HSBC BANK PLC

Financial Statements Consolidated income statement for the year ended 31 December 2014 2014 Total £m

2013 Total £m

Interest income

9,438

10,008

Interest expense

(2,809)

(3,047)

Net interest income

6,629

6,961

Fee income

4,568

4,723

Fee expense

(1,302)

(1,387)

Net fee income

3,266

3,336

Trading income excluding net interest income

1,142

1,694

467

679

Net interest income on trading activities

1,609

2,373

Net income from financial instruments designated at fair value

371

900

Gains less losses from financial investments

321

100

Net trading income

Dividend income 2

Net insurance premium income Other operating income Total operating income

20

18

1,823

2,022

163

158

14,202

15,868

(2,316)

(3,028)

11,886

12,840

Net insurance claims, benefits paid and movement in liabilities to policyholders

3

Net operating income before loan impairment charges and other credit risk provisions 4 Loan impairment charges and other credit risk provisions

4

Net operating income

4

11,437

11,869

Employee compensation and benefits

5

(4,144)

(3,838)

(4,811)

(4,195)

Depreciation and impairment of property, plant and equipment

(321)

(331)

Amortisation and impairment of intangible assets

(211)

(211)

(9,487)

(8,575)

1,950

3,294

General and administrative expenses

Total operating expenses Operating profit Share of profit in associates and joint ventures Profit before tax 8

Tax expense

(449)

(971)

3

–

1,953

3,294

(564)

(754)

Profit for the year

1,389

2,540

Profit attributable to shareholders of the parent company

1,354

2,495

35

45

Profit attributable to non-controlling interests

The accompanying notes on pages 113 to 195 and the audited sections of the ‘Report of the Directors: Risk’ on pages 31 to 83 and the ‘Report of the Directors: Capital Management’ on pages 84 to 93 form an integral part of these financial statements.

105

HSBC BANK PLC

Financial Statements (continued) Consolidated statement of comprehensive income for the year ended 31 December 2014

Profit for the year

2014

2013

Total

Total

£m

£m

1,389

2,540

1,033

420

Other comprehensive income Items that will be reclassified subsequently to profit or loss when specific conditions are met Available-for-sale investments – fair value gain – fair value (gains)/losses transferred to the income statement on disposal – amounts transferred to the income statement in respect of impairment losses

(407)

223

36

115

(218)

– income taxes

2

Cash flow hedges – fair value gains – fair value (gains) transferred to the income statement – income taxes Exchange differences and other

838

46

(575)

(423)

(74)

109

(820)

39

Items that will not be reclassified subsequently to profit or loss Actuarial gains/(losses) on defined benefit plans 1,638

– before income taxes

(322)

– income taxes

(957) 251

Other comprehensive income for the year, net of tax

1,129

Total comprehensive income for the year

2,518

2,365

2,504

2,319

(175)

Total comprehensive income for the year attributable to: – shareholders of the parent company – non-controlling interests

14

46

2,518

2,365

The accompanying notes on pages 113 to 195 and the audited sections of the ‘Report of the Directors: Risk’ on pages 31 to 83 and the ‘Report of the Directors: Capital Management’ on pages 84 to 93 form an integral part of these financial statements.

106

HSBC BANK PLC

Financial Statements (continued) Consolidated statement of financial position at 31 December 2014 Notes Assets Cash and balances at central banks Items in the course of collection from other banks Trading assets Financial assets designated at fair value Derivatives Loans and advances to banks Loans and advances to customers Reverse repurchase agreements – non-trading Financial investments Prepayments, accrued income and other assets Current tax assets Interests in associates and joint ventures Goodwill and intangible assets Deferred tax assets

11 14 15 29 29 16 17 19 20 21 8

Total assets Liabilities and equity Liabilities Deposits by banks Customer accounts Repurchase agreements – non-trading Items in the course of transmission to other banks Trading liabilities Financial liabilities designated at fair value Derivatives Debt securities in issue Accruals, deferred income and other liabilities Current tax liabilities Liabilities under insurance contracts issued Provisions Deferred tax liabilities Subordinated liabilities

29 29 16 23 24 15 29 25 26 27 8 28

Total liabilities Equity Called up share capital Share premium account Other equity instruments Other reserves Retained earnings

32 32

Total shareholders’ equity Non-controlling interests Total equity Total equity and liabilities

2014 £m

2013 £m

42,853 973 130,127 6,899 187,736 25,262 257,252 41,945 76,194 20,319 190 69 7,294 176

67,584 1,948 134,097 16,661 137,239 23,013 273,722 61,525 75,030 12,443 210 67 7,934 222

797,289

811,695

27,590 346,507 23,353 667 82,600 22,552 188,278 27,921 12,417 255 17,522 1,707 364 8,858

28,769 346,358 65,573 960 91,842 34,036 137,352 32,895 9,158 89 19,228 1,707 24 10,785

760,591

778,776

797 20,733 2,196 772 11,580

797 20,427 921 10,225

36,078 620

32,370 549

36,698

32,919

797,289

811,695

The accompanying notes on pages 113 to 195 and the audited sections of the ‘Report of the Directors: Risk’ on pages 31 to 83 and the ‘Report of the Directors: Capital Management’ on pages 84 to 93 form an integral part of these financial statements.

A P S Simoes, Director

23 February 2015

107

HSBC BANK PLC

Financial Statements (continued) Consolidated cash flow statement for the year ended 31 December 2014 2014 £m

2013 £m

1,953

3,294

2,918 19,031 (58,960) 2,828 (359) (3) (254) (579)

2,684 (53,006) 61,035 (623) (130) – (393) (363)

Net cash (used in)/generated from operating activities

(33,425)

12,498

Cash flows from investing activities Purchase of financial investments Proceeds from the sale and maturity of financial investments Purchase of property, plant and equipment Proceeds from the sale of property, plant and equipment Purchase of goodwill and intangible assets Proceeds from the sale of intangible assets Net cash outflow from acquisition of businesses and subsidiaries Proceeds from disposal of subsidiaries Proceeds from sale of associates Net cash disposed of on sale of subsidiaries Purchases of HSBC Holdings plc shares to satisfy share-based payment transactions

(26,890) 26,132 (411) 414 (231) 2 (61) 112 23 (457) (11)

(32,298) 32,472 (322) 14 (199) 3 (406) 12 – – –

Net cash used in investing activities

(1,378)

(724)

Cash flows from financing activities Issue of ordinary share capital Issue of capital securities Subordinated liabilities issued Subordinated liabilities repaid Net cash inflow from change in stake of subsidiaries Dividends paid to shareholders Dividends paid to non-controlling interests

306 2,196 203 (2,242) 77 (1,274) (16)

402 – 542 (7) – (2,014) (22)

(750)

(1,099)

(35,553) 108,769 (1,716)

10,675 98,158 (64)

71,500

108,769

Notes Cash flows from operating activities Profit before tax Adjustments for: – non-cash items included in profit before tax – change in operating assets – change in operating liabilities – elimination of exchange differences1 – net gain from investing activities – share of profit in associates and joint ventures – contributions paid to defined benefit plans – tax paid

33 33 33

Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate changes on cash and cash equivalents 33

Cash and cash equivalents at 31 December

1 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.

The accompanying notes on pages 113 to 195 and the audited sections of the ‘Report of the Directors: Risk’ on pages 31 to 83 and the ‘Report of the Directors: Capital Management’ on pages 84 to 93 form an integral part of these financial statements.

108

HSBC BANK PLC

Financial Statements (continued) Consolidated statement of changes in equity for the year ended 31 December 2014 Called up Share capital

Share premium

Other equity instruments

Other reserves Availablefor-sale Cash flow Foreign Retained fair value hedging exchange 2 earnings reserve reserve reserve

Total Nonshareholders’ controlling equity interests

Total equity

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

797

20,427

—

10,225

634

(13)

300

32,370

549

32,919

–

–

–

1,354

–

–

–

1,354

35

1,389

– – –

– – –

– – –

1,321 – –

436 436 –

189 – 189

(796) – –

1,150 436 189

(21) 8 –

1,129 444 189

– –

– –

– –

1,321 –

– –

– –

– (796)

1,321 (796)

(5) (24)

1,316 (820)

–

–

–

2,675

436

189

(796)

2,504

14

2,518

– – –

306 – –

– 2,196 –

– – –

– – –

– – –

306 2,196 (1,274)

– – (16)

306 2,196 (1,290)

– –

– –

– –

15 –

– –

– –

– 22

15 22

– –

15 22

– –

– –

– –

(61) –

– –

– –

– –

(61) –

73 –

12 –

At 31 December 2014

797

20,733

2,196

11,580

1,070

176

(474)

36,078

620

36,698

At 1 January 2013

797

20,025

—

10,459

259

266

31,675

525

32,200

—

—

—

2,495

—

—

—

2,495

45

2,540

— — —

— — —

— — —

(707) — —

765 765 —

(268) — (268)

34 — —

(176) 765 (268)

1 (5) —

(175) 760 (268)

— —

— —

— —

(707) —

— —

— —

— 34

(707) 34

1 5

(706) 39

— — —

— 402

— — —

1,788 — (2,014)

765 — —

(268) — —

34 — —

2,319 402 (2,014)

46 — (22)

2,365 402 (2,036)

—

—

—

4

—

—

—

4

—

4

— —

— —

— —

(11) (1)

— —

(4) —

— —

(15) (1)

— —

(15) (1)

797

20,427

—

10,225

634

(13)

300

32,370

549

32,919

At 1 January 2014 Profit for the year Other comprehensive income (net of tax) Available-for-sale investments Cash flow hedges Actuarial gains/(losses) on defined benefit plans Exchange differences and other Total comprehensive income for the year Share capital issued, net of costs1 Capital securities issued1 Dividends to shareholders Net impact of equity-settled sharebased payments Acquisitions and disposals Change in business combinations and other movements Tax on items taken directly to equity

Profit for the year Other comprehensive income (net of tax) Available-for-sale investments Cash flow hedges Actuarial gains/(losses) on defined benefit plans Exchange differences and other Total comprehensive income for the year Share capital issued, net of costs1 Dividends to shareholders Net impact of equity-settled sharebased payments Change in business combinations and other movements Tax on items taken directly to equity At 31 December 2013

– – (1,274)

(131)

1 All new capital subscribed during the year was issued to HSBC Holdings plc. See Note 32 for further details. 2 Movements in the cash flow hedging reserve include amounts transferred to the income statement of £575 million (2013:£423 million) comprising a £250 million loss (2013: £232 million loss) taken to ‘Net interest income’ and a £325 million loss (2013 £191 million loss) taken to ‘Net trading income’.

The accompanying notes on pages 113 to 195 and the audited sections of the ‘Report of the Directors: Risk’ on pages 31 to 83 and the ‘Report of the Directors: Capital Management’ on pages 84 to 93 form an integral part of these financial statements.

109

HSBC BANK PLC

Financial Statements (continued) HSBC Bank plc statement of financial position at 31 December 2014 Notes

2014 £m

2013 £m

41,424 630 97,757 9 160,232 18,776 201,671 36,391 48,438 12,908 125 62 11,339 948 5

60,996 1,374 101,287 3,983 112,623 16,332 217,567 47,847 45,048 8,201 424 62 11,206 891 88

630,715

627,929

31,383 282,687 18,293 336 59,039 16,127 161,442 14,950 5,289 160 1,345 345 7,854

32,456 280,940 51,198 422 62,414 22,006 114,710 19,576 5,695 142 1,271 2 9,903

599,250

600,735

Assets Cash and balances at central banks Items in the course of collection from other banks Trading assets Financial assets designated at fair value Derivatives Loans and advances to banks Loans and advances to customers Reverse repurchase agreements – non-trading Financial investments Prepayments, accrued income and other assets Current tax assets Interests in associates and joint ventures Investments in subsidiary undertakings Goodwill and intangible assets Deferred tax assets

11 14 15 29 29 16 17 19 20 22 21 8

Total assets Liabilities and equity Liabilities Deposits by banks Customer accounts Repurchase agreements – non-trading Items in the course of transmission to other banks Trading liabilities Financial liabilities designated at fair value Derivatives Debt securities in issue Accruals, deferred income and other liabilities Current tax liabilities Provisions Deferred tax liabilities Subordinated liabilities

29 29 16 23 24 15 29 25 27 8 28

Total liabilities Equity Called up share capital Share premium account Other equity instruments Other reserves Retained earnings

32 32

Total equity Total equity and liabilities

797 20,733 2,196 389 7,350

797 20,427 (372) 6,342

31,465

27,194

630,715

627,929

The accompanying notes on pages 113 to 195 and the audited sections of the ‘Report of the Directors: Risk’ on pages 31 to 83 and the ‘Report of the Directors: Capital Management’ on pages 84 to 93 form an integral part of these financial statements.

A P S Simoes, Director

23 February 2015

110

HSBC BANK PLC

Financial Statements (continued) HSBC Bank plc cash flow statement for the year ended 31 December 2014 2014 £m

2013 £m

1,367

2,913

2,527 18,204 (43,561) 1,703 (433) (242) (308)

2,008 (52,222) 67,495 1,407 (117) (387) (169)

Net cash (used in)/generated from operating activities

(20,743)

20,928

Cash flows from investing activities Purchase of financial investments Proceeds from the sale and maturity of financial investments Purchase of property, plant and equipment Proceeds from the sale of property, plant and equipment Purchase of goodwill and intangible assets Net cash outflow from acquisition of businesses and subsidiaries Proceeds from disposal and liquidation of businesses

(19,253) 16,188 (260) 401 (182) (61) 112

(28,472) 19,488 (227) 3 (184) (406) 447

Net cash used in investing activities

(3,055)

(9,351)

Cash flows from financing activities Issue of ordinary share capital Issue of capital securities Subordinated liabilities issued Subordinated liabilities repaid Net cash outflow from increase in stake of subsidiaries Dividends paid to shareholders

306 2,196 – (2,203) (244) (1,271)

402 – 542 (542) (207) (2,011)

(1,216)

(1,816)

Notes Cash flows from operating activities Profit before tax Adjustments for: – non-cash items included in profit before tax – change in operating assets – change in operating liabilities – elimination of exchange differences1 – net gain from investing activities – contributions paid to defined benefit plans – tax paid

33 33 33

Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate changes on cash and cash equivalents 33

Cash and cash equivalents at 31 December

(25,014)

9,761

88,017 (1,061)

78,661 (405)

61,942

88,017

1 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.

The accompanying notes on pages 113 to 195 and the audited sections of the ‘Report of the Directors: Risk’ on pages 31 to 83 and the ‘Report of the Directors: Capital Management’ on pages 84 to 93 form an integral part of these financial statements.

111

HSBC BANK PLC

Financial Statements (continued) HSBC Bank plc statement of changes in equity for the year ended 31 December 2014

Called up share capital £m

Availablefor-sale fair value reserve £m

Other reserves

Share premium £m

Other equity instruments £m

Retained earnings £m

797 –

20,427

–

6,342

(8)

(47)

–

–

975

–

–

–

975

Other comprehensive income (net of tax) Available-for-sale investments Cash flow hedges Actuarial gains on defined benefit plans Exchange differences and other

– – – – –

– – – – –

– – – – –

1,353 – – 1,353 –

656 656 – – –

108 – 108 – –

(3) – – – (3)

2,114 656 108 1,353 (3)

Total comprehensive income for the year

–

–

–

2,328

656

108

(3)

3,089

Share capital issued, net of costs1 Capital securities issued1 Dividends to shareholders Net impact of equity-settled share-based payments Change in business combinations and other movements Tax on items taken directly to equity

– – –

306 – –

– 2,196 –

– – –

– – –

– – –

306 2,196 (1,271)

– –

–

–

12

–

–

–

12

–

– –

– –

(61) –

– –

– –

– –

(61) –

At 31 December 2014

797

20,733

2,196

7,350

339

100

(50)

31,465

At 1 January 2013 Profit for the year

797 –

20,025

–

6,588

(377)

167

(133)

27,067

–

–

2,485

–

–

–

2,485

Other comprehensive income (net of tax) Available-for-sale investments Cash flow hedges Actuarial gains on defined benefit plans Exchange differences and other

– – – – –

– – – – –

– – – – –

Total comprehensive income for the year

–

–

–

Share capital issued, net of costs1 Dividends to shareholders Net impact of equity-settled share-based payments Change in business combinations and other movements Tax on items taken directly to equity

– –

402 –

– –

At 1 January 2014 Profit for the year

At 31 December 2013

– – (1,271)

(709) – – (709) –

(317)

Cash flow hedging reserve2 £m

Foreign exchange reserve £m

Total equity £m 27,194

62 62 – – –

(175) – (175) – –

86 – – – 86

1,776

62

(175)

86

1,749

– –

– (2,011)

– –

– –

– –

402 (2,011)

–

–

(3)

–

–

–

(3)

–

– –

– –

(8) –

(2) –

– –

– –

(10) –

797

20,427

–

(317)

(8)

(47)

6,342

(736) 62 (175) (709) 86

27,194

1 All new capital subscribed during the year was issued to HSBC Holdings plc. See Note 32 for further details. 2 Movements in the cash flow hedging reserve include amounts transferred to the income statement of £496 million (2013:£317 million) comprising a £213 million loss (2013: £181 million loss) taken to ‘Net interest income’ and a £283 million loss (2013 £131 million loss) taken to ‘Net trading income’.

The accompanying notes on pages 113 to 195 and the audited sections of the ‘Report of the Directors: Risk’ on pages 31 to 83 and the ‘Report of the Directors: Capital Management’ on pages 84 to 93 form an integral part of these financial statements.

112