HSBC Bank plc Annual Report and Accounts 2020 Contents Cautionary Statement Regarding Forward- Looking Statements Page Strategic Report This Annual Report and Accounts 2020 contains certain forward- Highlights 2 looking statements with respect to the financial condition, results Responding to the new environment 3 of operations and business of the group. Key financial metrics 3 Purpose and strategy 4 Statements that are not historical facts, including statements about the group’s beliefs and expectations, are forward-looking Products and services 6 statements. Words such as ‘expects’, ‘anticipates’, ‘intends’, How we do business 7 ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably Key Performance Indicators 12 possible’, variations of these words and similar expressions are Economic background and outlook 13 intended to identify forward-looking statements. These statements Financial summary 14 are based on current plans, estimates and projections, and Risk overview 20 therefore undue reliance should not be placed on them. Forward- Report of the Directors looking statements speak only as of the date they are made. HSBC Risk 22 Bank plc makes no commitment to revise or update any forward- – Our approach to risk 22 looking statements to reflect events or circumstances occurring or – Top and emerging risks 23 existing after the date of any forward-looking statement. – Areas of special interest 27 – Our material banking and insurance risks 31 Forward-looking statements involve inherent risks and Capital 72 uncertainties. Readers are cautioned that a number of factors Corporate Governance Report 86 could cause actual results to differ, in some instances materially, – Directors 86 from those anticipated or implied in any forward-looking – Company Secretary 88 statement. – Board of Directors 88 – Directors‘ emoluments 88 – Board committees 88 – Dividends 91 – Internal control 91 – Employees 92 – Auditors 93 – Articles of association, conflicts of interest and indemnification of directors 94 – Statement on going concern 95 – Statement of directors' responsibilities in respect of the financial statements 96 Financial Statements Independent Auditors’ Report 97 Financial statements 107 Notes on the financial statements 118 Presentation of Information This document comprises the Annual Report and Accounts 2020 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’, 'HSBC Group' or ‘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 is available on HSBC’s website: www.hsbc.com. Pillar 3 disclosures for the group are also available on www.hsbc.com, under Investors. All narrative disclosures, tables and graphs within the Strategic Report and Report of the Directors are unaudited unless otherwise stated. Our reporting currency is £ sterling. Unless otherwise specified, all $ symbols represent US dollars. HSBC Bank plc Annual Report and Accounts 2020 1 Strategic Report | Highlights Highlights For the year ended 31 December 2020 Reported (loss)/profit before tax (£m) Adjusted (loss)/profit before tax (£m) 2,000 2,500 1,974 2,100 1,000 0 (872) (1,614) 603 0 (184) -2,500 Dec 2020 Dec 2019 Dec 2018 Dec 2020 Dec 2019 Dec 2018 £(184)m £(1,614)m (2019: £603m) (2019: £(872)m) . Reported revenue (£m) Total assets at period end (£bn) 10,000 750 500 5,000 9,468 681 636 605 250 5,900 6,044 0 0 Dec 2020 Dec 2019 Dec 2018 Dec 2020 Dec 2019 Dec 2018 £5,900m £681bn (2019: £636bn) (2019: £6,044m) . Reported risk-weighted assets at period end (£bn) Common equity tier 1 ratio at period end (%) 150 15 100 10 144 14.7 14.2 13.8 122 125 50 5 0 0 Dec 2020 Dec 2019 Dec 2018 Dec 2020 Dec 2019 Dec 2018 £122bn 14.7% (2019: £125bn) (2019: 14.2%) . 2 HSBC Bank plc Annual Report and Accounts 2020 is implemented, given the underlying performance of the French Responding to the new retail business, a loss on sale is expected. environment In 2020, the economic outlook deteriorated due to the outbreak of Covid-19, a continued low interest rate environment and increased In February 2020, the Group announced a business update, to geopolitical risk. Covid-19 changed the external environment and increase returns by re-allocating capital out of low-return how we operate – our effective transition to remote working franchises into higher performing ones, reducing our cost base highlights our resilience through this period. Covid-19 significantly and simplifying our organisation. For Europe, our strategy was impacted customers and our priority was to support them through adjusted in line with the business update to focus on international a range of initiatives such as, local government lending schemes wholesale banking clients linked to our global network and a and payment holidays. targeted wealth franchise. We are simplifying HSBC Bank plc's We remain committed to the strategy and business model outlined operating model to become one integrated business with hubs in in February 2020; changes to the external landscape have London and Paris, supported by shared services. reinforced the need for HSBC Bank plc to become simpler and We are continuing with the strategic review of our retail banking more efficient to operate successfully in the European market. operations in France and are in negotiations in relation to a potential sale although no decision has yet been taken. If any sale Key financial metrics Footnotes 2020 2019 For the year (£m) Loss before tax (reported basis) (1,614) (872) (Loss) / profit before tax (adjusted basis) 1 (184) 603 Net operating income before change in expected credit losses and other credit impairment charges (reported basis) 2 5,900 6,044 Loss attributable to shareholders of the parent company (1,488) (1,013) At year-end (£m) Total equity attributable to shareholders of the parent company 23,666 23,503 Total assets 681,150 636,491 Risk-weighted assets 122,392 125,413 Loans and advances to customers (net of impairment allowances) 101,491 108,391 Customer accounts 195,184 177,236 Capital ratios (%) 3 Common equity tier 1 14.7 14.2 Tier 1 18.1 17.6 Total capital 27.3 27.9 Performance, efficiency and other ratios (annualised %) Return on average ordinary shareholders’ equity 4 (7.9) (4.6) Return on tangible equity (%) 5 (2.7) 0.6 Cost efficiency ratio (reported basis) 6 113.6 112.2 Cost efficiency ratio (adjusted basis) 6 89.6 87.9 Ratio of customer advances to customer accounts 52.0 61.2 1 Adjusted performance is computed by adjusting reported results for the effect of significant items as detailed on pages 16 to17. 2 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as revenue. 3 Capital ratios are detailed in the Capital section on pages 72 to 74. 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. Dividends paid on AT1 should be net of tax in the calculation. 5 The RoTE is calculated as reported profit attributable to ordinary shareholders less changes in goodwill and intangible assets and present value of in-force long-term insurance business divided by average tangible shareholders' equity. 6 Reported cost efficiency ratio is defined as total operating expenses (reported) divided by net operating income before change in expected credit losses and other credit impairment charges (reported), while adjusted cost efficiency ratio is defined as total operating expenses (adjusted) divided by net operating income before change in expected credit losses and other credit impairment charges (adjusted). HSBC Bank plc Annual Report and Accounts 2020 3 Strategic Report | Purpose and strategy business, aside from UK retail and most UK commercial banking About HSBC Group activity which, post ring-fencing, are managed by HSBC UK Bank plc. With assets of $3.0tn and operations in 64 countries and territories at 31 December 2020, HSBC is one of the largest banking and HSBC Bank Plc is simplifying its operating model to one integrated financial services organisations in the world. More than 40 million business with two main hubs in London and Paris. customers bank with us and we employ around 226,000 full-time HSBC Bank plc operates in 20 markets1. Our operating entities equivalent staff. We have around 194,000 shareholders in 130 represent the Group to customers, regulators, employees and countries and territories. other stakeholders. We are organised around the principal operating units detailed below. The London hub consists of the UK non-ring fenced bank, which Purpose and strategy provides overall governance and management for the Europe region as a whole and is a global centre of excellence for Our purpose and ambition wholesale banking for the Group. In addition, the management team directly oversees our businesses in Armenia, Channel Islands & Isle of Man, and Malta. Our new purpose is ‘Opening up a world of opportunity’ and our ambition is to be the preferred international finance partner for our HSBC Continental Europe, comprises our Paris hub and its clients. European Union ('EU') branches (Belgium, Czech Republic, Greece, Ireland, Italy, Luxembourg, Netherlands, Poland, Spain and HSBC values Sweden). We are creating an integrated Continental European HSBC values help define who we are as an organisation, and are bank anchored on Paris to better serve our clients, and simplify key to our long-term success.