charted, Société Générale and Wells Fargo. Coalition results are based upon HSBC's product taxonomy and includes all Corporate and Institutional clients -23 1. Source: HSBC FY16 2. Source: Oliver Wyman GTB Revenue Pool Estimates 2016 3. 45 4. On an adjusted basis 5. Average funded assets as at 4Q16 12#13Trade is pivotal to the value of HSBC's network Unrivalled global presence Value of HSBC being at both ends ✓ Local knowledge with a greater understanding of risk Better pricing ✓ Accelerated time to cash¹ ✓ HSBC is at both ends of a DC transaction c.70% of the time² Customer depth Balance sheet width & strength Product synergies Covers full global supply chain Small local suppliers up to MNCs Capital efficient Book in multiple jurisdictions Trade clients have deeper relationships³ c.4x average revenue c.2x number of countries and products 1. 7 days faster time to cash for a DC where HSBC is on both ends of the transaction vs. one end of the transaction 2. HSBC negotiates c.70% of DCs issued within the Group 123 3. Source Internal HSBC MI; comparison of CMB corporate clients with trade revenue vs. CMB corporate clients without GTRF revenue 13#14Trade is pivotal to the value of HSBC's network: client examples Microsoft Structured a receivables finance facility in US with HK Structured a receivables finance facility in MENA US UK Saudi Arabia LARSEN & TOUBRO A multi-geography Bank Guarantee solution for L&T (HQ in India) Netherlands Saudi Arabia UAE HK Microsoft (Seller) Δ Buyer HSBC Balance sheet MA Adam Smith Awards Seller Beneficiary HSBC Balance sheet India Japan Singapore 14#15Agenda 1 Introduction 2 3 Our Leading Competitive Differentiators Performance Trends 4 Looking Ahead 15#16After 30+ years of almost uninterrupted growth, global trade under short-term pressure Evolution of global goods and services exports Index 2012 = 100 Good & Services Export Value¹ Goods & Services Exports Volumes² 110 100 90 88 80 ■ Decline in trade value largely driven by commodity prices 140 ■ Trade volumes grew in 2015 & 2016 130 70 Since 2015, 60 50 8공영 30 40 trade value has 120 declined 110 100 20 10 220 90 ■ Trade expected to return to growth in 2017 0 80 1980 1985 1990 1995 2000 2005 2010 2015 2020F 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F Factors driving future growth; TFA3, RCEP4, Belt & Road initiative, Saudi Vision 2030, growth of middle-class in Asia Goods & Services Export Value: 1980-2005 - 1) UNCTAD BPM5, 2) UNCTAD BMP6, 3) WTO, 4) Oxford Economics 2006-2015 - UNCTAD (BPM6) 2016F-2020F - OE goods and services export value forecast Goods & Services Exports volume: 1980-2020 - Volume of world goods and services exports (IMF) 1234 2. 3. TFA stands for Trade Facilitation Agreement 4. RCEP stands for Regional Comprehensive Economic Partnership 16#17HSBC has shown resilient performance in challenging environment GTRF adjusted revenues declined in line with global trade value USDM Revenue decline bottomed out in 4Q16 -7% -1% 2,768 623 616 2,581 2015 2016 3Q16 4Q16 GTRF funded assets grew at the end of 2016 Period end funded assets +10% Increased market share in 2016; ☐ ☐ HK1 from 10.8% to 13%, record high Singapore2 from 8.6% to 12.7% ■ UK Receivables Finance³ from 19% to 21.6% see appendix for further information Balance sheet started to grow in 4Q16 -4% 70 72 72 74 70 66 65 67 ■ Asset growth momentum into 2017 1Q15 2Q15 3Q15 4Q15 Note: Balances on constant currency basis 1. Source: HKMA Trade Financing Dec 2016 2. Source: MAS Monthly Statistical Bulletin Dec 2016 3. Source: Asset Based Finance Association Sept 2016 1Q16 2Q16 3Q16 4Q16 ■ NIM remained broadly stable throughout 2016 17#18Agenda 1 Introduction 2 3 Our Leading Competitive Differentiators Performance Trends 4 Looking Ahead 18#19Five reasons to be optimistic in an uncertain environment Strong medium term prospects 1 Asia has potential to drive trade growth 2 HSBC well positioned within Asia and the trade market overall 3 We are strengthening capabilities in growth segments 4 Well positioned to capture additional opportunities from within the existing client base 5 Leading player in the digitisation of trade Key messages Trade market seems to have bottomed out in 2016 and is showing first signs of growth HSBC is the #1 Trade Bank1 and is differentiated vs. competitors Trade is core to creating value from the network for HSBC 1. Source: Coalition FY16. Peer group: Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Deutsche Bank, J.P. Morgan, Standard Charted, Société Générale and Wells Fargo. Coalition results are based upon HSBC's product taxonomy and includes all Corporate and Institutional clients 19#20HSBC is a leading player in the digitisation of trade GTRF digital priorities Tactical Improving digital customer experience Strategic Automating trade finance operations Project examples Self-Serve, real-time mobile solution for clients to track status of their trade transactions and documents Connecting with 3rd party platforms TRADESHIFT Automated supply chain financing proposition launched with Tradeshift 30MAR Leading digitisation of trade r3 solutions using R3/Corda Developing distributed ledger technology for trade finance Developing digital trade finance distributed ledger technology 20 20#21Five reasons to be optimistic in an uncertain environment Strong medium term prospects 1 Asia has potential to drive trade growth. 2 HSBC well positioned within Asia and the trade market overall 3 We are strengthening capabilities in growth segments 4 Well positioned to capture additional opportunities from within the existing client base 5 Leading player in the digitisation of trade Key messages ☐ Trade market seems to have bottomed out in 2016 and is showing first signs of growth ■ HSBC is the #1 Trade Bank¹ and is differentiated vs. competitors ■ Trade is core to creating value from the network for HSBC 1. Source: Coalition FY16. Peer group: Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Deutsche Bank, J.P. Morgan, Standard Charted, Société Générale and Wells Fargo. Coalition results are based upon HSBC's product taxonomy and includes all Corporate and Institutional clients 21#22Appendix HSBC 22#23Appendix Important notice and forward-looking statements Important notice The information set out in this presentation and subsequent discussion does not constitute a public offer for the purposes of any applicable law or an offer to sell or solicitation of any offer to purchase any securities or other financial instruments or any recommendation in respect of such securities or instruments. Forward-looking statements This presentation and subsequent discussion may contain projections, estimates, forecasts, targets, opinions, prospects, results, returns and forward- looking statements with respect to the financial condition, results of operations, capital position and business of the Group (together, "forward-looking statements"). Any such forward-looking statements are not a reliable indicator of future performance, as they may involve significant assumptions and subjective judgements which may or may not prove to be correct and there can be no assurance that any of the matters set out in forward-looking statements are attainable, will actually occur or will be realised or are complete or accurate. Forward-looking statements are statements about the future and are inherently uncertain and generally based on stated or implied assumptions. The assumptions may prove to be incorrect and involve known and unknown risks, uncertainties, contingencies and other important factors, many of which are outside the control of the Group. Actual achievements, results, performance or other future events or conditions may differ materially from those stated, implied and/or reflected in any forward-looking statements due to a variety of risks, uncertainties and other factors (including without limitation those which are referable to general market conditions or regulatory changes). Any such forward-looking statements are based on the beliefs, expectations and opinions of the Group at the date the statements are made, and the Group does not assume, and hereby disclaims, any obligation or duty to update them if circumstances or management's beliefs, expectations or opinions should change. For these reasons, recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our 2016 Annual Report and Accounts. This presentation contains non-GAAP financial information. The primary non-GAAP financial measure we use is 'adjusted performance' which is computed by adjusting reported results for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period comparisons. Significant items are those items which management and investors would ordinarily identify and consider separately when assessing performance in order to better understand the underlying trends in the business. Reconciliations between non-GAAP financial measurements and the most directly comparable measures under GAAP are provided in the 2016 Annual Report and Accounts and the Reconciliations of Non-GAAP Financial Measures document which are both available at www.hsbc.com. 23#24Executive Biographies Noel Quinn Group Managing Director and Chief Executive Officer, Global Commercial Banking ■ Noel Quinn was appointed Chief Executive, Global Commercial Banking, in December 2015. ■ He became a Group Managing Director in September 2016. ■ Based in London, Mr Quinn is responsible for HSBC's relationships with about 2 million business customers with turnover up to $5bn in Asia-Pacific, Europe, the Middle East and North Africa, North America and Latin America. He is responsible for c. $300bn of lending assets and $13bn of revenues across 54 countries. ■ From 2011 to 2015 he was the Regional Head of Commercial Banking for the Asia- Pacific region based in Hong Kong, which accounted for c.50% of global CMB revenues. From October 2008-2011 he was Head of Commercial Banking in the UK, which represented c.20% of global CMB revenues, and started in role by managing the business carefully through the global financial crisis. ■ Mr Quinn qualified as an accountant in October 1987. He joined Forward Trust Group, a subsidiary of Midland Bank (now part of HSBC), in January 1988. He has spent 30 years in Banking, 26 of which have been in front line or functional roles within HSBC. ■ He has lived and worked in the UK, Europe, US and Asia. He featured among the Top 30 Ally Executives in the 2015 Financial Times/OUTstanding Executive Diversity ranking. He is passionate about developing a culture that values inclusion and diversity, and helping entrepreneurial businesses to develop and grow. 24#25Executive Biographies Natalie Blyth Global Head of Trade and Receivables Finance, Global Commercial Banking ■ Natalie Blyth was appointed Global Head of Trade and Receivables Finance, Global Commercial Banking, in July 2016. ■ ☐ Based in HSBC Group's London offices, Ms. Blyth is responsible for a business which provides financing and risk mitigation solutions to meet clients' international and domestic trade requirements. Ms. Blyth has over 20 years' investment banking experience. She joined the Global Commercial Banking business in 2015, as the Global Head of Large Corporates and went on to become the Global Head of Client Coverage. Before moving into Commercial Banking, she spent 8 years with the Global Banking and Markets business, as the Global Head of the Consumer Group and the Co-Head of UK Banking. ■ Before joining HSBC in 2007, Ms. Blyth spent 3 years as the Head of Consumer at Deutsche Bank. Previously, she spent 11 years at Dresdner Kleinwort Wasserstein and prior to her move into banking, worked as a solicitor at Stephenson Harwood, focusing on corporate law. ■ Ms. Blyth holds a BSc in Biochemistry from St Andrew's University. 45 25#26The value of trade to our customers Key Product Clients needs..... ...and benefit to client Documentary Trade Buyer (defer payment) & Supplier (early payment) conflicting needs Bank's undertaking to pay the supplier if they have shipped in accordance to the buyers requirements Managed by routing of title documents through Bank Supplier is assured of payment and can receive upfront discounted proceeds Buyer is assured that goods are as per their requirement and can defer payment terms Trade Loans Facility that bridges working capital gaps and are tailored to the clients working capital cycle Often self-liquidating structures Provides competitive pricing (better capital treatment and shorter tenor) Incremental credit outlay Guarantees Clients need to provide comfort to beneficiary in relation to performance An unconditional undertaking to pay upon demand by the beneficiary in the event of non-performance Critical to client's operations and fundamental to projects and infrastructure. Helps clients cash position, as they are often in lieu of deposits Receivables Finance Clients need to improve cashflow without impacting balance sheet Purchase of receivables, we then seek payment from Buyers. Clients can use their generic working capital facilities for other purposes Ledger management services to improve clients A/R process Supply Chain Finance HSBC discount approved invoices from the buyer and release early payment to the Supplier (payment risk on the buyer) Buyer can extend payment terms without impacting their working capital and deepen supplier relationships Supplier benefits from competitive pricing 26#27How trade products relate to our balance sheet and P&L Letter of Credit Receivable Finance Guarantees Trade Loans Supply Chain Balance Sheet Capital Funded Asset Contingent Liability × RWA Profit & Loss NII NFI X 27#28Supply chain finance Banks intermediating in open account trade, providing working capital financing solutions across the entire supply chain benefiting both buyers and sellers Buyer 1 EEEEE = Interest and Fee income earned across life cycle 1 3 2 HSBC 4 HSBC agrees legal documents with Buyer and Seller 2 Buyer sends Approved Invoice data to HSBC 3 Seller requests early payment and receives early discounted payment 4 Buyer settlement of Approved Invoice on the due date Seller 28#299% decline in trade finance market in 2015 Trade Finance Global Market Size1 Revenue Pool, USDbn 52 51 51 52 52 -9% 47 43 28 27 26 25 22 Traditional Trade 25 Open Account revenues stable as clients move from Traditional Trade Finance ■ BCG projects 4% p.a. growth² in Trade Finance market over next decade Traditional Trade to return to growth Open account to continue to gain share 25 24 26 26 25 - Open Account 19 2010 2011 2012 2013 2014 2015 Open account 44% 48% 47% 51% 50% 53% % of total 1. Source: Oliver Wyman GTB Revenue Pool Estimates 2016 12 2. Source: The Boston Consulting Group, 2016 29 29#30HSBC has gained market share and remains #1 Trade Bank GTRF have shown resilient performance in challenging environment Market share¹ 2012 - 2015, % 11 10.2 9.9 Traditional Trade 10 9.0 9.2 GTRF vs. Lending Market Share Market share, % 9 5% 8 7 6.0 6.1 India³ 1% 5.6 6 5.5 Total Trade Lending Trade Finance LO 13% 4 3 2.5 3% 2.3 2.2 Open Account Singapore4 2 Lending Trade Finance 1 0 2012 2013 2014 2015 Source: Coalition FY16. Peer group: Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Deutsche Bank, J.P. Morgan, Standard Charted, Société Générale and Wells Fargo. Coalition results are based upon HSBC's product taxonomy and includes all Corporate and Institutional clients 1. 2. Source: Oliver Wyman GTB Revenue Pool Estimates 2016 3. Source: Govt. of India (Ministry of Commerce - DGFT), Dec 2016 4. Source: MAS Monthly Statistical Bulletin, Dec 2016 30#31Asia leading trade growth going forward, positioning HSBC well Selected Regional Bilateral Trade Corridors, 2015 Merchandise Trade1, USDtrn Area of bubble = Value of bilateral merchandise trade (global total = USD17trn) Intra-Europe 1.7 0.9 Europe-Asia 4.4 Intra-NAFTA 1.1 NAFTA-Europe 1.4 NAFTA-Asia Asia-MENA 3.3 Intra-Asia 0.8 Asian leadership in trade ■ RCEP² to drive liberalisation ■ China's Belt & Road initiative 1. 2015 UNCTAD regional trade data, split according to World Bank definitions of regions 2. Regional Comprehensive Economic Partnership accord is a mega-regional trade deal covering 16 countries in the Asia-Pacific region 31#32Further integration in ASEAN, RCEP, as well as the Belt and Road initiative are expected to deliver additional trade growth in Asia China Belt and Road Initiative Land route Maritime route Countries covered under plan¹ 65 " Number of planned projects1 >900 Trade along BRI by 20252 USD2.5trn World GDP connected4 Europe 29% Russia 1. 23 2. 3. UK Regional Comprehensive Economic Partnership (RCEP) Number of Asia-Pacific countries included Population covered as % of world total 16 48% Central Asia ◉ GDP as percent of world total 30% Mediterranean Sea Middle East South Asia Southeast Asia HK South China Sea Between now and 2050, the region will contribute 80% (c.USD100trn) of global economic growth, with three billion more people entering the middle class³ Capital dedicated to Belt and Road Initiative Indian Ocean Singapore South Pacific Fundraising centre Silk Road Fund: USD40m ASEAN integration Asia Infrastructure Investment Bank (AIIB): USD100m New Development Bank: USD50m Chinese policy banks e.g. China Development Bank, GDP and trade growth 1990-2014 CAGR Population by 2030 9% 736m China Export Import Bank " Private capital: bond issuances, IPOS Per capita GDP growth 2013-2030 3.6x Growth in middle class 2010-2025 2x BRI is geographically elastic, a fact acknowledged by Chinese government agencies. We have defined BRI coverage to include Greater China territories and countries identified using sources like HKTDC BRI coverage and State Council maps 4. HSBC Global Research, On the New Silk Road II 5.. China, Hong Kong, Singapore and the UK are expected to be key financing centres to support BRI Xi Jinping in 2015 Boao Forum, Xinhuanet, 29MAR15 (http://news.xinhuanet.com/english/2015-03/29/c_134107329.htm) McKinsey, estimated using Global Insight 32#332016 Key financial metrics Key financial metrics Return on average ordinary shareholders' equity Return on average tangible equity Jaws (adjusted)1.2 Dividends per ordinary share in respect of the period Earnings per share Common equity tier 1 ratio Leverage ratio Advances to deposits ratio Net asset value per ordinary share (NAV) Tangible net asset value per ordinary share (TNAV) Reported Income Statement, $m 4Q16 vs. 4Q15 2016 vs. 2015 Adjusted Income Statement, $m 2015 2016 7.2% 0.8% 8.1% 2.6% (3.7)% 1.2% $0.51 $0.51 $0.65 $0.07 11.9% 13.6% 5.0% 5.4% 71.7% 67.7% $8.73 $7.91 $7.48 $6.92 4Q16 vs. 4Q15 2016 vs. 2015 Revenue 8,984 (24)% 47,966 (20)% Revenue 11,000 (3)% 50,153 (2)% LICS (468) 72% (3,400) 9% LICS (468) 64% (2,652) (2)% Costs (12,459) (8)% (39,808) 0% Costs (8,411) 3% (30,556) 4% Associates 498 (10)% 2,354 (8)% Associates 498 (6)% 2,355 (4)% (Loss) / Profit before tax (3,445) <(200)% 7,112 (62)% Profit before tax 2,619 39% 19,300 (1)% 1. 12 Includes the impact of UK bank levy 2015 Jaws as reported in 2015 33#34Reconciliation of reported to adjusted PBT Reported profit before tax Includes: Currency translation Significant items: Discrete quarter 2016 4Q15 4Q16 vs. 4Q15 2015 2016 vs. 2015 (858) (3,445) (2,587) 18,867 7,112 (11,755) 139 (139) 840 (840) FVOD Fair value gains / losses on own debt (credit spreads only) Gain on the partial sale of shareholding in Industrial Bank (773) (1,648) (875) 1,002 (1,792) (2,794) 1,372 (1,372) Gains on disposal Gain on the disposal of our membership interest in Visa Europe Gain on the disposal of our membership interest in Visa US 584 584 116 116 116 116 Includes Loss on disposal of operations in Brazil (1,743) (1,743) Brazil disposal - Trading results from disposed operations in Brazil (190) 190 (78) (338) (260) $1.5bn tangible gain $(1.9)bn FX recycling $(1.3)bn of Settlements and provisions in connection with legal matters (370) 42 412 (1,649) (681) 968 goodwill Impairment of GPB Europe goodwill (2,440) (2,440) (3,240) (3,240) Cost-related UK customer redress programmes (337) (70) 267 (541) (559) (18) Costs to achieve (743) (1,086) (343) (908) (3,118) (2,210) Other Other significant items* (465) (978) (515) (699) (1,417) (718) Adjusted profit before tax 1,881 2,619 738 19,528 19,300 (228) *Other significant items include portfolio disposals and the costs associated with these, debit valuation adjustment (DVA) movements, fair value movements on non-qualifying hedges (NQHs), regulatory provisions in GPB, restructuring, and provisions arising from the on-going review of compliance with the Consumer Credit Act in the UK 34#35Empty