REG - Standard Chrtrd PLC - Additional Financial Information
21/02/2025 07:15
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RNS Number : 9808X Standard Chartered PLC 21 February 2025
Standard Chartered PLC - Additional Financial information
Highlights
Standard Chartered PLC (the Group) today releases its results for the year
ended 31 December 2024. The following pages provide additional information
related to the announcement.
Table of contents
Risk review and Capital review
Enterprise Risk Management Framework 2
Principal risks 8
Risk profile 17
Capital review 71
Statement of directors' responsibilities 77
Shareholder information 79
Page 1
Enterprise Risk Management Framework
Risk management is at the heart of banking, it is what we do. Managing risk
effectively is how we drive commerce and prosperity for our clients and our
communities, and it is how we grow sustainably and profitably as an
organisation.
Effective risk management is essential in delivering consistent and
sustainable performance for all our stakeholders and is a central part of the
financial and operational management of the Group. The Group adds value to
clients and the communities in which they operate by balancing risk and reward
to generate returns for shareholders.
The Enterprise Risk Management Framework (ERMF) enables the Group to manage
enterprise-wide risks, with the objective of maximising risk-adjusted returns
while remaining within our Risk Appetite (RA). The ERMF is complemented by
frameworks, policies and standards which are mainly aligned to the Principal
Risk Types (PRTs), and is embedded across the Group, including its branches
and subsidiaries.1 It is reviewed and approved by the Board annually, with the
latest version being effective from August 2024.
Risk culture
Risk culture encompasses our general awareness, attitudes, and behaviours
towards risk, as well as how risk is managed at enterprise level.
A healthy risk culture is one in which everyone takes personal responsibility
to identify and assess, openly discuss, and take prompt action to address
existing and emerging risks. We expect our control functions to provide
oversight and challenge constructively, collaboratively, and in a timely
manner on the risks owned by the first line of defence. This effort is
reflected in our valued behaviours and underpinned by our Code of Conduct and
Ethics.
The risks we face constantly evolve, and we must always look for ways to
manage them as effectively as possible. While unfavourable outcomes will occur
from time to time, a healthy risk culture means that we react quickly and
transparently. We can then take the opportunity to learn from our experience
and improve our framework and processes.
Strategic risk management
The Group's approach to strategic risk management includes the following:
• Risk identification: impact analyses of risks that arise from the Group's
growth plans, strategic initiatives, and business model vulnerabilities are
reviewed. This assesses how existing risks have evolved in terms of relative
importance and whether new risks have emerged.
• Risk Appetite: impact analysis is performed to assess if strategic
initiatives can be achieved within RA and highlight areas where additional RA
should be considered.
• Stress testing: identified risks are used to develop scenarios for
enterprise stress tests.
Roles and responsibilities
Senior Managers Regime2
Roles and responsibilities under the ERMF are aligned to the objectives of the
Senior Managers Regime. The Group Chief Risk Officer (GCRO) is responsible for
the overall development and maintenance of the Group's ERMF and for
identifying material risks which the Group may be exposed to. The GCRO
delegates effective implementation of the Risk Type Frameworks (RTF) to Risk
Framework Owners (RFO), who provide second line of defence oversight for their
respective PRTs.
1 The Group's ERMF and system of internal control applies only to
wholly controlled subsidiaries of the Group, and not to associates, joint
ventures or structured entities of the Group.
2 Senior managers refer to individuals designated as senior
management functions under the FCA and PRA Senior Managers Regime.
Page 2
The Risk function
The Risk function provides oversight and challenge on the Group's risk
management, ensuring that business is conducted in line with regulatory
expectations. The GCRO directly manages the Risk function, which is
independent from the origination, trading, and sales functions of the
businesses. The Risk function is responsible for:
• proposing the RA for approval by the Board
• maintaining the ERMF, ensuring that it remains relevant and appropriate to
the Group's business activities, and is effectively communicated and
implemented across the Group
• ensuring that risks are properly assessed, risk and return decisions are
transparent and risks are controlled in accordance with the Group's standards
and RA
• overseeing and challenging the management of PRTs under the ERMF
• independence of the Risk function by ensuring that the necessary balance
in making risk and return decisions is not compromised by short-term pressures
to generate revenues.
The Risk function supports the Group's strategy by building a sustainable ERMF
that places regulatory and compliance standards, together with culture of
appropriate conduct, at the forefront of the Group's agenda.
Our Compliance, Financial Crime and Conduct Risk (CFCR) function,(3) works
alongside the Risk function within the ERMF to deliver a unified second line
of defence. Compliance Risk and Financial Crime Risk, as PRTs, fall under the
scope of the CFCR's responsibilities.
Three lines of defence model
The Group applies a three lines of defence model to its day-to-day activities
for effective risk management, and to reinforce a strong governance and
control environment. Typically:
• Businesses and functions engaged in or supporting revenue generating
activities that own and manage risks constitute the first line of defence.
• Control functions, independent of the first line of defence, that provide
oversight and challenge of risk management activities act as the second line
of defence.
• Internal Audit acts as the third line of defence, providing independent
assurance on the effectiveness of controls supporting the activities of the
first and second lines of defence.
Each PRT has an RTF which outlines the areas of governance and risk management
and is the formal mechanism through which authorities are delegated. Risk
management plans, processes, activities, and resource allocations are
consistent with the three lines of defence model prescribed by the ERMF.
Risk identification and assessment
Identification and assessment of potentially adverse risk events is an
essential first step in managing the risks of any business or activity. To
ensure consistency we use PRTs to classify our risk exposures. However, we
also recognise the need to maintain a holistic perspective since:
• a single transaction or activity may give rise to multiple types of risk
exposure
• risk concentrations may arise from multiple exposures that are closely
correlated
• a given risk exposure may change its form from one risk type to another.
There are also sources of risk that arise beyond our own operations, such as
the Group's dependency on suppliers for the provision of services and
technology.
As the Group remains accountable for risks arising from the actions of such
third parties, failure to adequately monitor and manage these relationships
could materially impact the Group's ability to operate.
3 From 1 January 2025, our Conduct, Financial Crime and Compliance (CFCC)
function was renamed as Compliance, Financial Crime and Conduct Risk (CFCR).
Page 3
The Group maintains a taxonomy of risks inherent to the strategy and business
model, as well as a risk inventory which captures identified risks, including
the Topical and Emerging Risks (TERs) to which the Group is or might be
exposed to. Multiple identification and assessment techniques are used to
ensure breadth and depth of understanding of the internal and external risk
environment, as well as potential opportunities. A risk assessment of the
corporate plan is undertaken annually, supplemented by risk assessments of new
initiatives. Risk identification findings inform the related risk oversight
process, and most importantly RA and controls setting, scenario selection and
design, and model refinement and development.
The GCRO and the Group Risk Committee (GRC) regularly review reports on the
risk profile for the PRTs, adherence to Group RA, stress test results and the
Group risk inventory including TERs.
Risk Appetite and profile
The Group recognises the following constraints which determine the risks that
we are willing to take in pursuit of our strategy and the development of a
sustainable business:
• Risk capacity is the maximum level of risk the Group can assume, given its
current capabilities and resources, before breaching constraints determined by
capital and liquidity requirements or the internal operational environment, or
otherwise failing to meet the expectations of regulator and law enforcement
agencies.
• RA is defined by the Group and approved by the Board. It is the boundary
for the risk that the Group is willing to undertake to achieve its strategic
objectives and corporate plan. We set RA to enable us to grow sustainably
while managing our risks, giving confidence to our stakeholders. The Group RA
is supplemented by risk control tools such as granular level limits, policies,
and standards to maintain the Group's risk profile within approved RA.
The Board is responsible for approving the RA Statements, which are
underpinned by a set of financial and operational control parameters known as
RA metrics and their associated thresholds. These set boundaries for the
aggregate risk exposures that can be taken across the Group.
The Group RA is reviewed bi-annually to ensure that it is fit for purpose and
aligned with strategy, with focus given to new or emerging risks.
Risk Appetite Statement
The Group's objective is to not compromise adherence with its RA in order to
pursue revenue growth or higher returns.
See the table for the set of RA Statements.
Stress testing
The objective of stress testing is to support the Group in assessing that it:
• does not have exposure to excessive risk concentrations that could produce
unacceptably high losses under severe but plausible scenarios
• has sufficient financial resources to withstand severe but plausible
scenarios
• has the financial flexibility to respond to extreme but plausible
scenarios
• understands key business model risks and considers what kind of event
might crystallise those risks - even if extreme and with a low likelihood of
occurring
• identifies, as required, actions to mitigate the likelihood or impact of
those events
• has set RA metrics at appropriate levels.
Enterprise stress tests incorporate capital and liquidity adequacy stress
tests, including recovery and resolution, as well as reverse stress tests.
Stress tests are performed at the Group, country, business, and portfolio
level under a wide range of risks and at varying degrees of severity. Unless
specifically set by the regulator, scenario design is a bespoke process that
aims to explore risks that can adversely impact the Group.
The Board delegates approval of the Bank of England (BoE) stress test
submissions to the Board Risk Committee (BRC), which reviews the
recommendations from the GRC. Based on the stress test results, the Group
Chief Financial Officer (GCFO) and GCRO can recommend strategic actions to the
Board to ensure that the Group's strategy remains within RA.
Page 4
In addition, analysis is run at the PRT level to assess specific risks and
concentrations that the Group may be exposed to. These include qualitative
assessments such as stressing of credit sectors or portfolios, and
quantitative assessments such as potential losses from severe but plausible
market risk scenarios or internal stressed liquidity metrics.
Stress testing plays a critical role in assessing the potential impact on
portfolio values of extreme but plausible scenarios, leading to potential
losses typically much larger than those predicted by the Value at Risk (VaR)
model. The Group uses historical and forward-looking scenarios. A common set
of scenarios is used across all legal entities complemented in some cases with
entity-specific scenarios. RA for market risk stress losses is set at the
Group as well as legal entity level.
Non-financial risk types are also stressed to assess the necessary capital
requirements under the Operational and Technology RTF.
The Group has also undertaken a number of Climate Risk stress tests, both
those mandated by regulators as well as management scenarios.
Principal Risk Types
PRTs are those risks that are inherent in our strategy and business model and
have been formally defined in the Group's ERMF. These risks are managed
through distinct RTFs which are approved by the GCRO.
The PRTs and associated RA Statements are reviewed annually. The table below
shows the Group's current PRTs, their definition and RA Statement.
Principal Risk Types Definition Risk Appetite Statement
Credit Risk Potential for loss due to failure of a counterparty to meet its agreed The Group manages its credit exposures following the principle of
obligations to pay the Group. diversification across products, geographies, client segments and industry
sectors.
Traded Risk Potential for loss resulting from activities undertaken by the Group in The Group should control its financial markets activities to ensure that
financial markets. market and counterparty credit risk losses do not cause material damage to the
Group's franchise.
Treasury Risk Potential for insufficient capital, liquidity, or funding to support our The Group should maintain sufficient capital, liquidity and funding to support
operations, the risk of reductions in earnings or value from movements in its operations, and an interest rate profile ensuring that the reductions in
interest rates impacting banking book items and the potential for losses from earnings or value from movements in interest rates impacting banking book
a shortfall in the Group's pension plans. items does not cause material damage to the Group's franchise. In addition,
the Group should ensure its pension plans are adequately funded.
Operational and Technology Risk Potential for loss resulting from inadequate or failed internal processes, The Group aims to control operational and technology risks to ensure that
technology events, human error, or from the impact of external events operational losses (financial or reputational), including any related to the
(including legal risks). conduct of business matters, do not cause material damage to the Group's
franchise.
Information and Cyber Security (ICS) Risk Risk to the Group's assets, operations, and individuals due to the potential The Group aims to mitigate and control ICS risks to ensure that incidents do
for unauthorised access, use, disclosure, disruption, modification, or not cause the Bank material harm, business disruption, financial loss or
destruction of information assets and/or information systems. reputational damage - recognising that while incidents are unwanted, they
cannot be entirely avoided.
Financial Crime Risk(4) Potential for legal or regulatory penalties, material financial loss or The Group has no appetite for breaches of laws and regulations related to
reputational damage resulting from the failure to comply with applicable laws Financial Crime, recognising that while incidents are unwanted, they cannot be
and regulations relating to international sanctions, anti-money laundering and entirely avoided.
anti-bribery and corruption, and fraud.
Compliance Risk Potential for penalties or loss to the Group or for an adverse impact to our The Group has no appetite for breaches of laws and regulations related to
clients, stakeholders or to the integrity of the markets we operate in through regulatory non-compliance; recognising that while incidents are unwanted, they
a failure on our part to comply with laws, or regulations. cannot be entirely avoided.
Environmental, Social and Governance Potential or actual adverse impact on the environment and/or society, the The Group aims to measure and manage financial and non-financial risks arising
and Reputational (ESGR) Risk Group's financial performance, operations, or the Group's name, brand or from climate change, reduce emissions in line with our net zero strategy and
standing, arising from environmental, social or governance factors, or as a protect the Group from material reputational damage by upholding responsible
result of the Group's actual or perceived actions or inactions. conduct and striving to do no significant environmental and social harm.
Model Risk Potential loss that may occur because of decisions or the risk of The Group has no appetite for material adverse implications arising from
misestimation that could be principally based on the output of models, due to misuse of models or errors in the development or implementation of models;
errors in the development, implementation, or use of such models. while accepting some model uncertainty.
4 Fraud forms part of the Financial Crime RA Statement but, in line
with market practice, does not apply a zero-tolerance approach.
Page 5
As of November 2024, the Climate Risk RA Statement was integrated into the
ESGR PRT.
ERMF effectiveness reviews
The GCRO is responsible for annually affirming the effectiveness of the ERMF
to the BRC via an effectiveness review. This review is based on the principle
of evidence-based self-assessments for all the RTFs and relevant policies. A
top-down review and challenge of the results is conducted by the GCRO with all
RFOs and an opinion on the internal control environment is provided by
Internal Audit.
The ERMF effectiveness review measures year-on-year progress. The key outcomes
of the 2024 review are:
• Continued focus on embedding the ERMF across the organisation.
• Financial risks continue to be effectively managed, and the Group is
making good progress in embedding non-financial risk management.
• Self-assessments performed in branches and banking subsidiaries reflect
the embeddedness of the ERMF. Country and cluster risk committees continue to
play an active role in overseeing and managing risks across our footprint
markets.
Ongoing effectiveness reviews allow for a structured approach to identify
improvement opportunities and build plans to address them.
In 2025, the Group aims to further strengthen its risk management practices by
improving the management of non-financial risks within its businesses,
functions and across our footprint. As the regulatory environment continuously
changes, the Group constantly monitors regulatory developments and take
proactive actions for compliance.
Executive and Board risk oversight
Overview
The corporate governance and committee structure helps the Group to conduct
our business. The Board has ultimate responsibility for risk management and
approves the ERMF based on the recommendation of the BRC, which also
recommends the Group RA Statement for all PRTs and other risks. In addition to
the BRC and Audit Committee, the Culture and Sustainability Committee oversees
the Group's culture and key sustainability priorities.
Group Risk Committee
The GRC, which derives its authority from the GCRO, is responsible for
ensuring the effective management of risk throughout the Group in support of
the Group's strategy. The GCRO chairs the GRC, whose members are drawn from
the Group Management Team. The GRC oversees the effective implementation of
the ERMF for the Group, including the delegation of any part of its
authorities to appropriate individuals or sub-committees.
Group Risk Committee sub-committees Chair Roles and responsibilities
Group Non-Financial Risk Committee (GNFRC) Global Head, Operational, Technology and Cyber Risk Governs the in-scope non-financial risks throughout the Group in support of
the ERMF and the Group's strategy.
Group Financial Crime Risk Committee (GFCRC) Group Head, CFCR Ensures that the Financial Crime Risk profile (excluding Fraud Risk and
Secondary Reputational Risk arising from Financial Crime Risk) is managed
within RA and policies.
Group Responsibility and Reputational Risk Committee (GRRRC) GCRO Ensures the effective management of Reputational and Sustainability Risk
across the Group. This includes providing oversight of matters arising from
clients, products, transactions and strategic coverage-related decisions and
matters escalated by the respective RFOs.
International Financial Reporting Standards (IFRS) 9 Impairment Committee Co-chaired by the Global Head Enterprise Risk Management (ERM) and Group Head, Ensures the effective management of expected credit loss (ECL) computations,
(IIC) Central Finance as well as stage allocation of financial assets for quarterly financial
reporting.
Model Risk Committee (MRC) Global Head, ERM To support the Group strategy by ensuring the effective measurement and
management of Model Risk in line with internal policies and model RA.
Investment Committee Global Head of Stressed Assets Risk Ensures the optimised wind-down of the Group's non-core direct investment
activities in equities, quasi-equities (excluding mezzanine), funds and other
alternative investments (excluding debt/debt-like instruments).
SC Ventures (SCV) Risk Committee CRO, SCV who receives authority directly from the GCRO Oversees the effective management of risk throughout SCV and the portfolio of
controlled entities operating under SCV.
Climate Risk Management Committee (CRMC) Global Head, ERM Oversees the effective implementation of the Group's Climate Risk workplan,
including relevant regulatory requirements. This includes embedding Climate
Page 6
Group Risk Committee sub-committees Chair Roles and responsibilities
Risk and net zero oversight across Group businesses, as part of the Group's
commitment to manage Climate Risk related financial and non-financial risks.
Regulatory Interpretation Committee (RIC) Co-chaired by the Global Head ERM and Group Head, Central Finance Provides oversight of material regulatory interpretations for the Capital
Requirements Regulation (as amended by UK legislation), the Prudential
Regulatory Authority (PRA) rulebook and other relevant regulations impacting
Group regulatory capital calculations and reporting. The areas and risk types
in scope are credit risk, traded risk, operational risk, large exposures,
leverage ratio and securitisation.
Digital Assets Risk Committee (DRC) CRO, SC Ventures & Global Head, Digital Asset Risk Oversees effective risk management of the Digital Assets (DA) Risk profile of
the Group. This includes providing oversight and subject matter expertise of
DA Risk matters across the PRTs.
Corporate & Investment Banking Financial Risk Committee (CIBFRC) Co-Heads CRO CIB and CRO, ASEAN & South Asia Ensures the effective management of financial risk throughout CIB in support
of the Group's strategy.
Wealth & Retail Banking Risk Committee (WRBRC) Chief Risk Officer, WRB & GCNA Ensures the effective management of risk throughout WRB in support of the
Group's strategy.
HK & GCNA Risk Committee (HK&GCNA RC) CRO, Hong Kong & GCNA These committees ensure the effective management of risk in the clusters in
support of the Group's strategy.
SG & ASEAN Risk Committee (SG&ASEAN RC) CRO, Singapore & ASEAN
Standard Chartered Bank (SCB) India Country Risk Committee (CRC & CNFRC) CRO, India & South Asia
UK & Europe Risk Committee (UK & ERC) CRO & Chief Credit Officer, Europe
Americas Risk Committee (ARC) CRO, Americas
Middle East and Pakistan Risk Committee (MEPRC) CRO & Regional CCO AME
Africa Risk Committee CRO & Regional CCO AME
Group Asset and Liability Committee
The Group Asset and Liability Committee (GALCO) is chaired by the GCFO. Its
members are drawn principally from the Management Team. GALCO is responsible
for determining the Group's balance sheet strategy and ensuring that, in
executing the Group's strategy, the Group operates within RA and regulatory
requirements relating to capital, loss-absorbing capacity, liquidity,
leverage, Interest Rate Risk in the Banking Book (IRRBB), Banking Book Basis
Risk and Structural Foreign Exchange Risk. It also monitors the structural
impact of decisions around sustainable finance, net zero and climate risk.
GALCO is also responsible for ensuring that internal and external recovery
planning requirements are met.
Page 7
Principal risks
We manage and control our PRTs through distinct RTFs, policies and RA.
Changes impacting PRTs in 2024
In May 2024, to further align with our risk strategy and promote consistency
and efficiency, the Operational and Technology Risk and Information and Cyber
Security Risk teams were unified under the Operational, Technology and Cyber
Risk (OTCR) function. The PRT disclosures and RA Statements for ICS Risk and
Operational and Technology Risk remain separate.
Following Tracey McDermott's retirement as Group Head, Conduct, Financial
Crime and Compliance at the end of 2024, David Howes has been appointed as
Group Head, Compliance, Financial Crime and Conduct Risk (CFCR) from 1 January
2025 and will assume Senior Manager responsibilities for Financial Crime,
including the Group Entity Senior Manager Function, Compliance Oversight
Function (SMF16) and Money Laundering Reporting Officer (MLRO) role (SMF 17).
Credit Risk
Mitigation
Segment-specific policies are in place for Corporate & Investment Banking
(CIB) and Wealth & Retail Banking (WRB) which set the principles that must
be followed for the end-to-end credit process covering initiation, assessment,
documentation, approval, monitoring and governance.
The Group also sets out standards for the eligibility, enforceability, and
effectiveness of mitigation arrangements. Potential losses are mitigated using
a range of tools, such as collateral, netting agreements, credit insurance,
credit derivatives and guarantees.
Risk mitigants are carefully assessed for their market value, legal
enforceability, correlation, and counterparty risk of the protection provider.
Collateral is valued prior to drawdown and regularly thereafter as required,
to reflect current market conditions, the probability of recovery and the
period of time to realise the collateral in the event of liquidation. The
Group also seeks to diversify its collateral holdings across asset classes and
markets.
Where guarantees, credit insurance, standby letters of credit or credit
derivatives are used as Credit Risk mitigation, the creditworthiness of the
protection provider is assessed and monitored using the same credit process
applied to the obligor.
Monitoring
The Group regularly monitors credit exposures, portfolio performance, external
trends and emerging risks that may impact risk management outcomes. Internal
risk management reports that are presented to risk committees contain
information on key political and economic trends across major portfolios and
countries, portfolio delinquency and loan impairment performance.
In CIB, clients and portfolios are subject to additional review when they
display signs of actual or potential weakness; for example, where there is a
decline in the client's position within their industry, financial
deterioration, a breach of covenants, or non-performance of an obligation
within the stipulated period. Such accounts are subject to a dedicated process
overseen by the Credit Issues Committee in the relevant countries where client
account strategies and credit grades are re-evaluated. In addition, remedial
actions can be undertaken, such as placing accounts on early alert for
exposure reduction, security enhancement or exiting the account.
Credit-impaired accounts are managed by the Group's specialist recovery unit,
Stressed Asset Group (SAG), which is independent of the Client
Coverage/Relationship Managers. The Stressed Asset Risk (SAR) Group is the
second line risk unit.
On an annual basis, senior members from the CIB business and Risk participate
in a more extensive portfolio review (known as the 'industry portfolio
review') for certain industry groups. In addition to a review of the portfolio
information, this industry portfolio review incorporates industry outlook, key
elements of the business strategy, RA, credit profile and emerging and horizon
risks. A summary of these industry portfolio reviews is also shared with the
CIB Financial Risk Committee.
Page 8
For WRB, exposures and collateral monitoring are performed at the counterparty
and/or portfolio level across different client segments to ensure transactions
and portfolio exposures remain within RA. Portfolio delinquency trends are
also monitored. Accounts that are past due (or perceived as high risk but not
yet past due) are subject to collections or recovery processes managed by a
specialist independent function. In some countries, aspects of collections and
recovery activities are outsourced. For discretionary lending portfolios,
similar processes to those of CIB are followed.
Any material in-country developments that may impact sovereign ratings are
monitored closely by Country Risk within the ERM function. The Country Risk
Early Warning system, a triage-based risk identification system, categorises
countries based on a forward-looking view of possible downgrades and the
potential incremental risk-weighted assets (RWA) impact.
In addition, an independent Credit Risk review team within the ERM function
performs assessments of the Credit Risk profiles at various portfolio levels.
They focus on selected countries and segments through deep dives, comparative
analysis, and review and challenge of the basis of credit approvals. The
review aims to ensure that the evolving Credit Risk profiles of CIB and WRB
are well managed within RA and policies. Results of the reviews are reported
to the GRC and BRC.
Credit rating and measurement
All credit proposals are subject to a robust credit risk assessment. It
includes a comprehensive evaluation of the client's credit quality, including
willingness, ability, and capacity to repay. The primary lending consideration
for counterparties is based on their credit quality and operating cash flows,
while for individual borrowers it is based on personal income or wealth. The
risk assessment gives due consideration to the client's liquidity and leverage
position.
Where applicable, the assessment includes a detailed analysis of the Credit
Risk mitigation arrangements to determine the level of reliance on such
arrangements as the secondary source of repayment in the event of a
significant deterioration in a client's credit quality leading to default.
Client income, net worth, and the liquidity of asset by class are considered
for overall risk assessment for wealth lending. Wealth lending credit limits
are subject to the availability of qualified collateral.
A standard alphanumeric Credit Risk grade system is used for CIB, whereby
credit grades 1 to 12 are assigned to performing customers, and credit grades
13 and 14 are assigned to non-performing or defaulted customers.
WRB internal ratings-based portfolios use application and behavioural credit
scores that are calibrated to generate a probability of default. The Risk
Decision Framework uses a credit rating system to define the portfolio/new
booking segmentation, shape and decision criteria for the unsecured consumer
business segment.
Advanced Internal Ratings-Based (AIRB) models cover the majority of our
exposures and are used in assessing risks at a customer and portfolio level,
setting strategy, and optimising our risk-return decisions. The Model Risk
Committee (MRC) approves material internal ratings-based risk measurement
models. Prior to review and approval, all internal ratings-based models are
validated by an independent model validation team. Reviews are also triggered
if the performance of a model deteriorates materially against predetermined
thresholds, measured through the ongoing model performance monitoring process.
We adopt the AIRB approach under the Basel regulatory framework to calculate
Credit Risk capital requirements for the majority of our exposures. The Group
has also established a global programme to assess capital requirements
necessary to be implemented to meet the latest revised Basel III regulation
(referred to as Basel 3.1 or Basel IV).
Credit Concentration Risk
Credit Concentration Risk for CIB is managed through concentration limits
covering large exposure limit to a single counterparty or a group of connected
counterparties (based on control and economic dependence criteria), or at
portfolio level for multiple exposures that are closely correlated. Portfolio
RA metrics are set, where appropriate, by industry, products, tenor,
collateralisation level, top clients, and exposure to holding companies.
For concentrations that are material at a Group level, breaches and potential
breaches are monitored by the respective governance committees and reported to
the GRC and BRC.
Page 9
Credit impairment
For CIB, in line with the regulatory guidelines, Stage 3 expected credit loss
(ECL) is considered when an obligor is more than 90 days past due on any
amount payable to the Group, or the obligor has symptoms of unlikeliness to
pay its credit obligations in full as they fall due. These credit-impaired
accounts are managed by SAG.
In WRB, loans to individuals and small businesses are considered
credit-impaired as soon as any payment of interest or principal is 90 days
overdue or they meet other objective evidence of impairment, such as
bankruptcy, debt restructuring, fraud, or death, with unlikely continuation of
contractual payments. Financial assets are written off, in the amount that is
determined to be irrecoverable, when they meet conditions set such that
empirical evidence suggests the client is unlikely to meet their contractual
obligations, or a loss of principal is reasonably expected.
Estimating the amount and timing of future recoveries involves significant
judgement and considers the assessment of matters such as future economic
conditions and the value of collateral, for which there may not be a readily
accessible market. The total amount of the Group's impairment provision is
inherently uncertain, being sensitive to changes in economic and credit
conditions across the markets in which the Group operates.
Underwriting
The underwriting of securities and loans is in scope of the CIB RA.
Additional limits approved by the GCRO are set on sectoral concentration and
maximum holding period. The Underwriting Committee, under the authority of the
GCRO, approves individual proposals to underwrite new security issues and
loans for our clients. In July 2024, oversight of the Underwriting Committee
was transferred from Traded Risk to CIB Credit Risk.
Traded Risk
Mitigation
Traded Risk limits are defined at a level which aims to ensure that the Group
remains within RA. The Traded Risk Policy sets the principles that must be
followed for the end-to-end traded risk management process including limit
setting, risk capture and measurement, limit monitoring and escalation, risk
mitigation and stress testing. Policies are reviewed and approved by the
Global Head, Traded Risk Management periodically to ensure their ongoing
effectiveness.
Market Risk measurement
The Group uses a VaR model to measure the risk of losses arising from future
potential adverse movements in market rates, prices, and volatilities. VaR is
a quantitative measure of market risk that applies recent historical market
conditions to estimate the potential future loss in market value that will not
be exceeded in a set time period at a set statistical confidence level.
VaR provides a consistent measure that can be applied across trading
businesses and products over time and can be set against actual daily trading
profit and loss outcomes.
For day-to-day risk management, VaR is calculated as at the close of business,
generally at UK time for expected market movements over one business day and
to a confidence level of 97.5 per cent. Intra-day risk levels may vary from
those reported at the end of the day.
The Group applies two VaR methodologies:
• Historical simulation: this involves the revaluation of all existing
positions to reflect the effect of historically observed changes in Market
Risk factors on the valuation of the current portfolio. This approach is
applied for general Market Risk factors and the majority of specific (credit
spread) risk factors. The enhanced Volatility Scaling VaR (VSV) model went
live in January 2025, where risk factors' returns are scaled to reflect
historical volatility. The VSV model is more responsive to volatility changes
observed in the market.
• Monte Carlo simulation: this methodology is similar to historical
simulation but with considerably more input risk factor observations. These
are generated by random sampling techniques, but the results retain the
essential variability and correlations of historically observed risk factor
changes. This approach is applied for capturing the idiosyncratic credit
spread risk factors.
Page 10
As an input to regulatory capital, trading book VaR is calculated for expected
movements over 10 business days and to a confidence level of 99 per cent. Some
types of market risk are not captured in the regulatory VaR measure and these
risks not in VaR are subject to capital add-ons.
Counterparty Credit Risk measurement
A Potential Future Exposure (PFE) model is used to measure the credit exposure
arising from the positive mark-to-market of traded products. The PFE model
provides a quantitative estimate of future potential movements in market
rates, prices, and volatilities at a certain confidence level over different
time horizons based on the tenor of the transactions.
The Group applies two PFE methodologies: simulation based, which is
predominantly used, and an add-on based PFE methodology.
Monitoring
Traded Risk Management monitors the overall portfolio risk and ensures that it
is within specified limits and therefore RA. Limits are typically reviewed
twice a year.
All material Traded Risks are monitored daily against approved limits. Traded
Risk limits apply at all times unless separate intra-day limits have been set.
Treasury Risk
Mitigation
The Group develops policies to address material Treasury Risks and aims to
maintain its risk profile within RA. In order to do this, metrics are set
against Capital Risk, Liquidity and Funding Risk and IRRBB. Where appropriate,
RA metrics are cascaded down to clusters and countries in the form of limits
and management action triggers.
Capital Risk
In order to manage Capital Risk, strategic business and capital plans
(Corporate Plan) are drawn up covering a five-year horizon and are approved by
the Board annually. The plan ensures that adequate levels of capital,
including loss-absorbing capacity, and an efficient mix of the different
components of capital are maintained to support our strategy and business
plans.
Treasury is responsible for the ongoing assessment of the demand for capital
and the updating of the Group's capital plan.
RA metrics including capital, leverage, minimum requirement for own funds and
eligible liability (MREL) and double leverage are assessed within the
Corporate Plan to ensure that the strategy can be achieved within risk
tolerances.
Structural Foreign Exchange (FX) Risk
The Group's structural FX position results from the Group's non-US dollar
investment in the share capital and reserves of subsidiaries and branches. The
FX translation gains or losses are recorded in the Group's translation
reserves with a direct impact on the Group's Common Equity Tier 1 ratio.
The Group contracts hedges to manage its structural FX position in accordance
with the RA, and as a result the Group has taken net investment hedges to
partially cover its exposure to certain non-US dollar currencies to mitigate
the FX impact of such positions on its capital ratios.
Liquidity and Funding Risk
At Group, cluster and country level we implement various business-as-usual and
stress risk metrics to monitor and manage Liquidity and Funding risk. This
ensures that the Group maintains an adequate and well-diversified liquidity
buffer, as well as a stable funding base, to meet its liquidity and funding
regulatory requirements.
The risk management approach and RA are assessed annually through the Internal
Liquidity Adequacy Assessment Process. A funding plan is also developed for
efficient liquidity projections to ensure that the Group is adequately funded
in the required currencies, to meet its obligations and client funding needs.
The funding plan is part of the overall Corporate Plan process aligning to the
capital requirements.
Page 11
Interest Rate Risk in the Banking Book
This risk arises from differences in the repricing profile, interest rate
basis, and optionality of banking book assets, liabilities and off-balance
sheet items. IRRBB represents an economic and commercial risk to the Group and
its capital adequacy. The Group monitors IRRBB against the RA.
Pension Risk
Pension Risk is the potential for loss due to having to meet an actuarially
assessed shortfall in the Group's pension plans. Pension Risk arises from the
Group's contractual or other liabilities with respect to its occupational
pension plans or other long-term benefit obligation. For a funded plan, it
represents the risk that additional contributions will need to be made because
of a future funding shortfall. For unfunded obligations, it represents the
risk that the cost of meeting future benefit payments is greater than
currently anticipated.
The Pension Risk is monitored against the RA and reported to the GRC. The RA
metric is calculated as the total capital requirement (including both Pillar 1
and Pillar 2A capital) in respect of Pension Risk, expressed as a number of
basis points of RWA.
Recovery and resolution planning
In line with PRA requirements, the Group maintains a Recovery Plan, which is a
live document to be used by management in the event of stress in order to
restore the Group to a stable and sustainable position. The Recovery Plan
includes a set of recovery indicators, an escalation framework, and a set of
management actions capable of being implemented during a stress. A Recovery
Plan is also maintained within each major entity, and all Recovery Plans are
subject to periodic fire-drill testing.
As the UK resolution authority, the BoE set a single point of entry bail-in at
the ultimate holding company level (Standard Chartered PLC) as the preferred
resolution strategy for the Group. In support of this strategy, the Group has
a set of capabilities, arrangements, and resources in place to maintain, test
and improve resolution capabilities, and continue to meet the required
resolvability outcomes on an ongoing basis.
Following the BoE's first resolvability assessment and public disclosure for
major UK firms in 2022, the Group submitted its Resolvability Self-Assessment
Report to the BoE and PRA, and subsequently published its resolvability public
disclosure in August 2024 as part of the second Resolvability Assessment
Framework cycle.
Monitoring
On a day-to-day basis, Treasury Risk is managed by Treasury, Finance and
country CEOs. The Group regularly reports and monitors Treasury Risk inherent
in its business activities and those that arise from internal and external
events.
Internal risk management reports covering the balance sheet and the capital
and liquidity position are presented to the relevant country Asset and
Liability Committee. The reports contain key information on balance sheet
trends, exposures against RA and supporting risk measures which enable members
to make informed decisions around the overall management of the balance sheet.
In addition, an independent Treasury CRO within ERM reviews the prudency and
effectiveness of Treasury Risk management.
Pension Risk is managed by the Head of Pensions and Reward Analytics, and
monitored by the Global Head, ERM on a periodic basis.
Operational and Technology Risk
Mitigation
The Operational and Technology RTF sets out the Group's overall approach to
the management of Operational and Technology Risk in line with the Group's
Operational and Technology RA. This is supported by the Risk and Control
Self-Assessment (RCSA), which provides a systematic approach for
identification and assessment of operational risks, including design and
operation of mitigating controls (applicable to all risks as per the
Non-Financial Risk Taxonomy).
The RCSA is used to determine the design and operating effectiveness of each
process, and requires:
• the recording of end-to-end processes which deliver our key client journey
and business outcomes
Page 12
• the identification of risks to support the achievement of client and
business outcomes
• the assessment of inherent risk on the impact to client and business
outcomes, and likelihood of occurrence
• the design and monitoring of key controls to effectively and efficiently
mitigate prioritised risks within acceptable levels and
• the assessment of residual risk and timely treatment of elevated risks.
Elevated Residual Risks require treatment plans to address the underlying
causes and reduce the risks to within the RA.
Monitoring
To deliver services to clients and to participate in the financial services
sector, the Group runs processes which are exposed to Operational and
Technology risks. The Group prioritises and manages risks which are
significant to our clients and to the financial services sectors. The control
indicators are regularly monitored to determine the Group's exposure to
residual risk.
The residual risk assessments and reporting of events form the Group's
Operational and Technology Risk profile. The completeness of the Operational
and Technology Risk profile ensures appropriate prioritisation and timeliness
of risk decisions, including risk acceptances with treatment plans for risks
that exceed acceptable thresholds.
The BRC is informed on adherence to Operational and Technology RA through
metrics reported for selected risks. These metrics are monitored, and
escalation thresholds are devised based on the materiality and significance of
the risk. These Operational and Technology RA metrics are consolidated on a
regular basis and reported at the relevant Group committees, providing senior
management with the relevant information to inform their risk decisions.
Information and Cyber Security (ICS) Risk
Mitigation
ICS Risk is managed through the ICS RTF, comprising a risk assessment
methodology and supporting policy, standards, and methodologies. The ICS
Policy and standards are aligned to industry best practice models including
the National Institute of Standards and Technology Cyber Security Framework
and ISO 27001. We undertake an annual ICS Effectiveness Review to evaluate ICS
Risk management practices in alignment with the ERMF.
Monitoring
The Group Chief Information Security Officer (CISO) function monitors the
evolving threat landscape covering cyber threats, attack vectors and threat
actors that could target the Group. This includes performing a threat-led risk
assessment to identify key threats, in-scope applications and key controls
required to ensure the Group remains within RA.
The ICS Risk profiles of all businesses, functions and countries are
consolidated to present a holistic Group-level ICS Risk profile for ongoing
monitoring. Mandatory ICS learning, phishing exercises and role-specific
training support colleagues to monitor and manage this risk.
During these reviews, the status of each risk is assessed against the Group's
controls to identify any changes to impact and likelihood, which affects the
overall risk rating.
The Group stress tests its cyber posture through extensive control testing and
by executing offensive security testing exercises, including vulnerability
testing, code reviews, penetration tests and Red Team attack simulation
testing. This testing approach constantly stress tests the Group's defence and
approach to cyber security. These show a wider picture of the Group's risk
profile, leading to better visibility on potential 'in flight' risks. The
Group also tracks remediation of security matters identified by external
reviews, such as the BoE CBEST Threat Intelligence-Led Assessment and the Hong
Kong Monetary Authority's (HKMA) Intelligence-led Cyber Attack Simulation
Testing (iCAST).
The CISO and OTCR functions monitor the ICS Risk profile and ensure that
breaches of RA are escalated to the appropriate governance committee or
authority levels for remediation and tracking.
Page 13
Financial Crime Risk
Roles and responsibilities
The Group Head, CFCR is the Group's Compliance and Money-Laundering Reporting
Officer and performs the Financial Conduct Authority (FCA) controlled function
and senior management function in accordance with requirements set out by the
FCA, including those set out in their handbook on systems and controls.
Mitigation
The CFCR function is responsible for the establishment and maintenance of
policies, standards, and oversight of first line of defence controls to ensure
continued compliance with financial crime laws and regulations, and the
mitigation of Financial Crime Risk. In this, the requirements of the
Operational and Technology RTF are followed to ensure a consistent approach to
the management of processes and controls.
Financial Crime Risk management is built on a risk-based approach, meaning the
risk management plans, processes, activities, and resource allocations are
determined according to the level of risk.
Risk mitigation takes place through the process of identification of new and
amended regulations and the implementation of necessary process and control
changes to address these.
Monitoring
The Group monitors enterprise-wide financial crime risks through the Financial
Crime Risk Assessment. This is undertaken annually to assess the inherent
financial crime risk exposures and the associated processes and controls by
which these exposures are mitigated.
Financial Crime Risk controls are governed in line with the Operational and
Technology RTF. The Group has a monitoring and reporting process in place for
Financial Crime Risk, which includes escalation and reporting to the CFCR and
relevant risk committees.
While not a formal governance committee, the CFCR Oversight Group provides
oversight of CFCR risks including the effective implementation of the
Financial Crime RTF. It also provides oversight, challenge and direction to
CFCR policy owners on material changes and positions taken in CFCR-owned
policies, including issues relating to regulatory interpretation and Group's
CFCR RA. The Regulatory Change Oversight Forum provides visibility and
oversight of material and/or complex large-scale regulatory change emanating
from financial services regulators impacting non-financial risks.
Compliance Risk
Roles and responsibilities
All activities that the Group engages in must comply with the relevant
country/local specific and extraterritorial regulations.
Compliance Risk includes the risks associated with a failure to comply with
all regulations that are applicable to the Group regardless of the issuing
regulatory authority. Where Compliance Risk arises, or could arise, from
failure to manage another PRT, the oversight and management processes for that
specific PRT must be followed, to ensure that effective oversight and
challenge of the first line of defence can be provided by the appropriate
second line of defence function.
Areas of regulation can be broadly divided into two distinct categories: those
issued by financial service regulatory authorities and those issued by
non-financial service regulators. The Group is exposed to both categories of
regulation, and roles and responsibilities differ depending on the category.
For regulations issued by financial services regulatory authorities and other
regulators that may issue regulations pertaining to Compliance Risk, CFCR
identifies new and amended regulations as and when issued and communicates the
relevant regulatory obligations to the country RFO delegate. The areas where
CFCR does not act in a second line of defence capacity are specified in the
respective RTF with appropriate ownership.
Each of the assigned second line of defence functions have responsibilities,
including monitoring relevant regulatory developments from non-financial
services regulators at both Group and country levels, policy development,
implementation, and validation as well as oversight and challenge of first
line of defence processes and controls.
Page 14
Mitigation
The CFCR function is responsible for the establishment and maintenance of
policies, standards, and oversight of the first line of defence controls to
ensure compliance with laws and regulations, and the mitigation of Compliance
Risk. In this, the requirements of the Operational and Technology RTF are
followed to ensure a consistent approach to the management of processes and
controls.
Monitoring
The monitoring of controls designed to mitigate the risk of regulatory
non-compliance in processes is governed in line with the Operational and
Technology RTF. Compliance Risk reporting includes escalation and reporting to
the CFCR and relevant risk committees.
While not a formal governance committee, the CFCR Oversight Group provides
oversight of CFCR, risks including the effective implementation of the
Compliance RTF, and oversight, challenge and direction to CFCR policy owners
on material changes and positions taken in CFCR-owned policies, including
issues relating to regulatory interpretation and the Group's CFCR RA. The
Regulatory Change Oversight Forum provides visibility and oversight of
material and/or complex large-scale regulatory change emanating from financial
services regulators impacting non-financial risks.
Environmental, Social and Governance and Reputational (ESGR) Risk
Mitigation
The ESGR RTF provides the overall risk management approach for Environmental,
Social and Governance (ESG) and Reputational risks.
The ESG Risk policy outlines the Group's commitment to integrating ESG
considerations into its business, operations, and decision-making process. The
policy sets out the requirements for identifying, assessing, and managing ESG
risks, including Climate Risk.
The Reputational Risk policy sets out the principal sources of reputational
risk driven by negative shifts in stakeholder perceptions, as well as the
responsibilities for managing Reputational Risk arising out of client
onboarding and due diligence, from transactions, product design and product
features, or strategic coverages such as exposure to sensitive industries,
markets, or investments. Whenever potential for stakeholder concerns is
identified, issues are subject to review and decision by both the first and
second lines of defence. The Reputational Risk policy also sets out the key
considerations for mitigating greenwashing risk that can arise during product
and/or deal lifecycle, sustainability reporting and disclosures, and external
campaigns related to sustainability themes.
Monitoring
Exposure to reputational risks arising from transactions, clients, products
and strategic coverage is monitored through established triggers to prompt the
appropriate risk-based considerations and assessment by the first line of
defence and escalations to the second line of defence. Risk acceptance
decisions and thematic trends are also reviewed on a periodic basis.
Exposure to ESG Risks is monitored through triggers embedded within the first
line of defence processes. The environmental and social risks are considered
for clients and transactions via Environmental and Social Risk Assessments
and/or Climate Risk Assessments (CRAs). Vendors that are presenting as high
risk are assessed for modern slavery risk. Based on responses provided by the
supplier at onboarding, those that meet the high-risk category-country
combinations are subjected to further risk assessment.
Exposure to Climate Risk is monitored in conjunction with other PRTs. We have
embedded qualitative and quantitative climate considerations into the Group's
Credit Underwriting Principles for Oil and Gas, Mining, Shipping, Commercial
Real Estate and Project Finance portfolio. We have expanded coverage of
Climate and Credit Risk considerations to physical collateral, as they serve
as key risk mitigants, especially in default events. We assess physical risk
concentrations for our WRB portfolio on a quarterly basis and assess the
physical risk vulnerabilities of our sites periodically and when new sites are
onboarded.
Page 15
Our Net Zero Climate Risk Working Forum meets quarterly to discuss account
plans for high climate risk and net zero divergent clients. Stress testing and
scenario analysis are used to assess the impact of ESGR-related risks. The
impact on capital requirements has been included in the PLC Group Internal
Capital Adequacy Assessment Process. Management information is reviewed at a
quarterly frequency and any breaches in RA are reported to the GRC and BRC.
Model Risk
Mitigation
The Model Risk Policy and Standards define requirements for model development,
validation, implementation and use, including regular model performance
monitoring and, where required, model risk mitigants.
Model deficiencies identified through the development or validation process,
or model performance issues identified through ongoing monitoring, are
mitigated through respective model risk mitigants. Mitigants include model
overlays as either post-model adjustments (PMAs) or management adjustments,
model restrictions and potentially a model recalibration or redevelopment, all
of which undergo independent review, challenge, and approval. PMAs are used to
address observed deficiencies caused from within the model, by adjusting the
model output either directly or indirectly (e.g. adjusting parameters). Where
a PMA is applied as a mitigant for a model used in Pillar 1 or Pillar 2
calculations or models with material impact on financial accounting
disclosures (e.g. IFRS 9), the independent review must be performed by Group
Model Validation (GMV) with sign-off from the Model Approver prior to
implementation. Management adjustments are used to address issues by applying
management decisions without adjusting a direct modelling component.
As with all PRTs, operational controls are used to govern all Model
Risk-related processes, with regular risk assessments performed to assess
appropriateness and effectiveness of those controls, in line with the
Operational and Technology RTF, with remediation plans implemented where
necessary. Group Model Risk Policy and Standards also define requirements for
deterministic quantitative methods (DQMs) that are used as part of an
end-to-end modelled process. DQMs are similar in nature to a model, however
the processing component is either purely deterministic or has an element of
expert judgement. Unlike a model, there is no use of statistical, economic
financial or mathematical theories.
The regulatory framework around Model Risk is continuously evolving, the PRA's
Supervisory Statement 1/23 (SS1/23) is an example. The Group proactively
monitors regulatory changes to take the required actions timely for
compliance. Regarding SS1/23, the Group is currently delivering to a roadmap
to compliance, which commenced in 2024 and will continue over the next two
years.
Monitoring
The Group monitors Model Risk via a set of RA metrics. Adherence to Model RA
and any threshold breaches are reported to the BRC, GRC and MRC. These metrics
and thresholds are reviewed twice per year to ensure that threshold
calibration remains appropriate, and the themes adequately cover the current
risks.
Models undergo regular performance monitoring based on their level of
perceived Model Risk, with monitoring results presented, and breaches
escalated to the Model Sponsor, Model Owner, GMV and respective MRC or
Individual Delegated Model Approvers.
Model Risk management produces Model Risk reports covering the model
landscape, which include performance metrics, identified model issues and
remediation plans. These are presented for discussion at the Model Risk
governance committees on a regular basis.
Page 16
Risk profile
Credit Risk (audited)
Basis of preparation
Unless otherwise stated, the balance sheet and income statement information
presented within this section is based on the Group's management view. This is
principally the location from which a client relationship is managed, which
may differ from where it is financially booked and may be shared between
businesses and/or regions. This view reflects how the client segments and
regions are managed internally.
Loans and advances to customers and banks held at amortised cost in this 'Risk
profile' section include reverse repurchase agreement balances held at
amortised cost, per Note 16 Reverse repurchase and repurchase agreements
including other similar secured lending and borrowing.
Credit Risk overview
Credit Risk is the potential for loss due to the failure of a counterparty to
meet its contractual obligations to pay the Group. Credit exposures arise from
both the banking and trading books.
Impairment model
IFRS 9 mandates an impairment model that requires the recognition of expected
credit losses (ECL) on all financial debt instruments held at amortised cost,
Fair Value through Other Comprehensive Income (FVOCI), undrawn loan
commitments and financial guarantees.
Staging of financial instruments
Financial instruments that are not already credit-impaired are originated into
stage 1 and a 12-month ECL provision is recognised.
Instruments will remain in stage 1 until they are repaid, unless they
experience significant credit deterioration (stage 2) or they become
credit-impaired (stage 3).
Instruments will transfer to stage 2 and a lifetime ECL provision is
recognised when there has been a significant change in the Credit Risk
compared to what was expected at origination.
The framework used to determine a Significant Increase in Credit Risk (SICR)
is set out below.
Stage 1
• 12-month ECL
• Performing
Stage 2
· Lifetime expected credit loss
· Performing but has exhibited SICR
Stage 3
• Credit-impaired
• Non-performing
Page 17
IFRS 9 ECL principles and approaches
The main methodology principles and approach adopted by the Group are set out
in the following table.
Title Supplementary Information
Approach for determining ECL • IFRS 9 ECL methodology
• Application of lifetime ECL
Key assumptions and judgements in determining ECL • Incorporation of forward-looking information
• Forecast of key macroeconomic variables underlying the ECL calculation
and the impact of non-linearity
• Impact of multiple economic scenarios
• Judgemental adjustments and management overlays
• Sensitivity of ECL calculation to macroeconomic variables
Significant increase in Credit risk (SICR) • Quantitative and qualitative criteria
Assessment of credit-impaired financial assets • Wealth and Retail Banking (WRB) clients
• Corporate and Investment Banking (CIB) and Private Banking clients
• Write-offs
Transfers between stages • Movement in gross exposures and credit impairment
Modified financial assets • Forborne and other modified loans
Governance of PMAs and application of expert credit judgement in respect of • IFRS 9 Impairment Committee
ECL
Summary of Credit Risk performance
Maximum exposure
The Group's on-balance sheet maximum exposure to Credit Risk increased by $25
billion to $823 billion (31 December 2023: $798 billion). Cash and balances at
Central banks decreased by $6.5 billion to $63 billion (31 December 2023: $70
billion) due to reduced placements. Loans to banks held at amortised cost
decreased by $1.4 billion to $44 billion (31 December 2023: $45 billion). Fair
value through profit and loss increased by $27.8 billion to $172 billion (31
December 2023: $144 billion), largely due to increases in debt securities and
reverse repos, but this was partially offset by a $16.7 billion reduction in
debt securities not held at fair value through profit and loss. Loans and
advances to customers decreased by $5.9 billion to $281 billion (31 December
2023: $287 billion), due to a reduction in mortgages in Korea, Singapore and
Hong Kong, given continued headwinds, including foreign currency movements.
Loans and advances to customers in the CIB segment increased by $7.6 billion,
mainly due to the execution of pipeline deals in Global Banking, but this was
offset by a $7.4 billion decrease in Central and other items. Derivative
financial instruments increased by $31 billion to $81 billion (31 December
2023: $50 billion). Off-balance sheet instruments increased by $16 billion to
$273 billion (31 December 2023: $257 billion), due to an increase in
financial guarantees and other equivalents, which was driven by new business.
Loans and advances
94 per cent (31 December 2023: 94 per cent) of the Group's gross loans and
advances to customers remain in stage 1 at $269 billion (31 December 2023:
$274 billion), reflecting our continued focus on high-quality origination. For
WRB, stage 1 balances decreased by $6.5 billion to $117 billion (31 December
2023: $123 billion), of which $5.9 billion was mainly due to a reduction in
the mortgage portfolios in Korea, Singapore and Hong Kong, mainly driven by
slower booking momentum and higher attrition as a result of intense interest
rate competition. For CIB, stage 1 balances increased by $8 billion to $129
billion (31 December 2023: $121 billion) mainly driven by the Energy,
Financing, Insurance and Transport sectors. For Central and other items, stage
1 balances decreased by 6.3 billion to $22 billion (31 December 2023:
$28 billion) due to a reduction in exposures to the Government sector, across
a number of our markets.
Stage 2 loans and advances to customers decreased by $0.6 billion to $11
billion (31 December 2023: $11 billion). For WRB, stage 2 balances decreased
by $0.4 billion to $1.9 billion (31 December 2023: $2.3 billion), due to
decrease in the mortgage portfolio. For Central and other items, higher risk
exposures decreased by $0.9 billion to $0.1 billion (31 December 2023: $1
billion), was due to the maturity of short-term loan exposures that were
replaced with debt securities in Pakistan.
Page 18
Stage 3 loans and advances decreased by $1 billion to $6.2 billion (31
December 2023: $7.2 billion) due to debt sales, repayments, write-offs and
upgrades to Stage 2 loans in CIB. WRB stage 3 balances remained broadly stable
at $1.6 billion (31 December 2023: $1.5 billion). For Central and other items,
stage 3 balances decreased by $0.1 billion to $0.1 billion (31 December 2023:
$0.2 billion).
Analysis of Stage 2
The key SICR driver which caused exposures to be classified as stage 2 remains
an increase in probability of default (PD). The proportion of CIB exposures in
stage 2 decreased due to a reduction in clients placed on non-purely
precautionary early alert that have not breached PD thresholds. In WRB, the
exposures in stage 2 loans with more than 30 days past due remained stable at
$0.3 billion (31 December 2023: $0.3 billion). In Central and other items, the
$0.5 billion decrease in CG12 balances to $1.5 billion (31 December 2023: $2
billion) was due to the maturity of short-term loan exposures that were
replaced with debt securities in Pakistan. 'Others' category includes
exposures where origination data is incomplete and the exposures are allocated
into stage 2.
Credit impairment charges
The Group's ongoing credit impairment was a net charge of $547 million (31
December 2023: $508 million).
WRB contributed a net charge of $644 million (31 December 2023: $354 million),
driven by a higher interest rate environment impacting repayments on credit
cards and personal loans and to a few non-repeating ECL releases recorded in
2023. The increase in impairments was also due to the maturity and portfolio
growth of digital partnerships in China and Indonesia, as well as a $21
million overlay arising from the settlement failure of two e-commerce
platforms in Korea.
CIB contributed a net release of $106 million (31 December 2023: $123 million
charge) due to a number of stage 3 releases and repayments.
Commercial Real Estate (CRE)
The Group provides loans to CRE counterparties of which $8.8 billion is to
counterparties in the CIB segment where the source of repayment is
substantially derived from rental or sale of real estate and is secured by
real estate collateral. The remaining CRE loans comprise working capital loans
to real estate corporates, loans with non-property collateral, unsecured loans
and loans to real estate entities of diversified conglomerates. The average
LTV ratio of the performing book CRE portfolio has increased to 54 per cent
(31 December 2023: 52 per cent). The proportion of loans with an LTV greater
than 80 per cent has increased to 4 per cent (31 December 2023: 3 per cent).
China CRE
Total exposure to China CRE decreased by $0.6 billion to $2 billion (31
December 2023: $2.6 billion) mainly from exposure reductions. The proportion
of credit impaired exposures increased to 70 per cent (31 December 2023: 58
per cent) due to repayments within the non-credit impaired portfolio. The
overall provision coverage increased to 87 per cent (31 December 2023: 72 per
cent), reflecting increased provision charges during the year. The proportion
of the loan book rated as Higher Risk increased to 3 per cent (31 December
2023: 0.3 per cent) primarily due to downgrades during the year.
The Group continues to hold a judgemental management overlay, which decreased
by $71 million to $70 million (31 December 2023: $141 million), reflecting
repayments and utilisations during the year.
The Group is further indirectly exposed to China CRE through its associate
investment in China Bohai Bank.
High carbon sectors
With the Group's expansion in the asset-backed lending business, the total
on-and-off balance sheet exposure for the Aviation sector increased to $2.6
billion (31 December 2023: $1.9 billion), while the Shipping sector decreased
to $4.6 billion (31 December 2023: $5 billion). The Group's position
statements mandates that for newer vessels and aircraft, only carbon efficient
ones can be financed.
While exposures to the Oil and Gas sector increased to $21 billion (31
December 2023: $20 billion) due to increased funding towards more
emissions-efficient counterparties, exposures to the Power sector increased to
$11 billion (31 December 2023: $9 billion) due to increased lending to
renewables and efficient gas generation counterparties.
Page 19
Maximum exposure to Credit Risk (audited)
The table below presents the Group's maximum exposure to Credit Risk for its
on-balance sheet and off-balance sheet financial instruments as at 31 December
2024, before and after taking into account any collateral held or other Credit
Risk mitigation.
2024 2023
Maximum exposure Credit risk management Net Exposure Maximum exposure Credit risk management N
$million
$million
$million e
t
E
x
p
o
s
u
r
e
$
m
i
l
l
i
o
n
Collateral8 Master netting agreements Collateral8 Master netting agreements
$million
$million
$million
$million
On-balance sheet
Cash and balances at central banks 63,447 - - 63,447 69,905 - - 69,905
Loans and advances to banks1 43,593 2,946 40,647 44,977 1,738 43,239
of which - reverse repurchase agreements and other similar 2,946 2,946 - - 1,738 1,738 - -
secured lending7
Loans and advances to customers1 281,032 119,047 - 161,985 286,975 118,492 168,483
of which - reverse repurchase agreements and other similar 9,660 9,660 - - 13,996 13,996 - -
secured lending⁷
Investment securities - Debt securities and other eligible bills2 143,562 143,562 160,263 - - 160,263
Fair value through profit or loss3, 7 172,031 86,195 - 85,836 144,276 81,847 - 62,429
Loans and advances to banks 2,213 - - 2,213 2,265 - - 2,265
Loans and advances to customers 7,084 - - 7,084 7,212 - - 7,212
Reverse repurchase agreements and other similar lending7 86,195 86,195 - - 81,847 81,847 - -
Investment securities - Debt securities and other eligible bills2 76,539 - - 76,539 52,952 - - 52,952
Derivative financial instruments4, 7 81,472 15,005 60,280 6,187 50,434 8,440 39,293 2,701
Accrued income 2,776 - - 2,776 2,673 - - 2,673
Assets held for sale9 889 - - 889 701 - - 701
Other assets5 34,585 - - 34,585 38,140 - - 38,140
Total balance sheet 823,387 223,193 60,280 539,914 798,344 210,517 39,293 548,534
Off-balance sheet6
Undrawn Commitments 182,529 2,489 - 180,040 182,390 2,940 - 179,450
Financial Guarantees and other equivalents 90,632 1,807 - 88,825 74,414 2,590 - 71,824
Total off-balance sheet 273,161 4,296 - 268,865 256,804 5,530 - 251,274
Total 1,096,548 227,489 60,280 808,779 1,055,148 216,047 39,293 799,808
1 Amounts are net of ECL provisions. An analysis of credit quality is
set out in the credit quality analysis section. Further details of collateral
held by client segment and stage are set out in the collateral analysis
section. The Group also has credit mitigation through Credit Linked Notes as
set out below
2 Excludes equity and other investments of $994 million (31 December
2023: $992 million). Further details are set out in Note 13 financial
instruments
3 Excludes equity and other investments of $5,486 million (31
December 2023: $2,940 million). Further details are set out in Note 13
financial instruments
4 The Group enters into master netting agreements, which in the event of
default result in a single amount owed by or to the counterparty through
netting the sum of the positive and negative mark-to-market values of
applicable derivative transactions
5 Other assets include Hong Kong certificates of indebtedness, cash
collateral, and acceptances, in addition to unsettled trades and other
financial assets
6 Excludes ECL provisions of $255 million (31 December 2023: $227
million) which are reported under Provisions for liabilities and charges
7 Collateral capped at maximum exposure (over-collateralised)
8 Adjusted for over-collateralisation, which has been determined with
reference to the drawn and undrawn component as this best reflects the effect
on the amount arising from expected credit losses
9 The amount is after ECL. provisions. Further details are set out in Note
21 Assets held for sale and associated liabilities
Page 20
Analysis of financial instruments by stage (audited)
The table below presents the gross and credit impairment balances by stage for
the Group's amortised cost and FVOCI financial instruments as at 31 December
2024.
2024
Stage 1 Stage 2 Stage 3 Tot
al
Gross balance1 Total credit impair-ment Net carrying value Gross balance1 Total credit impair-ment Net carrying value Gross balance1 Total credit impair-ment Net carrying value Gross balance1 Total credit impair-ment Net carrying value
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Cash and balances at central banks 62,597 - 62,597 432 (4) 428 426 (4) 422 63,455 (8) 63,447
Loans and advances to banks (amortised cost) 43,208 (10) 43,198 318 (1) 317 83 (5) 78 43,609 (16) 43,593
Loans and advances to customers (amortised cost) 269,102 (483) 268,619 10,631 (473) 10,158 6,203 (3,948) 2,255 285,936 (4,904) 281,032
Debt securities and other eligible bills5 141,862 (23) 1,614 (4) 103 (2) 143,579 (29)
Amortised cost 54,637 (15) 54,622 475 (2) 473 42 - 42 55,154 (17) 55,137
FVOCI2 87,225 (8) 1,139 (2) 61 (2) 88,425 (12) -
Accrued income (amortised cost)4 2,776 2,776 - - 2,776 - 2,776
Assets held for sale4 840 (7) 833 38 - 38 58 (45) 13 936 (52) 884
Other assets 34,585 - 34,585 - - - 3 (3) - 34,588 (3) 34,585
Undrawn commitments3 178,516 (50) 4,006 (52) 7 (1) 182,529 (103)
Financial guarantees, trade credits and irrevocable letter of credits3 87,991 (16) 2,038 (7) 603 (129) 90,632 (152)
Total 821,477 (589) 19,077 (541) 7,486 (4,137) 848,040 (5,267)
1 Gross carrying amount for off-balance sheet refers to notional
values
2 These instruments are held at fair value on the balance sheet. The
ECL provision in respect of debt securities measured at FVOCI is held within
the OCI reserve
3 These are off-balance sheet instruments. Only the ECL is recorded
on-balance sheet as a financial liability and therefore there is no "net
carrying amount". ECL allowances on off-balance sheet instruments are held as
liability provisions to the extent that the drawn and undrawn components of
loan exposures can be separately identified. Otherwise they will be reported
against the drawn component
4 Stage 1 ECL is not material
5 Stage 3 gross includes $59 million (31 December 2023: $80 million)
originated credit-impaired debt securities with impairment of $Nil million (31
December 2023: $14 million)
Page 21
2023
Stage 1 Stage 2 Stage 3 Tot
al
Gross balance1 Total credit impair-ment Net carrying value Gross balance1 Total credit impair-ment Net carrying value Gross balance1 Total credit impair-ment Net carrying value Gross balance1 Total credit impair-ment Net carrying value
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Cash and balances at central banks 69,313 - 69,313 207 (7) 200 404 (12) 392 69,924 (19) 69,905
Loans and advances to banks (amortised cost) 44,384 (8) 44,376 540 (10) 530 77 (6) 71 45,001 (24) 44,977
Loans and advances to customers (amortised cost) 273,692 (430) 273,262 11,225 (420) 10,805 7,228 (4,320) 2,908 292,145 (5,170) 286,975
Debt securities and other eligible bills5 158,314 (26) 1,860 (34) 164 (61) 160,338 (121)
Amortised cost 56,787 (16) 56,771 103 (2) 101 120 (57) 63 57,010 (75) 56,935
FVOCI2 101,527 (10) 1,757 (32) 44 (4) 103,328 (46)
Accrued income (amortised cost)4 2,673 2,673 - - 2,673 - 2,673
Assets held for sale4 661 (33) 628 76 (4) 72 1 - 1 738 (37) 701
Other assets 38,139 - 38,139 - - - 4 (3) 1 38,143 (3) 38,140
Undrawn commitments3 176,654 (52) 5,733 (39) 3 - 182,390 (91)
Financial guarantees, trade credits and irrevocable letter of credits3 70,832 (10) 2,910 (14) 672 (112) 74,414 (136)
Total 834,662 (559) 22,551 (528) 8,553 (4,514) 865,766 (5,601)
1 Gross carrying amount for off-balance sheet refers to notional
values
2 These instruments are held at fair value on the balance sheet. The
ECL provision in respect of debt securities measured at FVOCI is held within
the OCI reserve
3 These are off-balance sheet instruments. Only the ECL is recorded
on-balance sheet as a financial liability and therefore there is no "net
carrying amount". ECL allowances on off-balance sheet instruments are held as
liability provisions to the extent that the drawn and undrawn components of
loan exposures can be separately identified. Otherwise they will be reported
against the drawn component
4 Stage 1 ECL is not material
5 Stage 3 gross includes $80 million originated credit-impaired debt
securities with impairment of $14 million
Credit quality analysis (audited)
Credit quality by client segment
For CIB, exposures are analysed by credit grade (CG), which plays a central
role in the quality assessment and monitoring of risk. All loans are assigned
a CG, which is reviewed periodically and amended in light of changes in the
borrower's circumstances or behaviour. CGs 1 to 12 are assigned to stage 1 and
stage 2 (performing) clients or accounts, while CGs 13 and 14 are assigned to
stage 3 (credit-impaired) clients. Consumer and Business Banking portfolios
are analysed by days past due and Private Banking by the type of collateral
held.
Mapping of credit quality
The Group uses the following internal risk mapping to determine the credit
quality for loans.
Credit quality description Corporate & Investment Banking Private Banking1 Wealth & Retail Banking4
Internal grade mapping S&P external ratings Regulatory PD range (%) Internal ratings Internal grade mapping
equivalent
Strong 1A to 5B AAA/AA+ to BBB-/BB+(2) 0 to 0.425 Class I and Class IV Current loans (no past dues nor impaired)
Satisfactory 6A to 11C BB to CCC+(3) 0.426 to 15.75 Class II and Class III Loans past due till 29 days
Higher risk Grade 12 CCC+ to C 15.751 to 99.999 Stressed Assets Group (SAG) Managed Past due loans 30 days and over till 90 days
1 For Private Banking, classes of risk represent the type of
collateral held. Class I represents facilities with liquid collateral, such as
cash and marketable securities. Class II represents unsecured/partially
secured facilities and those with illiquid collateral, such as equity in
private enterprises. Class III represents facilities with residential or
commercial real estate collateral. Class IV covers margin trading facilities
2 Banks' rating: AAA/AA+ to BB+/BB. Sovereigns' rating: AAA to BB+
3 Banks' rating: BB to "CCC+ to C". Sovereigns' rating: BB+/BB to
B-/CCC+
4 Wealth & Retail Banking excludes Private Banking. Medium
enterprise clients within Business Banking are managed using the same internal
credit grades as CIB
Page 22
The table below sets out the gross loans and advances held at amortised cost,
ECL provisions and expected credit loss coverage by business segment and
stage. ECL coverage represents the ECL reported for each segment and stage as
a proportion of the gross loan balance for each segment and stage.
Loans and advances by client segment (audited)
Amortised cost 2024
Banks Customers Undrawn commitments Financial Guarantees
$million
$million
$million
Corporate & Investment Banking Wealth & Retail Banking Ventures Central & other items Customer Total
$million
$million
$million
$million
$million
Stage 1 43,208 128,746 117,015 1,383 21,958 269,102 178,516 87,991
- Strong 31,239 90,725 111,706 1,367 21,540 225,338 162,574 56,070
- Satisfactory 11,969 38,021 5,309 16 418 43,764 15,942 31,921
Stage 2 318 8,643 1,905 48 35 10,631 4,006 2,038
- Strong 8 1,229 1,413 31 - 2,673 994 471
- Satisfactory 125 6,665 155 6 - 6,826 2,862 1,403
- Higher risk 185 749 337 11 35 1,132 150 164
Of which (stage 2):
- Less than 30 days past due - 55 155 6 - 216 - -
- More than 30 days past due 2 7 337 11 - 355 - -
Stage 3, credit-impaired financial assets 83 4,476 1,617 12 98 6,203 7 603
Gross balance¹ 43,609 141,865 120,537 1,443 22,091 285,936 182,529 90,632
Stage 1 (10) (80) (383) (20) - (483) (50) (16)
- Strong (7) (28) (325) (18) - (371) (33) (7)
- Satisfactory (3) (52) (58) (2) - (112) (17) (9)
Stage 2 (1) (303) (147) (23) - (473) (52) (7)
- Strong - (41) (70) (14) - (125) (10) -
- Satisfactory (1) (218) (32) (3) - (253) (32) (4)
- Higher risk - (44) (45) (6) - (95) (10) (3)
Of which (stage 2):
- Less than 30 days past due - (1) (32) (3) - (36) - -
- More than 30 days past due - - (45) (6) - (51) - -
Stage 3, credit-impaired financial assets (5) (3,178) (759) (11) - (3,948) (1) (129)
Total credit impairment (16) (3,561) (1,289) (54) - (4,904) (103) (152)
Net carrying value 43,593 138,304 119,248 1,389 22,091 281,032
Stage 1 0.0% 0.1% 0.3% 1.4% 0.0% 0.2% 0.0% 0.0%
- Strong 0.0% 0.0% 0.3% 1.3% 0.0% 0.2% 0.0% 0.0%
- Satisfactory 0.0% 0.1% 1.1% 12.5% 0.0% 0.3% 0.1% 0.0%
Stage 2 0.3% 3.6% 7.7% 47.9% 0.0% 4.4% 1.3% 0.3%
- Strong 0.0% 3.3% 5.0% 45.2% 0.0% 4.7% 1.0% 0.0%
- Satisfactory 0.8% 3.3% 20.6% 50.0% 0.0% 3.7% 1.1% 0.3%
- Higher risk 0.0% 5.9% 13.4% 54.5% 0.0% 8.4% 6.7% 1.8%
Of which (stage 2):
- Less than 30 days past due 0.0% 1.8% 20.6% 50.0% 0.0% 16.7% 0.0% 0.0%
- More than 30 days past due 0.0% 0.0% 13.4% 54.5% 0.0% 14.4% 0.0% 0.0%
Stage 3, credit-impaired financial assets (S3) 6.0% 71.0% 46.9% 91.7% 0.0% 63.6% 14.3% 21.4%
- Stage 3 Collateral 1 297 584 - - 881 - 46
- Stage 3 Cover ratio 7.2% 77.6% 83.1% 91.7% 0.0% 77.8% 14.3% 29.0%
(after collateral)
Cover ratio 0.0% 2.5% 1.1% 3.7% 0.0% 1.7% 0.1% 0.2%
Fair value through profit or loss
Performing 36,967 58,506 6 - - 58,512 - -
- Strong 30,799 38,084 3 - - 38,087 - -
- Satisfactory 6,158 20,314 3 - - 20,317 - -
- Higher risk 10 108 - - - 108 - -
Defaulted (CG13-14) - 13 - - - 13 - -
Gross balance (FVTPL)2 36,967 58,519 6 - - 58,525 - -
Net carrying value (incl FVTPL) 80,560 196,823 119,254 1,389 22,091 339,557 - -
1 Loans and advances includes reverse repurchase agreements and other
similar secured lending of $9,660 million under Customers and of $2,946
million under Banks, held at amortised cost
2 Loans and advances includes reverse repurchase agreements and other
similar secured lending of $51,441 million under Customers and of $34,754
million under Banks, held at fair value through profit or loss
Page 23
Amortised cost 2023
Banks Customers Undrawn commitments Financial Guarantees
$million
$million
$million
Corporate & Investment Banking Wealth & Retail Banking Ventures Central & Customer Total
$million
$million
$million
other items
$million
$million
Stage 1 44,384 120,886 123,486 1,015 28,305 273,692 176,654 70,832
- Strong 35,284 84,248 118,193 1,000 27,967 231,408 162,643 47,885
- Satisfactory 9,100 36,638 5,293 15 338 42,284 14,011 22,947
Stage 2 540 7,902 2,304 54 965 11,225 5,733 2,910
- Strong 55 1,145 1,761 34 - 2,940 1,090 830
- Satisfactory 212 5,840 206 7 - 6,053 4,169 1,823
- Higher risk 273 917 337 13 965 2,232 474 257
Of which (stage 2):
- Less than 30 days past due - 78 206 7 - 291 - -
- More than 30 days past due - 10 337 13 - 360 - -
Stage 3, credit-impaired financial assets 77 5,508 1,484 12 224 7,228 3 672
Gross balance¹ 45,001 134,296 127,274 1,081 29,494 292,145 182,390 74,414
Stage 1 (8) (101) (314) (15) - (430) (52) (10)
- Strong (3) (34) (234) (14) - (282) (31) (2)
- Satisfactory (5) (67) (80) (1) - (148) (21) (8)
Stage 2 (10) (257) (141) (21) (1) (420) (39) (14)
- Strong (1) (18) (65) (14) - (97) (5) -
- Satisfactory (2) (179) (22) (3) - (204) (23) (7)
- Higher risk (7) (60) (54) (4) (1) (119) (11) (7)
Of which (stage 2):
- Less than 30 days past due - (2) (22) (3) - (27) - -
- More than 30 days past due - (1) (54) (4) - (59) - -
Stage 3, credit-impaired financial assets (6) (3,533) (760) (12) (15) (4,320) - (112)
Total credit impairment (24) (3,891) (1,215) (48) (16) (5,170) (91) (136)
Net carrying value 44,977 130,405 126,059 1,033 29,478 286,975 - -
Stage 1 0.0% 0.1% 0.3% 1.5% 0.0% 0.2% 0.0% 0.0%
- Strong 0.0% 0.0% 0.2% 1.4% 0.0% 0.1% 0.0% 0.0%
- Satisfactory 0.1% 0.2% 1.5% 6.7% 0.0% 0.4% 0.1% 0.0%
Stage 2 1.9% 3.3% 6.1% 38.9% 0.1% 3.7% 0.7% 0.5%
- Strong 1.8% 1.6% 3.7% 41.2% 0.0% 3.3% 0.5% 0.0%
- Satisfactory 0.9% 3.1% 10.7% 42.9% 0.0% 3.4% 0.6% 0.4%
- Higher risk 2.6% 6.5% 16.0% 30.8% 0.1% 5.3% 2.3% 2.7%
Of which (stage 2):
- Less than 30 days past due 0.0% 2.6% 10.7% 42.9% 0.0% 9.3% 0.0% 0.0%
- More than 30 days past due 0.0% 10.0% 16.0% 30.8% 0.0% 16.4% 0.0% 0.0%
Stage 3, credit-impaired financial assets (S3) 7.8% 64.1% 51.2% 100.0% 6.7% 59.8% 0.0% 16.7%
- Stage 3 Collateral 2 621 554 - - 1,175 - 34
- Stage 3 Cover ratio 10.4% 75.4% 88.5% 100.0% 6.7% 76.0% 0.0% 21.7%
(after collateral)
Cover ratio 0.1% 2.9% 1.0% 4.4% 0.1% 1.8% 0.0% 0.2%
Fair value through profit or loss
Performing 32,813 58,465 13 - - 58,478 - -
- Strong 28,402 38,014 13 - - 38,027 - -
- Satisfactory 4,411 20,388 - - - 20,388 - -
- Higher risk - 63 - - - 63 - -
Defaulted (CG13-14) - 33 - - - 33 - -
Gross balance (FVTPL)2 32,813 58,498 13 - - 58,511 - -
Net carrying value (incl FVTPL) 77,790 188,903 126,072 1,033 29,478 345,486 - -
1 Loans and advances includes reverse repurchase agreements and other
similar secured lending of $13,996 million under Customers and of $1,738
million under Banks, held at amortised cost
2. Loans and advances includes reverse repurchase agreements and other
similar secured lending of $51,299 million under Customers and of $30,548
million under Banks, held at fair value through profit or loss
Page 24
Loans and advances by client segment credit quality analysis
Credit grade Regulatory 1 year S&P external ratings equivalent 2024
PD range (%)
Corporate
&
Investmen
t Banking
and
Central
&
other
items
Gross Cred
it
impa
irme
nt
Stage 1 $million Stage 2 $million Stage 3 $million Total $million Stage 1 $million Stage 2 $million Stage 3 $million Total $million
Strong 112,265 1,229 - 113,494 (28) (41) - (69)
1A-2B 0 - 0.045 A+ and above 32,160 31 - 32,191 (2) - - (2)
3A-4A 0.046 - 0.110 A/A- to BBB+/BBB 40,712 524 - 41,236 (8) (33) - (41)
4B-5B 0.111 - 0.425 BBB to BBB-/BB+ 39,393 674 - 40,067 (18) (8) - (26)
Satisfactory 38,439 6,665 - 45,104 (52) (218) - (270)
6A-7B 0.426 - 1.350 BB+/BB to BB- 24,928 2,677 - 27,605 (21) (24) - (45)
8A-9B 1.351 - 4.000 BB-/B+ to B 9,514 2,618 - 12,132 (20) (169) - (189)
10A-11C 4.001 - 15.75 B/B- to B-/CCC+ 3,997 1,370 - 5,367 (11) (25) - (36)
Higher risk - 784 - 784 - (44) - (44)
12 15.751 - 99.999 CCC/C - 784 - 784 - (44) - (44)
Credit-impaired - - 4,574 4,574 - - (3,178) (3,178)
13-14 100 Defaulted - - 4,574 4,574 - - (3,178) (3,178)
Total 150,704 8,678 4,574 163,956 (80) (303) (3,178) (3,561)
2023
Strong 112,215 1,145 - 113,360 (34) (18) - (52)
1A-2B 0 - 0.045 A+ and above 37,936 81 - 38,017 - - - -
3A-4A 0.046 - 0.110 A/A- to BBB+/BBB 32,004 558 - 32,562 (3) - - (3)
4B-5B 0.111 - 0.425 BBB to BBB-/BB+ 42,275 506 - 42,781 (31) (18) - (49)
Satisfactory 36,976 5,840 - 42,816 (67) (179) - (246)
6A-7B 0.426 - 1.350 BB+/BB to BB- 24,598 1,873 - 26,471 (38) (77) - (115)
8A-9B 1.351 - 4.000 BB-/B+ to B 8,232 2,273 - 10,505 (13) (90) - (103)
10A-11C 4.001 - 15.75 B/B- to B-/CCC+ 4,146 1,694 - 5,840 (16) (12) - (28)
Higher risk - 1,882 - 1,882 - (61) - (61)
12 15.751 - 99.999 CCC/C - 1,882 - 1,882 - (61) - (61)
Credit-impaired - - 5,732 5,732 - - (3,548) (3,548)
13-14 100 Defaulted - - 5,732 5,732 - - (3,548) (3,548)
Total 149,191 8,867 5,732 163,790 (101) (258) (3,548) (3,907)
Page 25
Undrawn commitment and financial guarantees - by client segment credit quality
Credit grade Regulatory 1 year S&P external ratings equivalent 2024
PD range (%)
Corporate
&
Investmen
t Banking
and
Central
&
other
items
Notional Cred
it
impa
irme
nt
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total $million
$million
$million
$million
$million
$million
$million
$million
Strong 140,733 1,265 - 141,998 (22) (6) - (29)
1A-2B 0 - 0.045 A+ and above 29,623 280 - 29,903 (1) - - (1)
3A-4A 0.046 - 0.110 A/A- to BBB+/BBB 53,568 492 - 54,060 (4) - - (4)
4B-5B 0.111 - 0.425 BBB to BBB-/BB+ 57,542 493 - 58,035 (17) (6) - (23)
Satisfactory 46,394 4,200 - 50,594 (23) (33) - (56)
6A-7B 0.426 - 1.350 BB+/BB to BB- 2,544 1,065 - 3,609 (4) (6) - (10)
8A-9B 1.351 - 4.000 BB-/B+ to B 30,438 1,162 - 31,600 (11) (16) - (27)
10A-11C 4.001 - 15.75 B/B- to B-/CCC+ 13,412 1,973 - 15,385 (8) (11) - (19)
Higher risk - 286 - 286 - (11) - (11)
12 15.751 - 99.999 CCC+/C - 286 - 286 - (11) - (11)
Credit-impaired - - 593 593 - - (129) (129)
13-14 100 Defaulted - - 593 593 - - (129) (129)
Total 187,127 5,751 593 193,471 (45) (50) (129) (224)
2023
Strong 129,331 1,649 - 130,980 (19) (3) - (22)
1A-2B 0 - 0.045 A+ and above 27,882 179 - 28,061 (1) - - (1)
3A-4A 0.046 - 0.110 A/A- to BBB+/BBB 52,061 557 - 52,618 (3) (1) - (4)
4B-5B 0.111 - 0.425 BBB to BBB-/BB+ 49,388 913 - 50,301 (15) (2) - (17)
Satisfactory 35,405 5,921 - 41,326 (23) (28) - (51)
6A-7B 0.426 - 1.350 BB+/BB to BB- 2,581 1,065 - 3,646 (2) (6) - (8)
8A-9B 1.351 - 4.000 BB-/B+ to B 25,089 3,028 - 28,117 (14) (9) - (23)
10A-11C 4.001 - 15.75 B/B- to B-/CCC+ 7,735 1,828 - 9,563 (7) (13) - (20)
Higher risk - 697 - 697 - (15) - (15)
12 15.751 - 99.999 CCC+/C - 697 - 697 - (15) - (15)
Credit-impaired - - 663 663 - - (112) (112)
13-14 100 Defaulted - - 663 663 - - (112) (112)
Total 164,736 8,267 663 173,666 (42) (46) (112) (200)
Page 26
Loans and advances by client segment credit quality analysis by key geography
Corporate & Investment Banking and Central & other items
2024
Gross Credit
Impairment
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 St T
ag o
e t
3 a
l
C
o
v
e
r
a
g
e
%
Strong $million Satis-factory $million Total $million Strong $million Satis-factory $million Higher Risk $million Total $million Defaulted Total $million Strong $million Satis-factory $million Total $million Strong $million Satis-factory $million Higher Risk $million Total $million Defaulted Total $million
$million
$million
Hong Kong 32,552 12,079 44,631 230 1,539 64 1,833 1,272 1,272 (8) (8) (16) (33) (107) (9) (149) (1,157) (1,157) (2.8)%
Corporate Lending 14,429 6,180 20,609 225 1,329 64 1,618 1,260 1,260 (5) (4) (9) (33) (102) (9) (144) (1,157) (1,157) (5.6)%
Non Corporate Lending1 4,567 2,730 7,297 4 206 - 210 12 12 (1) (3) (4) - (5) - (5) - - (0.1)%
Banks 13,556 3,169 16,725 1 4 - 5 - - (2) (1) (3) - - - - - - (0.0)%
Singapore 31,129 7,769 38,898 500 955 35 1,490 407 407 - (8) (8) (4) (14) - (18) (196) (196) (0.5)%
Corporate Lending 7,333 4,003 11,336 469 594 35 1,098 335 335 - (6) (6) (4) (14) - (18) (195) (195) (1.7)%
Non Corporate Lending1 19,348 567 19,915 29 358 - 387 - - - (1) (1) - - - - - - (0.0)%
Banks 4,448 3,199 7,647 2 3 - 5 72 72 - (1) (1) - - - - (1) (1) (0.0)%
UK 11,029 3,939 14,968 48 479 3 530 316 316 (10) (4) (14) - (27) (6) (33) (258) (258) (1.9)%
Corporate Lending 325 871 1,196 47 479 1 527 258 258 (9) (3) (12) - (27) (6) (33) (237) (237) (14.2)%
Non Corporate Lending1 8,690 982 9,672 1 - - 1 57 57 (1) (1) (2) - - - - (21) (21) (0.2)%
Banks 2,014 2,086 4,100 - - 2 2 1 1 - - - - - - - - - (0.0)%
US 16,244 4,456 20,700 92 433 33 558 31 31 (4) (1) (5) (1) (1) - (2) (3) (3) (0.0)%
Corporate Lending 5,426 2,761 8,187 77 322 - 399 28 28 (3) (1) (4) (1) (1) - (2) - - (0.1)%
Non Corporate Lending1 9,688 123 9,811 15 79 - 94 3 3 (1) - (1) - - - - (3) (3) (0.0)%
Banks 1,130 1,572 2,702 - 32 33 65 - - - - - - - - - - - (0.0)%
China 10,380 2,794 13,174 49 133 14 196 171 171 (3) (1) (4) - - - - (86) (86) (0.7)%
Corporate Lending 4,933 2,193 7,126 49 133 14 196 168 168 (1) (1) (2) - - - - (83) (83) (1.1)%
Non Corporate Lending1 3,241 363 3,604 - - - - - - (1) - (1) - - - - - - (0.0)%
Banks 2,206 238 2,444 - - - - 3 3 (1) - (1) - - - - (3) (3) (0.2)%
Others 42,171 19,370 61,541 318 3,251 819 4,389 2,460 2,460 (10) (33) (43) (3) (70) (29) (102) (1,483) (1,483) (2.4)%
Corporate Lending 24,835 14,075 38,910 291 2,048 516 2,855 2,221 2,221 (6) (26) (32) (3) (38) (28) (69) (1,333) (1,333) (3.3)%
Non Corporate Lending1 9,451 3,590 13,041 22 1,117 153 1,292 232 232 - (6) (6) - (31) (1) (32) (149) (149) (1.3)%
Banks 7,885 1,705 9,590 5 86 150 241 7 7 (4) (1) (5) - (1) - (1) (1) (1) (0.1)%
Total 143,505 50,407 193,912 1,237 6,790 968 8,996 4,657 4,657 (35) (55) (90) (41) (219) (44) (304) (3,183) (3,183) (1.7)%
Page 27
Corporate & Investment Banking and Central & other items2
2023
Gross Credit
Impairment
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 St T
ag o
e t
3 a
l
C
o
v
e
r
a
g
e
%
Strong $million Satis-factory $million Total $million Strong $million Satis-factory $million Higher Risk $million Total $million Defaulted Total $million Strong $million Satis-factory $million Total $million Strong $million Satis-factory $million Higher Risk $million Total $million Defaulted Total $million
$million
$million
Hong Kong 36,776 10,151 46,927 167 937 30 1,134 1,284 1,284 (7) (23) (30) (4) (118) (3) (125) (1,025) (1,025) (2.4)%
Corporate Lending 14,401 6,289 20,690 165 855 30 1,050 1,219 1,219 (5) (20) (25) (3) (118) (3) (124) (1,024) (1,024) (5.1)%
Non Corporate Lending1 6,323 2,458 8,781 1 81 - 82 65 65 (1) (2) (3) - - - - (1) (1) (0.0)%
Banks 16,052 1,404 17,456 1 1 - 2 - - (1) (1) (2) (1) - - (1) - - (0.0)%
Singapore 34,526 6,046 40,572 361 509 36 906 285 285 (4) (4) (8) (11) (14) (4) (29) (75) (75) (0.3)%
Corporate Lending 5,766 2,334 8,100 304 504 36 844 221 221 (4) (3) (7) (11) (13) (4) (28) (74) (74) (1.2)%
Non Corporate Lending1 23,033 510 23,543 57 2 - 59 - - - (1) (1) - - - - - - (0.0)%
Banks 5,727 3,202 8,929 - 3 - 3 64 64 - - - - (1) - (1) (1) (1) (0.0)%
UK 8,364 4,171 12,535 56 785 83 924 257 257 (5) (5) (10) - (14) (7) (21) (209) (209) (1.7)%
Corporate Lending 5,407 1,559 6,966 52 539 71 662 250 250 (4) (5) (9) - (13) (7) (20) (202) (202) (2.9)%
Non Corporate Lending1 558 1,244 1,802 - 160 - 160 3 3 (1) - (1) - (1) - (1) (3) (3) (0.3)%
Banks 2,399 1,368 3,767 4 86 12 102 4 4 - - - - - - - (4) (4) (0.1)%
US 14,550 4,742 19,292 219 176 19 414 5 5 (2) (2) (4) - - - - (5) (5) (0.0)%
Corporate Lending 7,487 2,765 10,252 146 130 - 276 1 1 (1) (2) (3) - - - - (1) (1) (0.0)%
Non Corporate Lending1 6,181 425 6,606 25 4 - 29 4 4 (1) - (1) - - - - (4) (4) (0.1)%
Banks 882 1,552 2,434 48 42 19 109 - - - - - - - - - - - (0.0)%
China 9,737 2,733 12,470 31 298 8 337 262 262 (3) (4) (7) - - - - (125) (125) (1.0)%
Corporate Lending 4,723 2,179 6,902 31 297 8 336 259 259 (2) (1) (3) - - - - (125) (125) (1.7)%
Non Corporate Lending1 3,254 318 3,572 - - - - - - (1) - (1) - - - - - - (0.0)%
Banks 1,760 236 1,996 - 1 - 1 3 3 - (3) (3) - - - - - - (0.2)%
Others 43,547 18,233 61,780 366 3,347 1,979 5,692 3,716 3,716 (16) (34) (50) (4) (35) (54) (93) (2,115) (2,115) (3.2)%
Corporate Lending 16,189 15,034 31,223 345 2,322 678 3,345 3,335 3,335 (8) (27) (35) (3) (28) (46) (77) (2,012) (2,012) (5.6)%
Non Corporate Lending1 18,894 1,861 20,755 19 946 1,059 2,024 375 375 (6) (6) (12) (1) (6) (1) (8) (102) (102) (0.5)%
Banks 8,464 1,338 9,802 2 79 242 323 6 6 (2) (1) (3) - (1) (7) (8) (1) (1) (0.1)%
Total 147,500 46,076 193,576 1,200 6,052 2,155 9,407 5,809 5,809 (37) (72) (109) (19) (181) (68) (268) (3,554) (3,554) (1.9)%
1 Include financing, insurance and non-banking corporations and
governments
2 Amounts have been re-presented from a regional basis (Asia; Africa
& Middle East; and Europe & Americas) to key geographies covering the
majority of the reported balances
Wealth & Retail Banking and Ventures
2024
Gross Credit
Impairment
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 St T
ag o
e t
3 a
l
C
o
v
e
r
a
g
e
%
Strong $million Satis-factory $million Total $million Strong $million Satis-factory $million Higher Risk $million Total $million Impaired Total $million Strong $million Satis-factory $million Total $million Strong $million Satis-factory $million Higher Risk $million Total $million Impaired $million Total $million
$million
Hong Kong 41,906 320 42,226 288 47 40 375 228 228 (59) (14) (73) (33) (20) (4) (57) (69) (69) (0.5)%
Mortgages 31,080 265 31,345 55 14 24 93 75 75 - - - - - - - (7) (7) (0.0)%
Credit cards 4,210 19 4,229 93 30 1 124 14 14 (36) (11) (47) (27) (19) (1) (47) (14) (14) (2.5)%
Others 6,616 36 6,652 140 3 15 158 139 139 (23) (3) (26) (6) (1) (3) (10) (48) (48) (1.2)%
Singapore 26,755 52 26,807 441 39 34 514 312 312 (29) (26) (55) (6) (6) (6) (18) (265) (265) (1.2)%
Mortgages 13,531 12 13,543 160 32 15 207 9 9 - - - - - - - (4) (4) (0.0)%
Credit cards 2,248 25 2,273 14 5 16 35 16 16 (9) (26) (35) (5) (5) (4) (14) (19) (19) (2.9)%
Others 10,976 15 10,991 267 2 3 272 287 287 (20) - (20) (1) (1) (2) (4) (242) (242) (2.3)%
Korea 18,062 220 18,282 378 9 22 409 112 112 (22) (1) (23) (28) (4) (1) (33) (33) (33) (0.5)%
Mortgages 13,198 171 13,369 250 8 17 275 62 62 - - - - - - - (2) (2) (0.0)%
Credit cards 36 1 37 1 - - 1 - - (1) - (1) - - - - - - (2.6)%
Others 4,828 48 4,876 127 1 5 133 50 50 (21) (1) (22) (28) (4) (1) (33) (31) (31) (1.7)%
Rest of World 26,085 4,998 31,083 338 76 241 655 977 977 (239) (13) (252) (39) (5) (18) (62) (403) (403) (2.2)%
Mortgages 15,079 2,007 17,086 136 43 141 320 459 459 (4) (2) (6) - - (1) (1) (124) (124) (0.7)%
Credit cards 1,148 351 1,499 29 12 19 60 40 40 (33) (1) (34) (21) - (1) (22) (27) (27) (5.2)%
Others 9,858 2,640 12,498 173 21 81 275 478 478 (202) (10) (212) (18) (5) (16) (39) (252) (252) (3.8)%
Total 112,808 5,590 118,398 1,445 171 337 1,953 1,629 1,629 (349) (54) (403) (106) (35) (29) (170) (770) (770) (1.1)%
Page 28
Wealth & Retail Banking and Ventures1
2023
Gross Credit
Impairment
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 St T
ag o
e t
3 a
l
C
o
v
e
r
a
g
e
%
Strong $million Satis-factory $million Total $million Strong $million Satis-factory $million Higher Risk $million Total $million Impaired Total $million Strong $million Satis-factory $million Total $million Strong $million Satis-factory $million Higher Risk $million Total $million Impaired $million Total $million
$million
Hong Kong 42,930 242 43,172 514 74 51 639 174 174 (24) (34) (58) (28) (13) (12) (53) (49) (49) (0.4)%
Mortgages 32,376 152 32,528 282 53 13 348 63 63 - - - (1) - - (1) (1) (1) (0.0)%
Credit cards 4,045 44 4,089 80 17 24 121 18 18 (9) (33) (42) (19) (12) (8) (39) (18) (18) (2.3)%
Others 6,509 46 6,555 152 4 14 170 93 93 (15) (1) (16) (8) (1) (4) (13) (30) (30) (0.9)%
Singapore 26,644 68 26,712 379 41 34 454 282 282 (15) (18) (33) (2) (5) (4) (11) (247) (247) (1.1)%
Mortgages 14,993 16 15,009 230 34 11 275 13 13 - - - - - - - (4) (4) (0.0)%
Credit cards 1,916 25 1,941 11 5 16 32 10 10 (7) (17) (24) - (5) (3) (8) (16) (16) (2.4)%
Others 9,735 27 9,762 138 2 7 147 259 259 (8) (1) (9) (2) - (1) (3) (227) (227) (2.4)%
Korea 22,966 211 23,177 462 20 9 491 93 93 (40) - (40) (18) - - (18) (19) (19) (0.3)%
Mortgages 16,535 164 16,699 364 18 8 390 69 69 - - - - - - - - - (0.0)%
Credit cards 113 2 115 3 - - 3 - - (4) - (4) - - - - - - (3.4)%
Others 6,318 45 6,363 95 2 1 98 24 24 (36) - (36) (18) - - (18) (19) (19) (1.1)%
Rest of World 26,653 4,787 31,440 440 79 256 775 947 947 (169) (29) (198) (31) (7) (42) (80) (457) (457) (2.2)%
Mortgages 14,678 2,297 16,975 156 48 134 338 375 375 (5) (2) (7) (2) - (1) (3) (118) (118) (0.7)%
Credit cards 1,419 68 1,487 73 1 15 89 40 40 (26) (9) (35) (7) - (10) (17) (16) (16) (4.2)%
Others 10,556 2,422 12,978 211 29 107 347 532 532 (138) (18) (156) (22) (7) (31) (60) (323) (323) (3.9)%
Total 119,193 5,308 124,501 1,795 213 350 2,358 1,496 1,496 (248) (81) (329) (79) (25) (58) (162) (772) (772) (1.0)%
1 Amounts have been re-presented from a regional basis (Asia, Africa and
Middle East, and Europe and Americas) to key geographies covering the majority
of the reported balances.
Undrawn commitment and financial guarantees - by client segment credit quality
Amortised cost Wealth & Retail Banking and Ventures
2024
Notional ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$million
$million
$million
$million
$million
$million
$million
$million
Strong 70,595 100 - 70,695 (15) (3) - (18)
Satisfactory 850 11 - 861 (5) (1) - (6)
Higher risk - 21 - 21 - (3) - (3)
Impaired - - 8 8 - - - -
Total 71,445 132 8 71,585 (20) (7) - (27)
Amortised cost 2023
Notional ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$million
$million
$million
$million
$million
$million
$million
$million
Strong 73,819 160 - 73,980 (15) (3) - (18)
Satisfactory 889 18 - 907 (5) (1) - (6)
Higher risk - 33 - 33 - (3) - (3)
Impaired - - 3 3 - - - -
Total 74,708 211 3 74,922 (20) (7) - (27)
Movement in gross exposures and credit impairment for loans and advances, debt
securities, undrawn commitments and financial guarantees (audited)
The tables overleaf set out the movement in gross exposures and credit
impairment by stage in respect of amortised cost loans to banks and customers,
undrawn commitments, financial guarantees and debt securities classified at
amortised cost and FVOCI. The tables are presented for the Group and
separately for CIB and WRB (which also includes a separate presentation for
secured and unsecured exposures).
Methodology
The movement lines within the tables are an aggregation of monthly movements
over the year and will therefore reflect the accumulation of multiple trades
during the year. The credit impairment charge in the income statement
comprises the amounts within the boxes in the table below, less recoveries of
amounts previously written off. Discount unwind is reported in net interest
income and related to stage 3 financial instruments only.
The approach for determining the key line items in the tables is set out
below.
• Transfers - transfers between stages are deemed to occur at the beginning
of a month based on prior month closing balances.
Page 29
• Net remeasurement from stage changes - the remeasurement of credit
impairment provisions arising from a change in stage is reported within the
stage that the assets are transferred to. For example, assets transferred into
stage 2 are remeasured from a 12-month to a lifetime ECL, with the effect of
remeasurement reported in stage 2. For stage 3, this represents the initial
remeasurement from specific provisions recognised on individual assets
transferred into stage 3 in the year.
• Net changes in exposures - new business written less repayments in the
year. Within stage 1, new business written will attract up to 12 months of ECL
charges. Repayments of non-amortising loans (primarily within CIB) will have
low amounts of ECL provisions attributed to them, due to the release of
provisions over the term to maturity. In stages 2 and 3, the net change in
exposures reflect repayments although stage 2 may include new facilities where
clients are on non-purely precautionary early alert, are CG 12, or when
non-investment grade debt securities are acquired.
• Changes in risk parameters - for stages 1 and 2, this reflects changes in
the probability of default (PD), loss given default (LGD) and exposure at
default (EAD) of assets during the year, which includes the impact of
releasing provisions over the term to maturity. It also includes the effect of
changes in forecasts of macroeconomic variables during the year. In stage 3,
this line represents additional specific provisions recognised on exposures
held within stage 3.
• Interest due but not paid - change in contractual amount of interest due
in stage 3 financial instruments but not paid, being the net of accruals,
repayments and write-offs, together with the corresponding change in credit
impairment.
Changes to ECL models, which incorporate changes to model approaches and
methodologies, are not reported as a separate line item as these have an
impact over a number of lines and stages.
Movements during the year
Stage 1 gross exposures decreased by $3.2 billion to $721 billion (31 December
2023: $724 billion). CIB exposure increased by $30 billion to $367 billion
(31 December 2023: $337 billion), due to an increase in exposures in financial
guarantees in the Energy, Financing, Insurance and Transport sectors. WRB
decreased by $11.4 billion to $180 billion (31 December 2023: $191 billion),
largely driven by fewer mortgages in Korea, Singapore and Hong Kong, as well
as off-balance sheet commitments. Debt securities decreased by $16.5 billion,
largely in the Central and other items segment which had also seen a $6.3
billion reduction in loan balances.
Total stage 1 provisions increased by $56 million to $582 million (31 December
2023: $526 million). CIB provisions decreased by $18 million to $133 million
(31 December 2023: $151 million), due to a release in the China CRE overlay
which was driven by repayments and portfolio movements. This was partly offset
by new overlays of $27 million, primarily in Bangladesh. WRB provisions
increased by $67 million to $392 million (31 December 2023: $325 million), due
to delinquencies in the personal loans and unsecured lending portfolio.
Stage 2 gross exposures decreased by $4 billion to $19 billion (31 December
2023: $22 billion), primarily driven by a net reduction in CIB exposures from
off-balance sheet instruments. WRB exposures decreased by $0.4 billion to $2
billion (31 December 2023: $2.5 billion), mainly due to the mortgage
portfolio.
Stage 2 provisions increased by $20 million to $537 million (31 December 2023:
$517 million). CIB provisions increased by $44 million to $362 million (31
December 2023: $318 million), due to $76 million new overlays, largely in Hong
Kong, and portfolio movements. This was offset by China CRE overlay releases,
which were driven by repayments. WRB provisions increased by $11 million to
$151 million (31 December 2023: $140 million) mainly driven by the overlay in
Korea due to the settlement failure of two e-commerce platforms. Debt
securities primarily held in the Central and other items segment decreased by
$31 million, due to sovereign upgrades.
The impact of model and methodology updates in 2024 reduced modelled
provisions by $15 million across stages 1, 2 and 3 in WRB.
Stage 3 gross exposures for CIB decreased by $1.1 billion to $5.2 billion (31
December 2023: $6.3 billion) due to repayments and write-offs. CIB provisions
decreased by $0.3 billion to $3.3 billion (31 December 2023: $3.7 billion),
due to releases from repayments and write-offs. WRB stage 3 loans remained
broadly stable at $1.6 billion (31 December 2023: $1.5 billion) and provisions
also remained stable at $0.8 billion (31 December 2023: $0.8 billion). The
amount of stage 3 exposures written off during the year that remain subject to
enforcement activity is $1.2 billion (31 December 2023: $1 billion).
Page 30
All segments (audited)
Amortised cost and FVOCI Stage 1 Stage 2 Stage 3⁵ Total
Gross balance3 Total credit impair-ment Net Gross balance3 Total credit impair-ment Net Gross balance3 Total credit impair-ment Net Gross balance3 Total credit impair-ment Net
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
As at 1 January 2023 720,112 (645) 719,467 27,479 (618) 26,861 8,841 (4,724) 4,117 756,432 (5,987) 750,445
Transfers to stage 1 19,594 (661) 18,933 (19,583) 661 (18,922) (11) - (11) - - -
Transfers to stage 2 (42,628) 174 (42,454) 42,793 (182) 42,611 (165) 8 (157) - - -
Transfers to stage 3 (96) 6 (90) (2,329) 326 (2,003) 2,425 (332) 2,093 - - -
Net change in exposures 23,717 (185) 23,532 (22,727) 22 (22,705) (1,708) 624 (1,084) (718) 461 (257)
Net remeasurement from stage changes - 52 52 - (199) (199) - (163) (163) - (310) (310)
Changes in risk parameters - 202 202 - (32) (32) - (1,100) (1,100) - (930) (930)
Write-offs - - - - - - (1,027) 1,027 - (1,027) 1,027 -
Interest due but unpaid - - - - - - (83) 83 - (83) 83 -
Discount unwind - - - - - - - 180 180 - 180 180
Exchange translation differences and other movements¹ 3,177 531 3,708 (3,365) (495) (3,860) (128) (102) (230) (316) (66) (382)
As at 31 December 2023² 723,876 (526) 723,350 22,268 (517) 21,751 8,144 (4,499) 3,645 754,288 (5,542) 748,746
Income statement ECL (charge)/release 69 (209) (639) (779)
Recoveries of amounts previously written off - - 271 271
Total credit impairment (charge)/release 69 (209) (368) (508)
As at 1 January 2024 723,876 (526) 723,350 22,268 (517) 21,751 8,144 (4,499) 3,645 754,288 (5,542) 748,746
Transfers to stage 1 16,433 (543) 15,890 (16,423) 543 (15,880) (10) - (10) - - -
Transfers to stage 2 (33,301) 128 (33,173) 33,770 (153) 33,617 (469) 25 (444) - - -
Transfers to stage 3 (1,631) 63 (1,568) (146) 168 22 1,777 (231) 1,546 - - -
Net change in exposures 29,928 (173) 29,755 (18,435) 80 (18,355) (1,383) 622 (761) 10,110 529 10,639
Net remeasurement from stage changes - 61 61 - (185) (185) - (203) (203) - (327) (327)
Changes in risk parameters - 84 84 - (242) (242) - (873) (873) - (1,031) (1,031)
Derecognised - - - - - - - - - - - -
Write-offs - - - - - - (1,260) 1,260 - (1,260) 1,260 -
Interest due but unpaid - - - - - - 53 (53) - 53 (53) -
Discount unwind - - - - - - - 135 135 - 135 135
Exchange translation differences and other movements¹ (14,626) 324 (14,302) (2,427) (231) (2,658) 147 (268) (121) (16,906) (175) (17,081)
As at 31 December 2024² 720,679 (582) 720,097 18,607 (537) 18,070 6,999 (4,085) 2,914 746,285 (5,204) 741,081
Income statement ECL (charge)/release⁶ (28) (347) (454) (829)
Recoveries of amounts previously written off - - 279 279
Total credit impairment (28) (347) (175) (550)
(charge)/release4
1 Includes fair value adjustments and amortisation on debt securities
2 Excludes Cash and balances at central banks, Accrued income, Assets
held for sale and Other assets gross balances of $101,755 million (31 December
2023: $111,478 million) and Total credit impairment of $63 million (31
December 2023: $59 million)
3 The gross balance includes the notional amount of off balance sheet
instruments
4 Reported basis
5 Stage 3 gross includes $59 million (31 December 2023: $80 million)
originated credit-impaired debt securities with impairment of $Nil million (31
December 2023: $14 million)
6 Does not include release relating to Other assets of $3 million (31
December 2023: Nil)
Page 31
Corporate & Investment Banking (audited)
Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 Total
Gross balance(1) Total credit impair-ment Net Gross balance(1) Total credit impair-ment Net Gross balance(1) Total credit impair-ment Net Gross balance(1) Total credit impair-ment Net
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
As at 1 January 2023 315,437 (194) 315,243 20,148 (411) 19,737 6,994 (3,822) 3,172 342,579 (4,427) 338,152
Transfers to stage 1 14,948 (347) 14,601 (14,948) 347 (14,601) - - - - - -
Transfers to stage 2 (34,133) 80 (34,053) 34,175 (88) 34,087 (42) 8 (34) - - -
Transfers to stage 3 (17) - (17) (1,270) 141 (1,129) 1,287 (141) 1,146 - - -
Net change in exposures 41,314 (73) 41,241 (20,084) 89 (19,995) (1,335) 623 (712) 19,895 639 20,534
Net remeasurement from stage changes - 15 15 - (45) (45) - (82) (82) - (112) (112)
Changes in risk parameters - 60 60 - (68) (68) - (668) (668) - (676) (676)
Write-offs - - - - - - (340) 340 - (340) 340 -
Interest due but unpaid - - - - - - (120) 120 - (120) 120 -
Discount unwind - - - - - - - 155 155 - 155 155
Exchange translation differences and other movements (360) 308 (52) (1,148) (283) (1,431) (188) (184) (372) (1,696) (159) (1,855)
As at 31 December 2023 337,189 (151) 337,038 16,873 (318) 16,555 6,256 (3,651) 2,605 360,318 (4,120) 356,198
Income statement ECL (charge)/release 2 (24) (127) (149)
Recoveries of amounts previously written off - - 31 31
Total credit impairment 2 (24) (96) (118)
(charge)/release
As at 1 January 2024 337,189 (151) 337,038 16,873 (318) 16,555 6,256 (3,651) 2,605 360,318 (4,120) 356,198
Transfers to stage 1 10,390 (245) 10,145 (10,390) 245 (10,145) - - - - - -
Transfers to stage 2 (25,698) 47 (25,651) 25,810 (58) 25,752 (112) 11 (101) - - -
Transfers to stage 3 (186) (4) (190) (186) 22 (164) 372 (18) 354 - - -
Net change in exposures 50,866 (50) 50,816 (16,508) 88 (16,420) (1,063) 607 (456) 33,295 645 33,940
Net remeasurement from stage changes - 16 16 (4) (36) (40) - (100) (100) (4) (120) (124)
Changes in risk parameters - 29 29 - (129) (129) - (336) (336) - (436) (436)
Derecognised - - - - - - - - - - - -
Write-offs - - - - - - (321) 321 - (321) 321 -
Interest due but unpaid - - - - - - 25 (25) - 25 (25) -
Discount unwind - - - - - - - 104 104 - 104 104
Exchange translation differences and other movements (5,455) 225 (5,230) (726) (176) (902) 13 (225) (212) (6,168) (176) (6,344)
As at 31 December 2024 367,106 (133) 366,973 14,869 (362) 14,507 5,170 (3,312) 1,858 387,145 (3,807) 383,338
Income statement ECL (charge)/release (5) (77) 171 89
Recoveries of amounts previously written off - - 26 26
Total credit impairment (charge)/release (5) (77) 197 115
1 The gross balance includes the notional amount of off balance sheet
instruments
Page 32
Wealth & Retail Banking (audited)
Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 Total
Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
As at 1 January 2023 193,239 (413) 192,826 1,821 (118) 1,703 1,454 (776) 678 196,514 (1,307) 195,207
Transfers to stage 1 4,265 (246) 4,019 (4,254) 246 (4,008) (11) - (11) - - -
Transfers to stage 2 (7,544) 73 (7,471) 7,667 (73) 7,594 (123) - (123) - - -
Transfers to stage 3 (64) 1 (63) (1,049) 187 (862) 1,113 (188) 925 - - -
Net change in exposures 1,965 (78) 1,887 (1,713) 14 (1,699) (395) - (395) (143) (64) (207)
Net remeasurement from stage changes - 31 31 - (137) (137) - (38) (38) - (144) (144)
Changes in risk parameters - 110 110 - (69) (69) - (426) (426) - (385) (385)
Write-offs - - - - - - (649) 649 - (649) 649 -
Interest due but unpaid - - - - - - 37 (37) - 37 (37) -
Discount unwind - - - - - - - 24 24 - 24 24
Exchange translation differences and other movements (862) 197 (665) - (190) (190) 59 33 92 (803) 40 (763)
As at 31 December 2023 190,999 (325) 190,674 2,472 (140) 2,332 1,485 (759) 726 194,956 (1,224) 193,732
Income statement ECL (charge)/release 63 (192) (464) (593)
Recoveries of amounts previously written off - - 239 239
Total credit impairment (charge)/release 63 (192) (225) (354)
As at 1 January 2024 190,999 (325) 190,674 2,472 (140) 2,332 1,485 (759) 726 194,956 (1,224) 193,732
Transfers to stage 1 5,126 (288) 4,838 (5,116) 288 (4,828) (10) - (10) - - -
Transfers to stage 2 (7,393) 80 (7,313) 7,525 (80) 7,445 (132) - (132) - - -
Transfers to stage 3 (98) 1 (97) (1,254) 211 (1,043) 1,352 (212) 1,140 - - -
Net change in exposures (3,926) (89) (4,015) (1,505) 21 (1,484) (431) - (431) (5,862) (68) (5,930)
Net remeasurement from stage changes - 29 29 - (144) (144) - (44) (44) - (159) (159)
Changes in risk parameters - 19 19 - (152) (152) - (537) (537) - (670) (670)
Write-offs - - - - - - (808) 808 - (808) 808 -
Interest due but unpaid - - - - - - 28 (28) - 28 (28) -
Discount unwind - - - - - - - 30 30 - 30 30
Exchange translation differences and other movements (5,128) 181 (4,947) (92) (155) (247) 139 (16) 123 (5,081) 10 (5,071)
As at 31 December 2024 179,580 (392) 179,188 2,030 (151) 1,879 1,623 (758) 865 183,233 (1,301) 181,932
Income statement ECL (charge)/release (41) (275) (581) (897)
Recoveries of amounts previously written off - - 253 253
Total credit impairment (charge)/release (41) (275) (328) (644)
1 The gross balance includes the notional amount of off-balance sheet
instruments
Page 33
Wealth & Retail Banking - Secured (audited)
Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 Total
Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net
$million
$million
$million $million
$million
$million $million
$million
$million $million
$million
$million
As at 1 January 2023 135,362 (60) 135,302 1,413 (17) 1,396 1,028 (552) 476 137,803 (629) 137,174
Transfers to stage 1 3,311 (20) 3,291 (3,302) 20 (3,282) (9) - (9) - - -
Transfers to stage 2 (5,340) 11 (5,329) 5,436 (9) 5,427 (96) (2) (98) - - -
Transfers to stage 3 (28) 1 (27) (463) 1 (462) 491 (2) 489 - - -
Net change in exposures (3,138) (16) (3,154) (1,250) 3 (1,247) (216) - (216) (4,604) (13) (4,617)
Net remeasurement from stage changes - 4 4 - (16) (16) - (3) (3) - (15) (15)
Changes in risk parameters - 22 22 - 24 24 - (110) (110) - (64) (64)
Write-offs - - - - - - (109) 109 - (109) 109 -
Interest due but unpaid - - - - - - (3) 3 - (3) 3 -
Discount unwind - - - - - - - 12 12 - 12 12
Exchange translation differences and other movements (369) 25 (344) (7) (22) (29) (24) 20 (4) (400) 23 (377)
As at 31 December 2023 129,798 (33) 129,765 1,827 (16) 1,811 1,062 (525) 537 132,687 (574) 132,113
Income statement ECL (charge)/release 10 11 (113) (92)
Recoveries of amounts previously written off - - 68 68
Total credit impairment (charge)/release 10 11 (45) (24)
As at 1 January 2024 129,798 (33) 129,765 1,827 (16) 1,811 1,062 (525) 537 132,687 (574) 132,113
Transfers to stage 1 3,839 (23) 3,816 (3,836) 23 (3,813) (3) - (3) - - -
Transfers to stage 2 (4,952) 13 (4,939) 5,054 (13) 5,041 (102) - (102) - - -
Transfers to stage 3 (43) - (43) (566) 19 (547) 609 (19) 590 - - -
Net change in exposures 2,570 (11) 2,559 (917) 8 (909) (268) - (268) 1,385 (3) 1,382
Net remeasurement from stage changes - 6 6 - (15) (15) - (7) (7) - (16) (16)
Changes in risk parameters - (6) (6) - (6) (6) - (129) (129) - (141) (141)
Write-offs - - - - - - (114) 114 - (114) 114 -
Interest due but unpaid - - - - - - 53 (53) - 53 (53) -
Discount unwind - - - - - - - 16 16 - 16 16
Exchange translation differences and other movements (4,496) 6 (4,490) (57) (31) (88) (33) 47 14 (4,586) 22 (4,564)
As at 31 December 2024 126,716 (48) 126,668 1,505 (31) 1,474 1,204 (556) 648 129,425 (635) 128,790
Income statement ECL (charge)/release (11) (13) (136) (160)
Recoveries of amounts previously written off - - 80 80
Total credit impairment (charge)/release (11) (13) (56) (80)
1 The gross balance includes the notional amount of off balance sheet
instruments
Page 34
Wealth & Retail Banking - Unsecured (audited)
Retail Banking Stage 1 Stage 2 Stage 3 Total
Amortised cost nd FVOCI
Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net Gross balance1 Total credit impair-ment Net
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
As at 1 January 2023 57,877 (353) 57,524 408 (101) 307 426 (224) 202 58,711 (678) 58,033
Transfers to stage 1 954 (226) 728 (952) 226 (726) (2) - (2) - - -
Transfers to stage 2 (2,204) 62 (2,142) 2,231 (64) 2,167 (27) 2 (25) - - -
Transfers to stage 3 (36) - (36) (586) 186 (400) 622 (186) 436 - - -
Net change in exposures 5,103 (62) 5,041 (463) 11 (452) (179) - (179) 4,461 (51) 4,410
Net remeasurement from stage changes - 27 27 - (121) (121) - (35) (35) - (129) (129)
Changes in risk parameters - 88 88 - (93) (93) - (316) (316) - (321) (321)
Write-offs - - - - - - (540) 540 - (540) 540 -
Interest due but unpaid - - - - - - 40 (40) - 40 (40) -
Discount unwind - - - - - - - 12 12 - 12 12
Exchange translation differences and other movements (493) 172 (321) 7 (168) (161) 83 13 96 (403) 17 (386)
As at 31 December 2023 61,201 (292) 60,909 645 (124) 521 423 (234) 189 62,269 (650) 61,619
Income statement ECL (charge)/release 53 (203) (351) (501)
Recoveries of amounts previously written off - - 171 171
Total credit impairment (charge)/release 53 (203) (180) (330)
As at 1 January 2024 61,201 (292) 60,909 645 (124) 521 423 (234) 189 62,269 (650) 61,619
Transfers to stage 1 1,287 (265) 1,022 (1,280) 265 (1,015) (7) - (7) - - -
Transfers to stage 2 (2,441) 67 (2,374) 2,471 (67) 2,404 (30) - (30) - - -
Transfers to stage 3 (55) 1 (54) (688) 192 (496) 743 (193) 550 - - -
Net change in exposures (6,496) (78) (6,574) (588) 13 (575) (163) - (163) (7,247) (65) (7,312)
Net remeasurement from stage changes - 23 23 - (129) (129) - (37) (37) - (143) (143)
Changes in risk parameters - 25 25 - (146) (146) - (408) (408) - (529) (529)
Write-offs - - - - - - (694) 694 - (694) 694 -
Interest due but unpaid - - - - - - (25) 25 - (25) 25 -
Discount unwind - - - - - - - 14 14 - 14 14
Exchange translation differences and other movements (632) 175 (457) (35) (124) (159) 172 (63) 109 (495) (12) (507)
As at 31 December 2024 52,864 (344) 52,520 525 (120) 405 419 (202) 217 53,808 (666) 53,142
Income statement ECL (charge)/release (30) (262) (445) (737)
Recoveries of amounts previously written off - - 172 172
Total credit impairment (charge)/release (30) (262) (273) (565)
1 The gross balance includes the notional amount of off balance sheet
instruments
Page 35
Analysis of stage 2 balances
The table below analyses total stage 2 gross on-and off-balance sheet
exposures and associated expected credit provisions by the key SICR driver
that caused the exposures to be classified as stage 2 as at 31 December 2024
and 31 December 2023 for each segment.
Where multiple drivers apply, the exposure is allocated based on the table
order. For example, a loan may have breached the PD thresholds and could also
be on non-purely precautionary early alert; in this instance, the exposure is
reported under 'Increase in PD'.
2024
Corporate & Wealth & Ventures Central & other items1 Tot
Investment Banking
Retail Banking al
Gross ECL Coverage Gross ECL Coverage Gross ECL Coverage Gross ECL Coverage Gross ECL Coverage
$million
$million
%
$million
$million
%
$million
$million
%
$million
$million
%
$million
$million
%
Increase in PD 8,465 112 1.3% 1,366 104 7.6% 48 20 31.3% 154 - 0.0% 10,033 236 2.4%
Non-purely precautionary early alert 3,473 44 1.3% 30 - 0.0% - - 0.0% - - 0.0% 3,503 44 1.3%
Higher risk (CG12) 686 24 3.5% 18 - 0.0% - - 0.0% 1,488 1 0.4% 2,192 25 1.1%
Top up/Sell down (Private Banking) - - 0.0% 254 1 0.4% - - 0.0% - - 0.0% 254 1 0.4%
Others 2,245 25 1.1% 150 5 3.3% - - 0.0% 482 - 0.0% 2,877 30 1.0%
30 days past due - - 0.0% 212 19 9.0% 6 4 66.7% - - 0.0% 218 23 10.6%
Management overlay - 157 0.0% - 22 0.0% - 3 0.0% - - 0.0% - 182 0.0%
Total stage 2 14,869 362 2.4% 2,030 151 7.4% 54 27 40.7% 2,124 1 0.3% 19,077 541 2.8%
2023
Increase in PD 8,262 75 0.9% 1,962 109 5.6% 96 23 24.0% 599 13 2.2% 10,919 220 2.0%
Non-purely precautionary early alert 5,136 26 0.5% 37 - 0.0% - - 0.0% - - 0.0% 5,173 26 0.5%
Higher risk (CG12) 1,008 56 5.6% 26 1 3.8% - - 0.0% 2,020 17 0.8% 3,054 74 2.4%
Top up/Sell down (Private Banking) - - 0.0% 148 2 1.4% - - 0.0% - - 0.0% 148 2 1.7%
Others 2,467 37 1.5% 151 16 10.6% - - 0.0% 489 - 0.0% 3,107 53 1.7%
30 days past due - - 0.0% 148 12 8.1% 2 - 0.0% - - 0.0% 150 12 7.7%
Management overlay - 124 0.0% - - 0.0% - - 0.0% - 17 0.0% - 141 0.0%
Total stage 2 16,873 318 1.9% 2,472 140 5.7% 98 23 23.5% 3,108 47 1.5% 22,551 528 2.3%
1 Includes Gross and ECL for Cash and balances at central banks and
Assets held for sale
Credit impairment charge (audited)
The table below analyses credit impairment charges or releases of the ongoing
business portfolio and restructuring business portfolio for the year ended 31
December 2024.
2024 2023
Stage 1 & 2 Stage 3 Total Stage 1 & 2 Stage 3 Total
$million
$million
$million
$million
$million
$million
Ongoing business portfolio
Corporate & Investment Banking 81 (187) (106) 11 112 123
Wealth & Retail Banking 317 327 644 129 225 354
Ventures 10 64 74 42 43 85
Central & other items (37) (18) (55) (44) 10 (34)
Credit impairment charge/(release) 371 186 557 138 390 528
Restructuring business portfolio
Others 1 (11) (10) 1 (21) (20)
Credit impairment charge/(release) 1 (11) (10) 1 (21) (20)
Total credit impairment charge/(release) 372 175 547 139 369 508
Page 36
Problem credit management and provisioning (audited)
Forborne and other modified loans by client segment
A forborne loan arises when a concession has been made to the contractual
terms of a loan in response to a customer's financial difficulties.
Net forborne loans decreased by $221 million to $784 million (31 December
2023: $1 billion), mainly due to repayments in CIB non-performing forborne
loans. Net non-performing forborne loans decreased by $235 million to $732
million (31 December 2023: $967 million), which was partly offset by a $17
million increase in CIB performing forborne loans.
Amortised cost 2024 2023
Corporate & Investment Banking Wealth & Total Corporate & Investment Banking Wealth & Total
$million
Retail Banking
$million
$million
Retail Banking
$million
$million
$million
Gross stage 1 and 2 forborne loans 17 36 53 - 40 40
Modification of terms and conditions1 17 36 53 - 40 40
Impairment provisions - (1) (1) - (2) (2)
Modification of terms and conditions1 - (1) (1) - (2) (2)
Net stage 1 and 2 forborne loans 17 35 52 - 38 38
Collateral - 27 27 - 31 31
Gross stage 3 forborne loans 2,065 258 2,323 2,340 274 2,614
Modification of terms and conditions1 1,824 258 2,082 2,113 274 2,387
Refinancing2 241 - 241 227 - 227
Impairment provisions (1,481) (110) (1,591) (1,529) (118) (1,647)
Modification of terms and conditions1 (1,242) (110) (1,352) (1,337) (118) (1,454)
Refinancing2 (239) - (239) (192) - (192)
Net stage 3 forborne loans 584 148 732 811 156 967
Collateral 172 55 227 341 49 390
Net carrying value of forborne loans 601 183 784 811 194 1,005
1 Modification of terms is any contractual change apart from
refinancing, as a result of credit stress of the counterparty, i.e. interest
reductions, loan covenant waivers
2 Refinancing is a new contract to a borrower in credit stress, such that
they are refinanced and can pay other debt contracts that they were unable to
honour
Forborne and other modified loans by key geography
Net forborne loans decreased by $221 million to $784 million (31 December
2023: $1 billion), mainly due to non-performing forborne loans.
Amortised cost 2024 20233
Hong Kong Korea China Singa-pore UK US Other Total Hong Kong Korea China Singa-pore UK US Other Total
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Performing forborne loans 2 8 - 3 - - 39 52 - 6 - 3 - - 29 38
Stage 3 forborne loans 118 18 77 25 78 1 415 732 104 22 114 37 46 1 643 967
Net forborne loans 120 26 77 28 78 1 454 784 104 28 114 40 46 1 672 1,005
3 Amounts have been re-presented from a regional basis (Asia, Africa and
Middle East, and Europe and Americas) to key geographies covering the majority
of the reported balances)
Credit Risk mitigation
Potential credit losses from any given account, customer or portfolio are
mitigated using a range of tools such as collateral, netting arrangements,
credit insurance and credit derivatives, taking into account expected
volatility and guarantees.
The reliance that can be placed on these mitigants is carefully assessed in
light of issues such as legal certainty and enforceability, market valuation
correlation and counterparty risk of the guarantor.
Page 37
Collateral (audited)
A secured loan is one where the borrower pledges an asset as collateral of
which the Group is able to take possession in the event that the borrower
defaults.
The collateral values in the table below (which covers loans and advances to
banks and customers, excluding those held at fair value through profit or
loss) are adjusted where appropriate in accordance with our risk mitigation
policy and for the effect of over-collateralisation. The extent of
over-collateralisation has been determined with reference to both the drawn
and undrawn components of exposure as this best reflects the effect of
collateral and other credit enhancements on the amounts arising from ECL. The
value of collateral reflects management's best estimate and is backtested
against our prior experience.
Collateral held on loans and advances
The table below details collateral held against exposures, separately
disclosing stage 2 and stage 3 exposure and corresponding collateral.
Amortised cost 2024
Net amount outstanding Collateral Net
exp
osu
re
Total Stage 2 financial Credit-impaired financial Total2 Stage 2 financial assets Credit-impaired financial Total Stage 2 financial Credit-impaired financial
$million
assets
assets (S3)
$million
$million
assets (S3)
$million
assets
assets (S3)
$million
$million
$million
$million
$million
Corporate & Investment Banking1 181,897 8,657 1,376 36,750 3,052 298 145,147 5,605 1,078
Wealth & Retail Banking 119,248 1,758 858 85,163 891 584 34,085 867 274
Ventures 1,389 25 1 - - - 1,389 25 1
Central & other items 22,091 35 98 80 35 - 22,011 - 98
Total 324,625 10,475 2,333 121,993 3,978 882 202,632 6,497 1,451
2023
Corporate & Investment Banking1 175,382 8,175 2,046 36,458 2,972 623 138,924 5,203 1,423
Wealth & Retail Banking 126,059 2,163 724 86,827 1,136 554 39,232 1,027 170
Ventures 1,033 33 - - - - 1,033 33 -
Central & other items 29,478 964 209 2,475 964 - 27,003 - 209
Total 331,952 11,335 2,979 125,760 5,072 1,177 206,192 6,263 1,802
1 Includes loans and advances to banks
2 Adjusted for over-collateralisation based on the drawn and undrawn
components of exposures
Collateral - Corporate & Investment Banking (audited)
Our underwriting standards encourage taking specific charges on assets and we
consistently seek high-quality, investment-grade collateral.
Collateral taken for longer-term and sub-investment grade corporate loans
increased to 49 per cent (31 December 2023: 41 per cent).
The unadjusted market value of collateral across all asset types, in respect
of CIB, without adjusting for over collateralisation, increased to $383
billion (31 December 2023: $290 billion) predominantly due to an increase in
reverse repos.
88 per cent (31 December 2023: 83 per cent) of tangible collateral excluding
reverse repurchase agreements and financial guarantees held comprises physical
assets with the remainder held in cash. Overall collateral remained broadly
stable at $37 billion (31 December 2023: $36 billion).
Non-tangible collateral, such as guarantees and standby letters of credit, is
also held against corporate exposures, although the financial effect of this
type of collateral is less significant in terms of recoveries. However, this
is considered when determining the loss given default and other credit-related
factors. Collateral is also held against off-balance sheet exposures,
including undrawn commitments and trade-related instruments.
Page 38
Corporate & Investment Banking
Amortised cost 2024 2023
$million
$million
Maximum exposure 181,897 175,382
Property 8,504 9,339
Plant, machinery and other stock 935 933
Cash 1,973 2,985
Reverse repos 12,568 13,826
AA- to AA+ 938 1,036
A- to A+ 8,324 10,606
BBB- to BBB+ 1,437 855
Lower than BBB- 95 169
Unrated 1,774 1,160
Financial guarantees and insurance 7,075 5,057
Commodities 33 5
Ships and aircraft 5,662 4,313
Total value of collateral1 36,750 36,458
Net exposure 145,147 138,924
1 Adjusted for over-collateralisation based on the drawn and undrawn
components of exposures
Collateral - Wealth & Retail Banking (audited)
In WRB, fully secured products remain stable at 85 per cent of the total
portfolio (31 December 2023: 85 per cent).
The following table presents an analysis of loans to individuals by product -
split between fully secured, partially secured and unsecured.
Amortised cost 2024 2023
Fully Partially secured¹ Unsecured Total(2) Fully Partially secured¹ Unsecured Total²
secured¹
$million
$million
$million
secured¹
$million
$million
$million
$million
$million
Maximum exposure 101,264 536 17,448 119,248 106,914 505 18,640 126,059
Loans to individuals
Mortgages 76,696 - - 76,696 82,943 - - 82,943
CCPL 463 - 16,343 16,806 375 - 17,395 17,770
Auto 160 - - 160 312 - - 312
Secured wealth products 21,928 - - 21,928 20,303 - - 20,303
Other 2,017 536 1,105 3,658 2,981 505 1,245 4,731
Total collateral2 85,163 86,827
Net exposure3 34,085 39,232
Percentage of total loans 85% 0% 15% 85% 0% 15%
1 Secured loans are fully secured if the fair value of the collateral
is equal to or greater than the loan at the time of origination. All other
secured loans are considered to be partly secure
2 Collateral values are adjusted where appropriate in accordance with
our risk mitigation policy and for the effect of over-collateralisation
3 Amounts net of ECL
Mortgage loan-to-value ratios by geography (audited)
Loan-to-value (LTV) ratios measure the ratio of the current mortgage
outstanding to the current fair value of the properties on which they are
secured.
For the majority of mortgage loans, the value of property held as security
significantly exceeds the principal outstanding of the loan. The average LTV
of the overall mortgage portfolio increased to 48.9 per cent (31 December
2023: 47.1 per cent) driven by a decrease in property prices and regulatory
relaxations in a few key markets, including Hong Kong and Korea. Hong Kong,
which represents 34.3 per cent of WRB mortgage portfolio, has an average LTV
of 58.6 per cent (31 December 2023: 55.7 per cent). The increase in Hong Kong
residential mortgage LTV was due to a decrease in property prices. However, 29
per cent of the Hong Kong mortgage exposure is backed by credit insurance and,
specifically, 95 per cent of mortgage exposure with LTV greater than 80 per
cent is backed by credit insurance.
Our other key markets continued to have low portfolio average LTVs (Korea and
Singapore at 42.1 per cent and 42.5 per cent respectively). Korea average LTV
increased by 1.7 per cent ( 31 December 2023: 40.4 per cent) was mainly due to
government relaxations whereby highly regulated areas have eased up to
accommodate customers with higher LTV.
Page 39
An analysis of LTV ratios by geography for the mortgage portfolio is presented
in the table below.
Amortised cost 2024 20231
Hong Kong Singapore Korea Other Total Hong Kong Singapore Korea Other Total
%
%
%
%
%
%
%
%
%
%
Gross
Gross
Gross
Gross
Gross
Gross
Gross
Gross
Gross
Gross
Less than 50 per cent 40.9 52.7 64.1 50.2 51.3 44.9 50.9 69.5 51.0 54.9
50 per cent to 59 per cent 17.6 21.8 13.2 15.4 16.5 19.5 24.7 11.0 16.7 17.1
60 per cent to 69 per cent 12.7 15.6 13.5 17.0 14.3 9.7 15.2 9.7 16.3 11.9
70 per cent to 79 per cent 5.5 9.6 8.3 12.7 8.5 4.3 8.7 8.9 11.6 7.9
80 per cent to 89 per cent 5.1 0.1 0.8 4.1 2.9 7.3 0.5 0.6 3.6 3.3
90 per cent to 99 per cent 8.2 0.0 0.1 0.5 3.0 7.4 - 0.1 0.4 2.5
100 per cent and greater 10.1 0.1 0.1 0.2 3.5 7.0 - 0.1 0.4 2.4
Average portfolio loan-to-value 58.6 42.5 42.1 48.0 48.9 55.7 43.4 40.4 47.8 47.1
Loans to individuals - mortgages ($million) 31,506 13,756 13,703 17,731 76,696 32,935 15,292 17,157 17,559 82,943
1 Amounts have been re-presented from a regional basis (Asia, Africa
and Middle East, and Europe and Americas) to key geographies covering the
majority of the reported balances.
Collateral and other credit enhancements possessed or called upon (audited)
The Group obtains assets by taking possession of collateral or calling upon
other credit enhancements (such as guarantees). Repossessed properties are
sold in an orderly fashion. Where the proceeds are in excess of the
outstanding loan balance, the excess is returned to the borrower.
Certain equity securities acquired may be held by the Group for investment
purposes and are classified as fair value through profit or loss, and the
related loan written off. The carrying value of collateral possessed and held
by the Group is $23.7 million (31 December 2023: $16.5 million).
2024 2023
$million
$million
Property, plant and equipment 6.1 10.5
Guarantees 4.7 6.0
Other 12.9 -
Total 23.7 16.5
Other Credit Risk mitigation (audited)
Other forms of Credit Risk mitigation are set out below.
Credit default swaps
The Group has entered into credit default swaps for portfolio management
purposes, referencing loan assets with a notional value of $3.5 billion (31
December 2023: $3.5 billion). These credit default swaps are accounted for as
financial guarantees as per IFRS 9 as they will only reimburse the holder for
an incurred loss on an underlying debt instrument. The Group continues to hold
the underlying assets referenced in the credit default swaps and it continues
to be exposed to related Credit Risk and Foreign Exchange Rate Risk on these
assets.
Credit linked notes
The Group has issued credit linked notes for portfolio management purposes,
referencing loan assets with a notional value of $18.6 billion (31 December
2023: $22.5 billion). The Group continues to hold the underlying assets for
which the credit linked notes provide mitigation. The credit linked notes of
$2.0 billion (31 December 2023: $2.1 billion) are recognised as a financial
liability at amortised cost on the balance sheet and are adjusted, where
appropriate, for reductions in expected future cash flows with a corresponding
credit impairment in the income statement.
Derivative financial instruments
The Group enters into master netting agreements, which in the event of default
result in a single amount owed by or to the counterparty through netting the
sum of the positive and negative mark-to-market values of applicable
derivative transactions. These are also set out under the 'Derivative
financial instruments Credit Risk mitigation' section.
Off-balance sheet exposures
For certain types of exposures, such as letters of credit and guarantees, the
Group obtains collateral such as cash depending on internal Credit Risk
assessments, as well as in the case of letters of credit holding legal title
to the underlying assets should a default take place.
Page 40
Other portfolio analysis
This section provides maturity analysis by credit quality by industry and
industry and retail products analysis by key geography.
Maturity analysis of loans and advances by client segment
Loans and advances to the CIB segment remain predominantly short-term, with
$91 billion (31 December 2023: $91 billion) maturing in less than one year. 91
per cent (31 December 2023: 98 per cent) of loans to banks mature in less than
one year, as net exposures decreased to $44 billion (31 December 2023: $45
billion). Shorter maturities give us the flexibility to respond promptly to
events and rebalance or reduce our exposure to clients or sectors that are
facing increased pressure or uncertainty.
The WRB short-term book of one year or less, is stable at 27 per cent (31
December 2023: 26 per cent). The WRB long-term book of over five years also
remained stable at 62 per cent (31 December 2023: 63 per cent).
Amortised cost 2024 2023
One year One to Over Total One year One to Over Total
or less
five years
five years
$million
or less
five years
five years
$million
$million
$million
$million
$million
$million
$million
Corporate & Investment Banking 91,065 33,130 17,670 141,865 90,728 30,746 12,822 134,296
Wealth & Retail Banking 32,252 13,194 75,091 120,537 33,397 13,711 80,166 127,274
Ventures 1,001 442 - 1,443 747 334 - 1,081
Central & other items 22,085 2 4 22,091 29,448 43 3 29,494
Gross loans and advances to customers 146,403 46,768 92,765 285,936 154,320 44,834 92,991 292,145
Impairment provisions (4,369) (409) (126) (4,904) (4,872) (185) (113) (5,170)
Net loans and advances to customers 142,034 46,359 92,639 281,032 149,448 44,649 92,878 286,975
Net loans and advances to banks 39,591 3,699 303 43,593 43,955 1,021 1 44,977
Page 41
Credit quality by industry
Loans and advances
This section provides an analysis of the Group's amortised cost portfolio by
industry on a gross, total credit impairment and net basis.
Amortised cost 2024
Stage 1 Stage 2 Stage 3 Tot
al
Gross balance Total credit impair-ment Net carrying amount Gross balance Total credit impair-ment Net carrying amount Gross balance Total credit impair-ment Net carrying amount Gross balance Total credit impair-ment Net carrying amount
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Industry:
Energy 12,147 (9) 12,138 468 (57) 411 870 (559) 311 13,485 (625) 12,860
Manufacturing 19,942 (12) 19,930 840 (16) 824 418 (305) 113 21,200 (333) 20,867
Financing, insurance and non-banking 34,452 (16) 34,436 1,238 (6) 1,232 154 (142) 12 35,844 (164) 35,680
Transport, telecom and utilities 16,099 (11) 16,088 2,309 (32) 2,277 330 (85) 245 18,738 (128) 18,610
Food and household products 8,425 (8) 8,417 267 (8) 259 251 (198) 53 8,943 (214) 8,729
Commercial real estate 12,135 (10) 12,125 1,714 (126) 1,588 1,485 (1,265) 220 15,334 (1,401) 13,933
Mining and quarrying 5,542 (3) 5,539 287 (12) 275 124 (57) 67 5,953 (72) 5,881
Consumer durables 5,988 (6) 5,982 218 (26) 192 292 (259) 33 6,498 (291) 6,207
Construction 1,925 (2) 1,923 528 (5) 523 171 (160) 11 2,624 (167) 2,457
Trading companies & distributors 589 - 589 24 (1) 23 88 (48) 40 701 (49) 652
Government 28,870 - 28,870 441 (12) 429 205 (18) 187 29,516 (30) 29,486
Other 4,590 (3) 4,587 344 (2) 342 186 (82) 104 5,120 (87) 5,033
Total 150,704 (80) 150,624 8,678 (303) 8,375 4,574 (3,178) 1,396 163,956 (3,561) 160,395
Retail Products:
Mortgage 75,340 (8) 75,332 896 (2) 894 606 (136) 470 76,842 (146) 76,696
Credit Cards 8,037 (121) 7,916 222 (80) 142 71 (60) 11 8,330 (261) 8,069
Personal Loan and other unsecured lending 10,021 (228) 9,793 238 (53) 185 279 (131) 148 10,538 (412) 10,126
Auto 159 - 159 1 - 1 - - - 160 - 160
Secured wealth products 21,404 (37) 21,367 402 (6) 396 518 (353) 165 22,324 (396) 21,928
Other 3,437 (9) 3,428 194 (29) 165 155 (90) 65 3,786 (128) 3,658
Total 118,398 (403) 117,995 1,953 (170) 1,783 1,629 (770) 859 121,980 (1,343) 120,637
Net carrying value (customers)¹ 269,102 (483) 268,619 10,631 (473) 10,158 6,203 (3,948) 2,255 285,936 (4,904) 281,032
Net carrying value (Banks)1 43,208 (10) 43,198 318 (1) 317 83 (5) 78 43,609 (16) 43,593
1 Includes reverse repurchase agreements and other similar secured
lending held at amortised cost of $9,660 million for customers and $2,946
million for Banks.
Page 42
Amortised cost 2023
Stage 1 Stage 2 Stage 3 Tot
al
Gross balance Total credit impair-ment Net carrying amount Gross balance Total credit impair-ment Net carrying amount Gross balance Total credit impair-ment Net carrying amount Gross balance Total credit impair-ment Net carrying amount
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Industry:
Energy 9,397 (8) 9,389 672 (22) 650 949 (535) 414 11,018 (565) 10,453
Manufacturing 21,239 (8) 21,231 708 (16) 692 656 (436) 220 22,603 (460) 22,143
Financing, insurance and non-banking 31,633 (13) 31,620 571 (1) 570 80 (77) 3 32,284 (91) 32,193
Transport, telecom and utilities 14,710 (8) 14,702 1,722 (36) 1,686 481 (178) 303 16,913 (222) 16,691
Food and household products 7,668 (15) 7,653 323 (7) 316 355 (262) 93 8,346 (284) 8,062
Commercial real estate 12,261 (30) 12,231 1,848 (129) 1,719 1,712 (1,191) 521 15,821 (1,350) 14,471
Mining and quarrying 5,995 (4) 5,991 220 (10) 210 151 (84) 67 6,366 (98) 6,268
Consumer durables 5,815 (3) 5,812 300 (21) 279 329 (298) 31 6,444 (322) 6,122
Construction 2,230 (2) 2,228 502 (8) 494 358 (326) 32 3,090 (336) 2,754
Trading companies & distributors 581 - 581 57 - 57 107 (58) 49 745 (58) 687
Government 33,400 (6) 33,394 1,783 (5) 1,778 367 (33) 334 35,550 (44) 35,506
Other 4,262 (4) 4,258 161 (3) 158 187 (70) 117 4,610 (77) 4,533
Total 149,191 (101) 149,090 8,867 (258) 8,609 5,732 (3,548) 2,184 163,790 (3,907) 159,883
Retail Products:
Mortgage 81,210 (8) 81,202 1,350 (5) 1,345 519 (123) 396 83,079 (136) 82,943
Credit Cards 7,633 (104) 7,529 244 (65) 179 69 (50) 19 7,946 (219) 7,727
Personal Loan and other unsecured lending 10,867 (188) 10,679 324 (77) 247 315 (165) 150 11,506 (430) 11,076
Auto 310 - 310 1 - 1 1 - 1 312 - 312
Secured wealth products 19,923 (22) 19,901 278 (10) 268 474 (340) 134 20,675 (372) 20,303
Other 4,558 (7) 4,551 161 (5) 156 118 (94) 24 4,837 (106) 4,731
Total 124,501 (329) 124,172 2,358 (162) 2,196 1,496 (772) 724 128,355 (1,263) 127,092
Net carrying value (customers)¹ 273,692 (430) 273,262 11,225 (420) 10,805 7,228 (4,320) 2,908 292,145 (5,170) 286,975
Net carrying value (Banks)1 44,384 (8) 44,376 540 (10) 530 77 (6) 71 45,001 (24) 44,977
1 Includes reverse repurchase agreements and other similar secured
lending held at amortised cost of $13,996 million for customers and $1,738
million for Banks.
Industry and Retail Products analysis of loans and advances by key geography
This section provides an analysis of the Group's amortised cost loan
portfolio, net of provisions, by industry and geography.
The Manufacturing sector group is spread across a diverse range of industries,
including automobiles and components, capital goods, pharmaceuticals, biotech
and life sciences, technology hardware and equipment, chemicals, paper
products and packaging, with lending spread over 3,251 clients.
Page 43
Corporate & Investment Banking
Amortised Cost 2024 20231
Hong Kong $million China $million Singa-pore $million UK $million US $million Other $million Total $million Hong Kong $million China $million Singa-pore $million UK $million US $million Other $million Total $million
Industry:
Energy 2,200 59 1,552 1,744 1,750 5,551 12,856 3,118 42 1,162 1,341 3,638 1,130 10,431
Manufacturing 4,077 4,200 1,463 389 2,307 8,431 20,867 3,570 4,309 1,666 694 2,921 8,982 22,142
Financing, insurance and non-banking 3,674 3,486 1,893 4,005 9,900 12,696 35,654 3,700 3,570 1,708 1,724 6,627 14,864 32,193
Transport, telecom and utilities 5,131 662 3,106 1,084 936 7,685 18,604 4,634 429 2,499 1,030 630 7,470 16,692
Food and household products 1,038 428 1,414 962 685 4,202 8,729 541 519 911 816 664 4,611 8,062
Commercial Real estate 4,512 334 1,404 1,039 1,650 4,994 13,933 3,895 588 1,125 1,436 1,236 6,192 14,472
Mining and Quarrying 608 606 847 1,426 224 2,170 5,881 1,028 735 427 1,729 279 2,071 6,269
Consumer durables 2,780 293 466 84 537 2,046 6,206 3,030 244 180 177 483 2,008 6,122
Construction 318 156 372 96 247 1,268 2,457 176 163 319 137 389 1,569 2,753
Trading Companies & Distributors 95 103 106 31 40 277 652 119 75 121 31 20 321 687
Government 2,576 117 219 169 4 4,352 7,437 1,445 1 547 236 6 3,814 6,049
Other 1,419 563 786 377 233 1,650 5,028 1,676 265 646 257 264 1,425 4,533
Net Loans and advances to Customers 28,428 11,007 13,628 11,406 18,513 55,322 138,304 26,932 10,940 11,311 9,608 17,157 54,457 130,405
Net Loans and advances to Banks 16,727 2,443 7,721 4,103 2,766 9,833 43,593 17,457 1,996 8,994 3,868 2,544 10,119 44,978
Wealth & Retail Banking
Amortised Cost 2024 20231
Hong Kong $million Korea $million Singapore $million Other $million Total $million Hong Kong $million Korea $million Singapore $million Other $million Total $million
Retail Products:
Mortgages 31,506 13,703 13,756 17,731 76,696 32,935 17,157 15,292 17,559 82,943
Credit Cards 3,447 38 1,679 1,517 6,681 3,325 114 1,705 1,549 6,693
Personal Loans and other unsecured lending 1,057 2,796 301 5,972 10,126 950 3,230 220 6,676 11,076
Auto - - 122 38 160 - - 240 72 312
Secured wealth products 5,229 24 10,793 5,882 21,928 5,164 33 9,388 5,718 20,303
Other Retail 579 2,153 72 853 3,657 644 3,149 82 856 4,731
Net Loans and advances 41,818 18,714 26,723 31,993 119,248 43,018 23,683 26,927 32,430 126,058
to Customers
1 Amounts have been re-presented from a regional basis (Asia, Africa
and Middle East, and Europe and Americas) to key geographies covering the
majority of the reported balances.
High carbon sectors
Sectors are identified and grouped as per the International Standard
Industrial Classification (ISIC) system and exposure numbers have been updated
to include all in-scope ISIC codes used for target setting among the high
carbon sectors.
The maximum exposures shown in the table include loans and advances to
customers at amortised cost, Fair Value through profit or loss, and committed
facilities available as per IFRS 9 - Financial Instruments in $million.
Page 44
Maximum exposure
Amortised Cost 2024
Maximum on Balance Sheet Exposure (net of credit impairment) Collateral Net On Balance Sheet Exposure Undrawn Commitments (net of credit impairment) Financial Guarantees (net of credit impairment) Net Off Balance Sheet Exposure Total On & Off Balance Sheet Net Exposure
$million
$million
$million
$million
$million
$million
$million
Industry:
Automotive manufacturers 3,881 69 3,812 3,331 605 3,936 7,748
Aviation 1,829 960 869 842 928 1,770 2,639
Steel 1,526 316 1,210 816 325 1,141 2,351
Coal Mining 25 - 25 - - - 25
Aluminium 1,341 32 1,309 354 53 407 1,716
Cement 709 55 654 637 267 904 1,558
Shipping 7,038 5,037 2,001 2,176 397 2,573 4,574
Commercial Real Estate 7,635 3,400 4,235 2,758 684 3,442 7,677
Oil & Gas 7,421 988 6,433 7,928 7,079 15,007 21,440
Power 6,341 1,500 4,841 4,538 1,124 5,662 10,503
Total¹ 37,746 12,357 25,389 23,380 11,462 34,842 60,231
Total Corporate & Investment Banking² 196,823 32,152 164,671 118,106 81,132 199,238 363,909
Total Group³ 420,117 121,993 298,124 193,115 90,602 283,717 581,841
2023
Industry:
Automotive manufacturers 3,564 65 3,499 3,791 538 4,329 7,828
Aviation 1,330 974 356 944 615 1,559 1,915
Steel 1,596 193 1,403 601 358 959 2,362
Coal Mining 29 9 20 51 99 150 170
Aluminium 526 9 517 338 188 526 1,043
Cement 671 47 624 769 259 1,028 1,652
Shipping 5,964 3,557 2,407 2,261 291 2,552 4,959
Commercial Real Estate 7,498 3,383 4,115 1,587 112 1,699 5,814
Oil & Gas 6,278 894 5,384 7,845 6,944 14,789 20,173
Power 5,411 1,231 4,180 3,982 732 4,714 8,894
Total1 32,867 10,362 22,505 22,169 10,136 32,305 54,810
Total Corporate & Investment Banking² 188,903 32,744 156,159 104,437 63,183 167,620 323,779
Total Group³ 423,276 125,760 297,516 182,299 74,278 256,577 554,093
1 Maximum on balance sheet exposure includes FVTPL amount of High
Carbon sector is $749 million (31 December 2023: $125 million)
2 Includes on balance sheet FVTPL amount of $58,519 million (31
December 2023: $58,498 million) for Corporate & Investment Banking loans
to customers
3 Total Group includes net loans and advances to banks and net loans
and advances to customers held at amortised cost of $43,593 million (31
December 2023: $44,977 million) and $281,032 million (31 December 2023:
$286,975 million) respectively and loans to banks and loans and advances to
customers held at FVTPL of $36,967 million (31 December 2023: $32,813 million)
and $58, 525 million (31 December 2023: $58,511 million) respectively. Refer
to credit quality table
Maturity and ECL for high-carbon sectors
Sector 2024 2023
Loans and advances (Drawn funding) Maturity Buckets1 Expected Credit Loss Loans and advances (Drawn funding) Mat E
$million
$million
$million uri x
ty p
Buc e
ket c
s1 t
e
d
C
r
e
d
i
t
L
o
s
s
$
m
i
l
l
i
o
n
Less than More than 1 to 5 years More than 5 years Less than More than 1 to 5 years More than 5 years
1 year
$million
$million
1 year
$million
$million
$million
$million
Automotive Manufacturers 3,883 3,458 369 56 2 3,566 3,106 460 - 2
Aviation 1,833 231 404 1,198 4 1,339 149 145 1,045 9
Cement 724 356 368 - 15 719 512 189 18 48
Coal Mining 38 25 13 - 13 42 9 33 - 13
Steel 1,598 941 133 524 72 1,649 1,258 185 206 53
Aluminium 1,352 1,089 177 86 11 537 442 63 32 11
Oil & Gas 7,580 2,601 2,407 2,572 159 6,444 2,980 1,576 1,888 166
Power 6,401 1,700 1,404 3,297 60 5,516 1,933 1,533 2,050 105
Shipping 7,053 1,035 2,450 3,568 15 5,971 1,051 2,568 2,352 7
Commercial Real Estate 7,773 3,880 3,680 213 138 7,664 3,722 3,935 7 166
Total balance1 38,235 15,316 11,405 11,514 489 33,447 15,162 10,687 7,598 580
1 Gross of credit impairment
Page 45
Sectors of interest
Commercial Real Estate
2024
Maximum on Balance Sheet Exposure Collateral Net On Balance Sheet Exposure Undrawn Commitments (net of credit impairment) Financial Guarantees Net Off Balance Sheet Exposure Total On & Off Balance Sheet Net Exposure
(net of credit impairment)1
$million
$million
$million
(net of credit impairment)
$million
$million
$million
$million
Commercial Real Estate 14,037 5,947 8,090 4,932 670 5,602 13,692
2023
Commercial Real Estate 14,533 6,363 8,170 4,658 311 4,969 13,139
1 Includes net loans and advances of $ 13,933 million (31 December
2023: $14,471 million) as detailed in the table below
Analysis of credit quality of loans and advances of Commercial Real Estate
Amortised costs 2024 2023
Gross
Gross
$million
$million
Strong 7,222 7,326
Satisfactory 6,515 6,751
Higher risk 112 32
Credit impaired (stage 3) 1,485 1,712
Total Gross Balance 15,334 15,821
Strong (83) (20)
Satisfactory (44) (139)
Higher risk (9) -
Credit impaired (stage 3) (1,265) (1,191)
Total Credit Impairment (1,401) (1,350)
Total Net of Credit Impairment 13,933 14,471
Strong 1.1% 0.3%
Satisfactory 0.7% 2.1%
Higher risk 8.0% 0.0%
Credit impaired (stage 3) 85.1% 69.6%
Cover Ratio 9.1% 8.5%
An analysis of the net CRE loans and advances by key geography, is set out
below.
China commercial real estate
The table below represents the on and off-balance sheet items that are exposed
to China CRE by credit quality.
2024 2023
China Hong Kong Rest of Group1 Total China Hong Kong Rest of Group1 Total
$million
$million
$million
$million
$million
$million
$million
$million
Loans to customers 324 1,598 - 1,922 584 1,821 39 2,444
Off balance sheet 1 40 - 41 42 82 - 124
Total as at 31 December 325 1,638 - 1,963 626 1,903 39 2,568
Loans to customers - By Credit quality
Gross
Strong - 12 - 12 33 - - 33
Satisfactory 172 338 - 510 339 619 39 997
Higher risk 12 42 - 54 8 - - 8
Credit impaired (stage 3) 140 1,206 - 1,346 204 1,202 - 1,406
Total as at 31 December 324 1,598 - 1,922 584 1,821 39 2,444
Loans to customers - ECL
Strong - - - - - - - -
Satisfactory (2) (73) - (75) (3) (134) (12) (149)
Higher risk - (1) - (1) - - - -
Credit impaired (stage 3) (63) (1,111) - (1,174) (70) (941) - (1,011)
Total as at 31 December (65) (1,185) - (1,250) (73) (1,075) (12) (1,160)
1 Rest of Group mainly includes Singapore
Page 46
Debt securities and other eligible bills (audited)
This section provides further detail on gross debt securities and treasury
bills.
The credit quality descriptions in the table below align to those used for CIB
and Central and other items, as described below. Debt securities held that
have a short-term external rating are reported against the long-term rating of
the issuer. For securities that are unrated, the Group applies an internal
credit rating, as described under the 'Credit rating and measurement' section.
Total gross debt securities and other eligible bills decreased by $16.8
billion to $144 billion (31 December 2023: $160 billion) due to maturity of
exposures, primarily in stage 1.
Stage 1 gross balance decreased by $16.5 billion to $142 billion (31 December
2023: $158 billion), mainly due to the maturity of exposures in Hong Kong.
Stage 2 gross balance decreased by $0.2 billion to $1.6 billion (31 December
2023: $1.9 billion).
Stage 3 gross balance was broadly stable at $0.1 billion (31 December 2023:
$0.2 billion).
Amortised cost and FVOCI 2024 2023
Gross ECL Net2 Gross ECL Net2
$million
$million
$million
$million
$million
$million
Stage 1 141,862 (23) 141,839 158,314 (26) 158,288
- Strong 138,353 (19) 138,334 155,568 (23) 155,545
- Satisfactory 3,509 (4) 3,505 2,746 (3) 2,743
Stage 2 1,614 (4) 1,610 1,860 (34) 1,826
- Strong 562 - 562 917 (3) 914
- Satisfactory 31 - 31 50 (1) 49
- High Risk 1,021 (4) 1,017 893 (30) 863
Stage 3 103 (2) 101 164 (61) 103
Gross balance¹ 143,579 (29) 143,550 160,338 (121) 160,217
1 Stage 3 gross includes $59 million (31 December 2023: $80 million)
originated credit-impaired debt securities with Nil impairment (31 December
2023: $14 million)
2 FVOCI instruments are not presented net of ECL on the balance
sheet. While the presentation is on a net basis for the table, the total net
on-balance sheet amount is $143,562 million (31 December 2023: $160,263
million). Refer to the Analysis of financial instrument by stage table
IFRS 9 ECL methodology (audited)
Approach for determining ECL
Credit loss terminology
Component Definition
Probability of default (PD) The probability that a counterparty will default, over the next 12 months from
the reporting date (stage 1) or over the lifetime of the product (stage 2),
incorporating the impact of forward looking economic assumptions that have an
effect on Credit Risk, such as unemployment rates and GDP forecasts. The PD
estimates will fluctuate in line with the economic cycle. The lifetime (or
term structure) PDs are based on statistical models, calibrated using
historical data and adjusted to incorporate forward-looking economic
assumptions.
Loss given default (LGD) The loss that is expected to arise on default, incorporating the impact of
forward-looking economic assumptions where relevant, which represents the
difference between the contractual cashflows due and those that the bank
expects to receive. The Group estimates LGD based on the history of recovery
rates and considers the recovery of any collateral that is integral to the
financial asset, taking into account forward-looking economic assumptions
where relevant.
Exposure at default (EAD) The expected balance sheet exposure at the time of default, taking into
account expected changes over the lifetime of the exposure. This incorporates
the impact of drawdowns of facilities with limits, repayments of principal and
interest, and amortisation.
To determine the ECL, these components are multiplied together: PD for the
reference period (up to 12 months or lifetime) x LGD x EAD and discounted to
the balance sheet date using the effective interest rate as the discount rate.
IFRS 9 ECL models have been developed for the CIB businesses on a global
basis, in line with their respective portfolios. However, for some of the key
countries, country-specific models have also been developed.
The calibration of forward-looking information is assessed at a country or
region level to take into account local macroeconomic conditions.
Retail ECL models are country and product specific, given the local nature of
the WRB business.
Page 47
For less material retail portfolios, the Group has adopted less sophisticated
approaches based on historical roll rates or loss rates:
• For medium-sized retail portfolios, a roll rate model is applied, which
uses a matrix that gives the average loan migration rate between delinquency
states from period to period. A matrix multiplication is then performed to
generate the final PDs by delinquency bucket over different time horizons.
• For smaller retail portfolios, a loss rate approach is applied. These use
an adjusted gross charge-off rate, developed using monthly write-off and
recoveries over the preceding 12 months and total outstanding balances.
• While the loss rate approaches do not incorporate forward looking
information, to the extent that there are significant changes in the
macroeconomic forecasts an assessment will be completed on whether an
adjustment to the modelled output is required.
For a limited number of exposures, proxy parameters or approaches are used
where the data is not available to calculate the origination PDs for the
purpose of applying the SICR criteria; or for some retail portfolios where a
full history of LGD data is not available, estimates based on the loss
experience from similar portfolios are used. The use of proxies is monitored
and will reduce over time.
The following processes are in place to assess the ongoing performance of the
models:
• Quarterly model monitoring that uses recent data to compare the
differences between model predictions and actual outcomes against approved
thresholds.
• Annual independent validation is performed by Group Model Validation
(GMV); Depth of GMV's validation varies depending on the model materiality.
Material models would go through a full annual re-validation process, while a
less intensive validation process will be performed on non-material models.
Application of lifetime ECL
ECL is estimated based on the period over which the Group is exposed to Credit
Risk. For the majority of exposures this equates to the maximum contractual
period. For retail credit cards and corporate overdraft facilities, however,
the Group does not typically enforce the contractual period, which can be as
short as one day. As a result, the period over which the Group is exposed to
Credit Risk for these instruments reflects their behavioural life, which
incorporates expectations of customer behaviour and the extent to which Credit
Risk management actions curtail the period of that exposure. The average
behavioural life for retail credit cards is between 3 and 6 years across our
footprint markets.
The behavioural life for corporate overdraft facilities was re-estimated from
24 months to 36 months. The impact of this change was not material.
Page 48
Composition of credit impairment provisions (audited)
The table below summarises the key components of the Group's credit impairment
provision balances at 31 December 2024 and 31 December 2023.
2024 2023
Corporate & Investment Banking Wealth & Retail Banking Ventures Central & other items Total Corporate & Investment Banking $ million Wealth & Retail Banking Ventures Central & other items Total
$ million
$ million
$ million
$ million4
$ million
$ million
$ million
$ million4
$ million
Modelled ECL provisions (base forecast) 337 613 61 37 1,048 372 553 48 98 1,071
Impact of multiple economic scenarios1 24 19 - - 43 20 18 - 6 44
Modelled ECL provisions before management judgements 361 632 61 37 1,091 392 571 48 104 1,115
Includes: Model performance post model adjustments - 14 - - 14 (3) (28) - - (31)
Judgemental post model adjustments2 - (23) - - (23) - 2 - - 2
Management overlays3
- China commercial real estate 70 - - - 70 141 - - - 141
- Other 109 27 7 - 143 - 5 - 17 22
Total modelled provisions 540 636 68 37 1,281 533 578 48 121 1,280
Of which:
Stage 1 133 392 30 34 589 151 325 15 68 559
Stage 2 362 151 27 1 541 318 140 21 49 528
Stage 3 45 93 11 2 151 64 113 12 4 193
Stage 3 non-modelled provisions 3,267 665 - 54 3,986 3,587 646 - 88 4,321
Total credit impairment provisions 3,807 1,301 68 91 5,267 4,120 1,224 48 209 5,601
1 Includes upwards judgemental post-model adjustment of $28 million
(31 December 2023: nil)
2 Excludes $28 million upwards judgemental post-model adjustment
which is included in "Impact of multiple economic scenarios"
3 $32 million (31 December 2023: $22 million) is in stage 1, $181
million (31 December 2023: $141 million) in stage 2 and $nil million (31
December 2023: nil) in stage 3
4 Includes ECL on cash and balances at central banks, accrued income,
assets held for sale and other assets
Model performance post model adjustments (PMAs)
As part of model monitoring and independent validation processes, where a
model's performance breaches the approved monitoring thresholds or validation
standards, an assessment is performed to determine whether a model performance
PMA is required to temporarily remediate the model issue. The process for the
determination of PMAs is set out in the 'Governance of PMAs and application of
expert credit judgement in respect of ECL' section.
As at 31 December 2024, model performance PMAs have been applied for five
models out of the total of 110 models. In aggregate, these PMAs increase the
Group's impairment provisions by $14 million (1 per cent of modelled
provisions) compared with a $31 million decrease at 31 December 2023. The
reduction was primarily due to the implementation of new models, thereby
removing the need for PMAs on the old models.
In addition to these model performance PMAs, separate judgemental post model
and management adjustments have also been applied as set out below.
2024 2023
$ million
$ million
Model performance PMAs
Corporate & Investment Banking - (3)
Wealth & Retail Banking 14 (28)
Total model performance PMAs 14 (31)
Page 49
Key assumptions and judgements in determining ECL
Incorporation of forward-looking information
The evolving economic environment is a key determinant of the ability of a
bank's clients to meet their obligations as they fall due. It is a fundamental
principle of IFRS 9 that the provisions banks hold against potential future
Credit Risk losses should depend, not just on the health of the economy today,
but should also take into account potential changes to the economic
environment. For example, if a bank were to anticipate a sharp slowdown in the
world economy over the coming year, it should hold more provisions today to
absorb the credit losses likely to occur in the near future.
To capture the effect of changes to the economic environment, the PDs and LGDs
used to calculate ECL incorporate forward-looking information in the form of
forecasts of the values of economic variables and asset prices that are likely
to have an effect on the repayment ability of the Group's clients.
The 'base forecast' of the economic variables and asset prices is based on
management's view of the five-year outlook, supported by projections from the
Group's in-house research team and outputs from a third-party model that
project specific economic variables and asset prices. The research team takes
consensus views into consideration, and senior management review projections
for some core country variables against consensus when forming their view of
the outlook. For the period beyond five years, management utilises the
in-house research view and third-party model outputs, which allow for a
reversion to long-term growth rates or norms. All projections are updated on a
quarterly basis.
Forecast of key macroeconomic variables underlying the ECL calculation and the
impact on non-linearity
In the Base Forecast - management's view of the most likely outcome - the pace
of growth of the world economy is expected to remain broadly unchanged from
2024 at around 3 per cent in 2025. This compares to the average of 3.7 per
cent growth for the 10 years prior to COVID-19 (between 2010 and 2019).
Support from easing financial conditions and expansionary fiscal policy may be
partly offset by protectionist trade policies and still-high interest rates in
the US and elsewhere. The US economy is set to moderate in 2025, after a
resilient 2024 performance despite elevated interest rates. The euro area
continues to struggle with major European economies including Germany and
France who risk slipping into recession. Asia is relatively healthy, although
growth at the regional level is set to moderate slightly in 2025 as both China
and India slow down. The Middle-East is expected also to remain a bright spot
for global growth, with the region's non-oil growth exceeding overall global
growth.
The uncertainty around the economic outlook remains elevated. In particular,
the change in US Presidency is expected to lead to significant changes in US
policies, including new and higher tariffs on key US trading partners. On the
geopolitical front, tensions remain elevated over the conflict in Ukraine and
the situation in the Middle-East.
While the quarterly Base Forecasts inform the Group's strategic plan, one key
requirement of IFRS 9 is that the assessment of provisions should consider
multiple future economic environments. For example, the global economy may
grow more quickly or more slowly than the Base Forecast, and these variations
would have different implications for the provisions that the Group should
hold today. As the negative impact of an economic downturn on credit losses
tends to be greater than the positive impact of an economic upturn, if the
Group sets provisions only on the ECL under the Base Forecast it might
maintain a level of provisions that does not appropriately capture the range
of potential outcomes. To address the inherent uncertainty in economic
forecast, and the property of skewness (or non-linearity), IFRS 9 requires
reported ECL to be a probability-weighted ECL, calculated over a range of
possible outcomes.
To assess the range of possible outcomes the Group simulates a set of 50
scenarios around the Base Forecast, calculates the ECL under each of them and
assigns an equal weight of 2 per cent to each scenario outcome. These
scenarios are generated by a Monte Carlo simulation, which addresses the
challenges of crafting many realistic alternative scenarios in the many
countries in which the Group operates by means of a model, which produces
these alternative scenarios while considering the degree of historical
uncertainty (or volatility) observed from Q1 1990 to Q3 2023 around economic
outcomes, the trends in each macroeconomic variable modelled and the
correlation in the unexplained movements around these trends. This naturally
means that each of the 50 scenarios do not have a specific narrative, although
collectively they explore a range of hypothetical alternative outcomes for the
global economy, including scenarios that turn out better than expected and
scenarios that amplify anticipated stresses.
Page 50
The GDP graphs below illustrate the shape of the Base Forecast for key
footprint markets in relation to prior periods' actuals. The long-term growth
rates are based on the pace of economic expansion expected for 2030. The
tables below provide a summary of the Group's Base Forecast for these markets.
The peak/trough amounts show the highest and lowest points within the Base
Forecast.
China's GDP growth is expected to ease slightly to 4.5 per cent in 2025 from
4.8 per cent in 2024. This reflects persistent weakness in the property
sector, though it is expected to moderate external headwinds and low consumer
confidence. Growth in India is also expected to ease with GDP expanding by 6.5
per cent from 6.9 per cent in 2024 as the impact from recent one-off factors
such as construction activity and electricity demand (amid below normal rains)
fade. GDP growth for Singapore is expected to slow to 2.4 per cent in 2025
from 3.5 per cent last year. An uncertain global trade outlook will weigh on
sentiment in trade-reliant economies. Recent economic activity may have also
been partly driven by front-loading of orders of electronics ahead of
potentially negative trade policies in 2025. Similarly, the uncertain external
environment and likely trade protectionist measures will limit the upside to
growth for both South Korea and Hong Kong which are expected to grow by 2.0
per cent and 2.9 per cent respectively in 2025.
2024 year-end forecasts
China Hong
Kong
GDP growth Unemployment 3-month House prices5 GDP growth Unemployment 3-month House prices
(YoY%)
%
interest rates
(YoY %)
(YoY %)
%
interest rates
(YoY %)
%
%
Base forecast1
2024 4.8 3.6 2.0 (3.7) 2.6 3.0 4.4 (11.1)
2025 4.5 3.5 1.7 (5.3) 2.9 3.1 2.5 1.8
2026 4.3 3.3 1.6 (3.2) 2.5 3.2 2.2 6.5
2027 4.1 3.2 1.6 (0.9) 2.1 3.2 2.4 4.8
2028 3.9 3.2 1.8 0.9 1.9 3.2 2.4 3.4
5-year average2 4.1 3.3 1.7 (1.3) 2.2 3.1 2.4 3.8
Quarterly peak 5.3 3.5 1.9 2.3 3.5 3.2 2.9 6.8
Quarterly trough 3.2 3.1 1.6 (5.6) 1.5 3.0 2.1 (2.6)
Monte Carlo
Low3 (1.0) 2.8 0.6 (10.1) (1.8) 1.8 0.3 (13.1)
High4 9.3 3.7 3.0 7.8 5.8 5.1 5.3 22.2
2024 year-end forecasts
Singapore Kore
a
GDP growth Unemployment6 3-month House prices GDP growth Unemployment 3-month House prices
(YoY%)
%
interest rates
(YoY%)
(YoY%)
%
interest rates
(YoY %)
%
%
Base forecast1
2024 3.5 2.9 3.6 4.3 2.5 2.8 3.6 (0.4)
2025 2.4 2.7 1.9 0.4 2.0 2.8 3.0 4.3
2026 2.1 2.7 1.9 2.2 2.2 2.8 2.9 3.4
2027 2.2 2.7 2.0 3.0 2.1 2.8 2.9 2.4
2028 2.4 2.7 2.0 3.1 1.9 2.8 2.9 2.1
5-year average2 2.3 2.7 2.0 2.4 2.0 2.8 2.9 2.8
Quarterly peak 3.4 2.8 2.4 3.2 2.2 2.9 3.2 4.8
Quarterly trough 0.6 2.7 1.6 (0.4) 1.5 2.8 2.9 1.9
Monte Carlo
Low3 (2.7) 2.0 0.3 (10.5) (1.3) 2.2 0.8 (4.3)
High4 7.0 3.6 3.9 17.5 5.2 3.5 5.7 9.8
Page 51
2024 year-end forecasts
Indi B
a r
e
n
t
C
r
u
d
e
$
p
b
GDP growth Unemployment7 3-month House prices
(YoY%)
%
interest rates
(YoY%)
%
Base forecast1
2024 6.9 NA 6.4 6.3 78.3
2025 6.5 NA 6.1 6.5 77.1
2026 6.5 NA 6.0 6.4 76.4
2027 6.6 NA 6.0 6.4 77.3
2028 6.6 NA 6.0 6.3 75.3
5-year average2 6.6 NA 6.0 6.4 76.2
Quarterly peak 7.1 NA 6.2 7.3 77.8
Quarterly trough 5.9 NA 6.0 6.0 74.8
Monte Carlo
Low3 3.2 NA 1.9 (0.1) 44.5
High4 10.0 NA 10.3 12.6 107.8
2023 year-end forecasts
China Hong
Kong
GDP growth Unemployment 3-month House prices5 GDP growth Unemployment 3-month House prices
(YoY%)
%
interest rates
(YoY%)
(YoY%)
%
interest rates
(YoY%)
%
%
5-year average2 4.3 4.0 2.1 4.6 2.5 3.4 3.4 2.8
Quarterly peak 5.7 4.1 2.5 7.2 3.8 3.4 5.0 4.6
Quarterly trough 3.8 3.8 1.7 1.5 1.5 3.4 2.3 (1.1)
Monte Carlo
Low3 0.6 3.3 0.8 (1.5) (3.8) 1.4 0.3 (19.3)
High4 7.7 4.4 3.8 12.0 8.2 6.4 8.3 25.5
2023 year-end forecasts
Singapore Kore
a
GDP growth Unemployment6 3-month House prices GDP growth Unemployment 3-month House prices
(YoY%)
%
interest rates
(YoY%)
(YoY%)
%
interest rates
(YoY%)
%
%
5-year average2 2.9 2.8 2.9 2.2 2.3 3.1 3.1 3.3
Quarterly peak 3.8 2.9 4.1 3.9 2.6 3.5 3.7 5.3
Quarterly trough 1.9 2.8 2.3 (0.7) 2.0 3.0 3.1 (0.3)
Monte Carlo
Low3 (2.4) 1.7 0.6 (16.2) (2.3) 1.4 0.7 (6.1)
High4 8.5 3.8 5.9 19.2 7.0 5.8 6.3 12.5
2023 year-end forecasts
Indi B
a r
e
n
t
c
r
u
d
e
$
p
b
GDP growth Unemployment 3-month House prices
(YoY%)
%
interest rates
(YoY%)
%
5-year average2 6.2 NA 6.2 6.1 88.2
Quarterly peak 9.1 NA 6.3 6.5 93.8
Quarterly trough 4.4 NA 5.8 4.7 82.8
Monte Carlo
Low3 2.1 NA 2.7 (0.5) 46.0
High4 10.5 NA 9.9 13.8 137.8
1 Data presented are those used in the calculation of ECL and presented as
average growth for the year. These may differ slightly to forecasts presented
elsewhere in the Annual Report as they are finalised before the period end
2 5 year averages covering 20 quarters from Q1 2025 to Q4 2029 for the
2024 annual report. They cover Q1 2024 to Q4 2028 for the numbers reported for
the 2023 annual report
3 Represents the 10th percentile in the range of economic scenarios used
to determine non-linearity
4 Represents the 90th percentile in the range of economic scenarios used
to determine non-linearity
5 A judgemental management adjustment is held in respect of the China
commercial real estate sector, as discussed below
6 Singapore unemployment rate covers the resident unemployment rate, which
refers to citizens and permanent residents
7 India unemployment is not available due to insufficient data
Page 52
Impact of multiple economic scenarios
The final probability weighted ECL reported by the Group is a simple average
of the ECL for each of the 50 scenarios simulated using a Monte Carlo model.
The Monte Carlo approach has the advantage that it generates many alternative
scenarios that cover our global footprint. The range of scenarios is
restricted through the use of ceilings and floors applied to the underlying
macroeconomic variables. The current set of ceilings and floors generated a
relatively narrow range of forecasts at 31 December 2024 and will be
redeveloped in the first quarter of 2025.
Prior to this, a $28 million non-linearity PMA has been applied, $13 million
for CIB and $15 million for WRB. The total amount of non-linearity has been
estimated by assigning probability weights of 68 per cent, 22 per cent and 10
per cent respectively to the Base Forecast, 'Higher for Longer Commodities and
Rates', and 'Global Trade and Geopolitical Tensions' scenarios which are
presented below and comparing this to the unweighted Base Forecast ECL. The
non-linearity PMA represents the difference between the probability weighted
ECL calculated using the three scenarios and the probability weighted ECL
calculated by the Monte Carlo model.
The total amount of non-linearity including the PMA is $43 million (31
December 2023: $44 million). The CIB portfolio accounted for $24 million (31
December 2023: $20 million) of the calculated non-linearity, with the
remaining $19 million (31 December 2023: $18 million) attributable to WRB
portfolios.
The impact of multiple economic scenarios on total modelled ECL is set out in
the table below, together with the management overlay and other judgemental
adjustments.
Base forecast Multiple economic scenarios1 Management overlays Total
$million
$million
and other judgemental adjustments
modelled ECL2
$million
$million
Total modelled expected credit loss at 31 December 2024 1,048 43 190 1,281
Total modelled expected credit loss at 31 December 2023 1,071 44 165 1,280
1 Includes an upwards judgemental PMA of $28 million (31 December
2023: nil)
2 Total modelled ECL comprises stage 1 and stage 2 balances of $1,130
million (31 December 2023: $1,105 million) and $151 million (31 December 2023:
$193 million) of modelled ECL on stage 3 loans
The average ECL under multiple scenarios is 4 per cent (31 December 2023: 4
per cent) higher than the ECL calculated using only the most likely scenario
(the Base Forecast). Portfolios that are more sensitive to non-linearity
include those with greater leverage and/or a longer tenor, such as Project and
Shipping Finance portfolios. Other portfolios display minimal non-linearity
owing to limited responsiveness to macroeconomic impacts for structural
reasons, such as significant collateralisation as with the WRB mortgage
portfolios.
Page 53
Judgemental adjustments
As at 31 December 2024, the Group held judgemental adjustments for ECL as set
out in the table below. All of the judgemental adjustments have been
determined after taking account of the model performance PMAs reported on
below. They are reassessed quarterly and are reviewed and approved by the IFRS
9 Impairment Committee (IIC) and will be released when no longer relevant.
31 December 2024 Corporate & Investment Banking Wealth & Retail Banking Ventures Central & other Total
$million
$million
$million
$million
Mortgages Credit Other Total
$million
Cards
$million
$million
$million
Judgemental post model adjustments 13 - 9 (17) (8) - - 5
Judgemental management overlays:
- China CRE 70 - - - - - - 70
- Other 109 - 5 22 27 7 - 143
Total judgemental adjustments 192 - 14 5 19 7 - 218
Judgemental adjustments by stage:
Stage 1 27 - 10 (11) (1) 4 - 30
Stage 2 165 - 5 25 30 3 - 198
Stage 3 - - (1) (9) (10) - - (10)
31 December 2023
Judgemental post model adjustments - - 1 1 2 - - 2
Judgemental management overlays:
- China CRE 141 - - - - - - 141
- Other - 1 2 2 5 - 17 22
Total judgemental adjustments 141 1 3 3 7 - 17 165
Judgemental adjustments by stage:
Stage 1 17 1 3 6 10 - - 27
Stage 2 124 - - (3) (3) - 17 138
Stage 3 - - - - - - - -
Judgemental PMAs
As at 31 December 2024, judgemental PMAs to increase ECL by a net $5 million
(31 December 2023: $2 million increase) have been applied. $28 million (31
December 2023: nil) of the increase in ECL related to multiple economic
scenarios, $13 million in CIB and $15 million in WRB (see 'Impact of multiple
economic scenarios' section). This was partly offset by a reduction of ECL of
$23 million for certain WRB models, primarily to adjust for temporary factors
impacting modelled outputs. These will be released when these factors
normalise.
Judgemental management overlays
China CRE
The real estate market in China has been in a downturn since late 2021, as
evidenced by continued decline in sales, and investments in the sector.
Liquidity issues experienced by Chinese property developers continued into
2023, with more developers defaulting on their obligations both offshore and
onshore. During 2023, authorities on the mainland introduced a slew of
policies to help revive the sector and restore buying sentiments. Relaxed
monetary policy and fiscal stimulus packages continued in 2024, which had
assisted in arresting the drop in new home sales and stabilising new home
sales in late 2024 to an extent in some cities, but home prices remain muted
overall. Continued policy relaxations, including those related to house
purchase restrictions, completion support for eligible projects from onshore
financial institutions, relaxation in mortgage rates, and further support for
affordable housing, are key for reversing the continued decline in sales and
investments and ensuring continued stabilisation in 2025.
The Group's loans and advances to China CRE clients was $1.9 billion at 31
December 2024 (31 December 2023: $2.4 billion). Heightened risk management
continues to be carried out, with a focus on managing upcoming maturities
through refinancing and/or repayment. No new financing transactions were
entered into, and total repayments amounted to around $500 million during
2024. Clients with exposure maturing within the next 12 months have been
placed on purely precautionary or non-purely precautionary early alert, where
appropriate, for closer monitoring. Given the evolving nature of the risks in
the China CRE sector, a management overlay of $70 million (31 December 2023:
$141 million) has been taken by estimating the impact of further deterioration
to exposures in this sector. The decrease from 31 December 2023 was primarily
driven by repayments and utilisation due to movement to stage 3.
Page 54
Other
In CIB, additional overlays of $109 million (31 December 2023: nil) have been
taken, $58 million of which is in Hong Kong, with the remainder relating to
Bangladesh and an immaterial amount for climate risks. The overlay in Hong
Kong reflects subdued economic activity and increasing commercial property
vacancy rates, which contributes to an uncertain outlook that are not yet
fully reflected in the credit grades and modelled ECL. The risk of further
impairment remains as a result of subdued economic activity in the property
sector and the related liquidity constraints faced by counterparties as a
result. The overlay in Bangladesh reflects the political situation that has
contributed to an increasing level of uncertainty in the macroeconomic
outlook. The overlays for Hong Kong and Bangladesh have been determined by
estimating the impact of a deterioration to certain exposures in these
countries.
In WRB, overlays of $27 million includes $21 million in Korea to cover the
risks relating to the failure of two e-commerce payment platforms in 2024,
increased bankruptcy trends in certain markets and an immaterial adjustment
for climate risks.
Further details on the adjustment for Climate Risk are set out in Note 1 of
the 'Notes to the financial statements' section.
Overlays held at 31 December 2023 of $5 million in WRB to capture
macroeconomic environment challenges caused by sovereign defaults or
heightened sovereign risk, and $17 million applied in Central and other items
due to a temporary market dislocation in the Africa and Middle East region
which were fully released during 2024.
Stage 3 assets
Credit-impaired assets managed by Stressed Asset Group (SAG) incorporate
forward-looking economic assumptions in respect of the recovery outcomes
identified and are assigned individual probability weightings per IFRS 9.
These assumptions are not based on a Monte Carlo simulation but are informed
by the Base Forecast.
Sensitivity of ECL calculation to macroeconomic variables
The ECL calculation relies on multiple variables and is inherently non-linear
and portfolio-dependent, which implies that no single analysis can fully
demonstrate the sensitivity of the ECL to changes in the macroeconomic
variables. The Group has conducted a series of analyses with the aim of
identifying the macroeconomic variables which might have the greatest impact
on the overall ECL. These encompassed single variable and multi-variable
exercises, using simple up/down variation and extracts from actual calculation
data, as well as bespoke scenario design assessments.
The primary conclusion of these exercises is that no individual macroeconomic
variable is materially influential. The Group believes this is plausible as
the number of variables used in the ECL calculation is large. This does not
mean that macroeconomic variables are uninfluential; rather, that the Group
believes that consideration of macroeconomics should involve whole scenarios,
as this aligns with the multi-variable nature of the calculation.
The Group faces downside risks in the operating environment related to the
uncertainties surrounding the macroeconomic outlook. To explore this, a
sensitivity analysis of ECL was undertaken to explore the effect of slower
economic recoveries across the Group's footprint markets. Two downside
scenarios were considered in particular to explore the current uncertainties
over commodity prices. The 'Global Trade and Geopolitical Tensions' scenario
is characterised by an escalating trade war between the US and China and other
economies. The 'Higher for Longer Commodities and Rates' scenario explores the
impact from stickier than expected inflation due to persistent shipping
disruptions and rise in energy prices amid fears of an escalation of the
Middle East conflict.
Baseline Global Trade and Higher for longer:
Geopolitical Tensions
Commodities and Rates
Five year average Peak/Trough Five year average Peak/Trough Five year average Peak/Trough
China GDP 4.1 5.3/3.2 0.8 3.8/(2.6) 3.5 4.3/1.8
China unemployment 3.3 3.5/3.1 4.9 5.5/3.8 4.3 5.2/3.1
China property prices (1.3) 2.3/(5.6) (5.1) 11.1 /(47.6) (1.4) 8.6/(24.5)
Hong Kong GDP 2.2 3.5/1.5 (1.0) 1.6/(8.0) 1.4 2.2/(0.1)
Hong Kong unemployment 3.1 3.2/3.0 6.2 7.2/3.7 4.7 6.3/3.2
Hong Kong property prices 3.8 6.8/(2.6) (0.1) 30.9/(34.8) 2.8 8.9/(3.5)
US GDP 2.0 2.6/1.1 0.3 2.2/(3.2) 1.1 2.5/(2.1)
Singapore GDP 2.3 3.4/0.6 0.0 3.1/(5.9) 1.6 2.8/(2.3)
India GDP 6.6 7.1/5.9 4.7 6.7/0.8 6.1 7.4/4.3
Crude oil 76.2 77.8/74.8 59.1 86. 2/46.2 84.9 113.4/74.8
Period covered from Q1 2025 to Q4 2029
Page 55
Base (GDP, YoY%) Global Trade and Geopolitical Tensions Difference from Base
2025 2026 2027 2028 2029 2025 2026 2027 2028 2029 2025 2026 2027 2028 2029
China 4.5 4.3 4.1 3.9 3.8 2.1 (2.0) (1.0) 1.4 3.5 (2.4) (6.3) (5.1) (2.6) (0.3)
Hong Kong 2.9 2.5 2.1 1.9 1.6 (6.3) (1.4) 0.1 0.9 1.4 (9.1) (3.9) (2.0) (1.0) (0.2)
US 1.4 2.2 2.4 2.1 2.0 (0.9) (2.2) 0.8 1.8 2.2 (2.3) (4.4) (1.6) (0.3) 0.1
Singapore 2.4 2.1 2.2 2.4 2.5 (2.9) (3.5) 1.0 2.8 2.6 (5.3) (5.6) (1.2) 0.4 0.1
India 6.8 6.3 6.7 6.5 6.5 4.6 1.8 5.3 5.8 6.1 (2.2) (4.4) (1.4) (0.8) (0.4)
Each year is from Q1 to Q4. For example 2025 is from Q1 2025 to Q4 2025.
Base (GDP, YoY%) Higher for longer: Commodities and Rates Difference from Base
2025 2026 2027 2028 2029 2025 2026 2027 2028 2029 2025 2026 2027 2028 2029
China 4.5 4.3 4.1 3.9 3.8 2.5 3.3 4.1 3.9 3.8 (2.0) (1.0) 0.0 0.0 (0.0)
Hong Kong 2.9 2.5 2.1 1.9 1.6 0.3 1.1 2.1 1.9 1.6 (2.6) (1.4) (0.0) (0.0) 0.0
US 1.4 2.2 2.4 2.1 2.0 (1.4) 0.5 2.4 2.1 2.0 (2.8) (1.7) (0.0) 0.0 0.0
Singapore 2.4 2.1 2.2 2.4 2.5 (0.2) 0.9 2.2 2.4 2.5 (2.6) (1.2) (0.0) (0.0) 0.0
India 6.8 6.3 6.7 6.5 6.5 4.9 5.8 6.7 6.5 6.5 (1.9) (0.5) (0.0) 0.0 0.0
Each year is from Q1 to Q4. For example 2025 is from Q1 2025 to Q4 2025
The total modelled stage 1 and 2 ECL provisions (including both on and
off-balance sheet instruments) would be approximately $84 million higher under
the 'Higher for Longer Commodities and Rates' scenario, and $258 million
higher under the 'Global Trade and Geopolitical Tensions' scenario than the
baseline ECL provisions (which excluded the impact of multiple economic
scenarios and management overlays which may already capture some of the risks
in these scenarios). Stage 2 exposures as a proportion of stage 1 and 2
exposures would increase from 2.7 per cent in the base case to 2.8 per cent
and 3.5 per cent respectively under the 'Higher for Longer Commodities and
Rates', and 'Global Trade and Geopolitical Tensions' scenarios. This includes
the impact of exposures transferring to stage 2 from stage 1 but does not
consider an increase in stage 3 defaults.
Under both scenarios, the majority of the increase in ECL in CIB came from the
main corporate CRE and Project Finance portfolios. For the main corporate
portfolios, ECL would increase by $18 million and $47 million for 'Higher for
Longer Commodities and Rates', and 'Global Trade and Geopolitical Tensions'
scenarios respectively and the proportion of stage 2 exposures would increase
from 4.1 per cent in the base case to 4.3 per cent and 6.1 per cent
respectively.
For the WRB portfolios, most of the increase in ECL came from the unsecured
retail portfolios, particularly Korea Personal Loans and the credit card
portfolios in Hong Kong and Singapore, although Private Banking was also
impacted in the 'Global Trade and Geopolitical Tensions' scenario. Under the
'Higher for Longer Commodities and Rates', and 'Global Trade and Geopolitical
Tensions' scenarios, Credit card ECL would increase by $18 million and $32
million respectively, largely in the Singapore and Hong Kong portfolios and
the proportion of stage 2 credit card exposures would increase from 1.8 per
cent in the base case to 2.3 per cent and 2.9 per cent for each scenario
respectively, with the Singapore portfolio most impacted. Mortgages ECL would
increase by $2 million and $19 million for each scenario respectively, with
portfolios in Korea impacted in the 'Higher for Longer Commodities and Rates'
scenario, and Malaysia in the 'Global Trade and Geopolitical Tensions'
scenario, and the proportion of stage 2 mortgages would increase from 1.0 per
cent in the base case to 1.4 per cent and 1.3 per cent respectively.
There was no material change in modelled stage 3 provisions as these primarily
relate to unsecured WRB exposures for which the LGD is not sensitive to
changes in the macroeconomic forecasts. There is also no material change for
non-modelled stage 3 exposures as these are more sensitive to client specific
factors than to alternative macroeconomic scenarios.
The actual outcome of any scenario may be materially different due to, among
other factors, the effect of management actions to mitigate potential
increases in risk and changes in the underlying portfolio.
Page 56
Gross as ECL as ECL Base case Higher for Longer Commodities and Rates Global Trade
reported1
reported2
$million
$million
and Geopolitical Tensions
$million
$million
$million
Stage 1 modelled
Corporate & Investment Banking 367,106 106 95 113 125
Wealth & Retail Banking 179,580 397 387 406 428
Ventures 1,391 27 27 27 27
Central & Other items 172,602 22 22 23 25
Total stage 1 excluding management judgements 720,679 552 531 569 605
Stage 2 modelled
Corporate & Investment Banking 14,869 198 185 206 315
Wealth & Retail Banking 2,030 116 107 132 161
Ventures 48 24 24 24 24
Central & Other items 1,660 1 1 1 1
Total stage 2 excluding management judgements 18,607 339 317 363 501
Total Stage 1 & 2 modelled
Corporate & Investment Banking 381,975 304 280 319 440
Wealth & Retail Banking 181,610 513 494 538 589
Ventures 1,439 51 51 51 51
Central & Other items 174,262 23 23 24 26
Total excluding management judgements 739,286 891 848 932 1,106
Stage 3 exposures excluding other assets 6,999 4,095
Other financial assets3 101,755 63
ECL from management judgements 218
Total financial assets reported at 31 December 2024 848,040 5,267
1 Gross balances includes both on- and off- balance sheet
instruments; allocation between stage 1 and 2 will differ by scenario
2 Includes ECL for both on- and off-balance sheet instruments
3 Includes cash and balances at central banks, Accrued income, Other
financial assets; and Assets held for sale
Significant increase in Credit Risk (SICR)
Quantitative criteria
SICR is assessed by comparing the risk of default at the reporting date to the
risk of default at origination. Whether a change in the risk of default is
significant or not is assessed using quantitative and qualitative criteria.
These criteria have been separately defined for each business and where
meaningful are consistently applied across business lines.
Assets are considered to have experienced SICR if they have breached both
relative and absolute thresholds for the change in the average annualised IFRS
9 lifetime probability of default (IFRS 9 PD) over the residual term of the
exposure.
The absolute measure of increase in credit risk is used to capture instances
where the IFRS 9 PDs on exposures are relatively low at initial recognition as
these may increase by several multiples without representing a significant
increase in credit risk. Where IFRS 9 PDs are relatively high at initial
recognition, a relative measure is more appropriate in assessing whether there
is a significant increase in credit risk, as the IFRS 9 PDs increase more
quickly.
The SICR thresholds have been calibrated based on the following principles:
• Stability - The thresholds are set to achieve a stable stage 2 population
at a portfolio level, trying to minimise the number of accounts moving back
and forth between stage 1 and stage 2 in a short period of time
• Accuracy - The thresholds are set such that there is a materially higher
propensity for stage 2 exposures to eventually default than is the case for
stage 1 exposures
• Dependency from backstops - The thresholds are stringent enough such that
a high proportion of accounts transfer to stage 2 due to movements in
forward-looking IFRS 9 PDs rather than relying on backward-looking backstops
such as arrears
• Relationship with business and product risk profiles - the thresholds
reflect the relative risk differences between different products, and are
aligned to business processes
Page 57
For CIB clients the quantitative thresholds are a relative 100 per cent
increase in IFRS 9 PD and an absolute change in IFRS 9 PD of between 50 and
100 bps for investment grade and sub-investment grade assets. For debt
securities originated before 1 January 2018, the bank is utilising the low
Credit Risk simplified approach, where debt securities with an internal credit
rating mapped to an investment grade equivalent are allocated to stage 1 and
all other debt securities are allocated to stage 2.
For WRB (excluding Private Banking) clients, portfolio specific quantitative
thresholds are applied to Credit Card portfolios in Hong Kong, Singapore,
Malaysia and UAE and Personal Loan portfolios in Taiwan (with a revision to
the thresholds applied in 2024). During 2024 portfolio specific quantitative
thresholds are also now being applied to Hong Kong Personal Loans and Business
Clients Mortgage portfolio in India. The impact of the threshold changes in
2024 was not material. For Credit Card portfolios, the thresholds include
relative and absolute increases in IFRS 9 PD with average lifetime IFRS 9 PD
cut-offs for those exposures that are within a range of customer utilisation
limit. For Personal Loans portfolios, the thresholds include relative and
absolute increases in IFRS 9 PD cut-offs for those exposures that are over six
months old in the portfolio, have certain months left in the loan tenor and
have certain behaviour scores. For Business Clients Mortgage, the threshold
includes relative and absolute increases in IFRS 9 PD cut-offs for those
exposures that were in high arrear grade bucket at least once in the last 12
months.
The range of thresholds applied are:
Portfolio Relative IFRS 9 Absolute IFRS 9 Customer Remaining tenor Average
PD increase
PD increase
utilisation
(months)
IFRS 9 PD
(%)
(%)
(%)
(lifetime)
Credit cards - Current 50-150% 3.4% - 9.3% 15% - 90% - 4.51% - 11.6%
Credit cards - 1-29 days past due 100% - 210% 3.5% - 6.1% 25% - 67% - 1.5% - 18.5%
Personal loans - Current 100% - 250% 1.0% - >60 -
Personal loan - 1-29 days past due 200% - 300% 1.5% - >12 -
Business Client Mortgages - Current 100% 4.4% - - -
Business Client Mortgages - 1-29 days past due 100% 7.0% - - -
For all other material WRB portfolios (excluding Private Banking) for which a
statistical model has been built, the quantitative SICR thresholds applied are
a relative threshold of 100 per cent increase in IFRS 9 PD and an absolute
change in IFRS 9 PD of between 100 and 350 bps depending on the product.
Certain countries have a higher absolute threshold reflecting the lower
default rate within their personal loan portfolios compared with the Group's
other personal loan portfolios. The original lifetime IFRS 9 PD term structure
is determined based on the original application score or risk segment of the
client.
For all Private Banking classes, in line with risk management practice, an
increase in credit risk is deemed to have occurred where margining or
loan-to-value covenants have been breached. For Class I assets (lending
against diversified liquid collateral), if these margining requirements have
not been met within 30 days of a trigger, a significant increase in credit
risk is assumed to have occurred. For Class I and Class III assets
(real-estate lending), a significant increase in credit risk is assumed to
have occurred where the bank is unable to 'sell down' the applicable assets to
meet revised collateral requirements within five days of a trigger. Class II
assets are typically unsecured or partially secured, or secured against
illiquid collateral such as shares in private companies. Significant credit
deterioration of these assets is deemed to have occurred when any early alert
trigger has been breached.
Qualitative criteria
Qualitative factors that indicate that there has been a significant increase
in credit risk include processes linked to current risk management, such as
placing loans on non-purely precautionary early alert or being assigned a CG12
rating. An account is placed on non-purely precautionary early alert if it
exhibits risk or potential weaknesses of a material nature requiring closer
monitoring, supervision or attention by management. Weaknesses in such a
borrower's account, if left uncorrected, could result in deterioration of
repayment prospects and the likelihood of being downgraded. Indicators could
include a rapid erosion of position within the industry, concerns over
management's ability to manage operations, weak/deteriorating operating
results, liquidity strain and overdue balances, among other factors.
All client assets that have been assigned a CG12 rating, equivalent to 'Higher
risk', are deemed to have experienced a significant increase in credit risk.
Accounts rated CG12 are primarily managed by relationship managers in the CIB
unit with support from SAG for certain accounts. All CIB clients are placed in
CG12 when they are 30 DPD unless they are granted a waiver through a strict
governance process.
Page 58
In WRB, SICR is also assessed for where specific risk elevation events have
occurred in a market that are not yet reflected in modelled outcomes or in
other metrics. This is applied collectively either to impacted specific
products/customer cohorts or across the overall consumer banking portfolio in
the affected market.
Backstop
Across all portfolios, accounts that are 30 or more days past due (DPD) on
contractual payments of principal and/or interest that have not been captured
by the criteria above are considered to have experienced a significant
increase in credit risk. For less material portfolios, which are modelled
based on a roll-rate or loss-rate approach, SICR is primarily assessed through
the 30 DPD trigger.
Expert credit judgement may be applied in assessing SICR to the extent that
certain risks may not have been captured by the models or through the above
criteria. Such instances are expected to be rare, for example due to events
and material uncertainties arising close to the reporting date.
Assessment of credit-impaired financial assets
WRB clients
The core components in determining credit-impaired ECL provisions are the
value of gross charge-off and recoveries. Gross charge-off and/or loss
provisions are recognised when it is established that the account is unlikely
to pay through the normal process. Recovery of unsecured debt post credit
impairment is recognised based on actual cash collected, either directly from
clients or through the sale of defaulted loans to third-party institutions.
Release of credit impairment provisions for secured loans is recognised if the
loan outstanding is paid in full (release of full provision), or the provision
is higher than the loan outstanding (release of the excess provision).
CIB and Private Banking clients
Credit-impaired accounts are managed by the Group's specialist recovery unit,
Stressed Asset Group (SAG), which is independent of the Client
Coverage/Relationship Managers. Where a portion of exposure is considered not
recoverable, a stage 3 credit impairment provision is raised. This stage 3
provision is the difference between the loan-carrying amount and the
probability-weighted present value of estimated future cash flows, reflecting
a range of scenarios (typically the 'upside', 'downside' and 'likely' recovery
outcomes). Where the exposure is secured by collateral, the values used will
incorporate the impact of forward-looking economic information on the value
recoverable collateral and time to realise the same.
The individual circumstances of each client are considered when SAG estimates
future cashflows and the timing of future recoveries which involves
significant judgement. All available sources, such as cashflow arising from
operations, selling assets or subsidiaries, realising collateral or payments
under guarantees, are considered. In any decision relating to the raising of
provisions, the Group attempts to balance economic conditions, local knowledge
and experience, and the results of independent asset reviews. The individual
impairment provisions (viz. those not directly from a model) are approved by
Stressed Assets Risk (SAR) who are in the Second Line of Defence.
Write-offs
Where it is considered that there is no realistic prospect of recovering a
portion of an exposure against which an impairment provision has been raised,
that amount will be written off.
Governance of PMAs and application of expert credit judgement in respect of
ECL
The Group's Credit Policy and Standards framework details the requirements for
continuous monitoring to identify any changes in credit quality and resultant
ratings, as well as ensuring a consistent approach to monitoring, managing and
mitigating credit risks. The framework aligns with the governance of ECL
estimation through the early recognition of significant deteriorations in
ratings which drive stage 2 and 3 ECL.
The models used in determining ECL are reviewed and approved by the Group
Credit Model Assessment Committee (CMAC) or Delegate Model Approver (DMA),
which is appointed by the Model Risk Committee. CMAC has the responsibility to
assess and approve the use of models and to review all IFRS 9 interpretations
related to models. CMAC also provides oversight on operational matters related
to model development, performance monitoring and model validation activities,
including standards and regulatory matters.
Prior to submission to CMAC for approval, the models are validated by GMV, a
function which is independent of the business and the model developers. GMV's
analysis comprises review of model documentation, model design and
methodology, data validation, review of the model development and calibration
process, out-of-sample performance testing, and assessment of compliance
review against IFRS 9 rules and internal standards.
Page 59
Model performance PMAs
The process of PMA identification, calculation and approval are prescribed in
the Credit Risk IFRS 9 ECL Model Family Standards, which are approved by the
Global Head, Model Risk Management. PMA calculations are reviewed by GMV and
submitted to CMAC for approval and will be removed when the estimates return
to being within the monitoring thresholds or validation standards. The level
of PMAs and remediation plans are regularly tracked at CMAC.
Judgemental adjustments
These comprise judgemental PMAs and judgemental management overlays, and
account for events that are not captured in the Base Case Forecast or the
resulting ECL calculated by the models. Judgemental adjustments must be
approved by the IIC having considered the nature of the event, why the risk is
not captured in the model, and the basis on which the quantum of the overlay
has been calculated. Judgemental adjustments are subject to quarterly review
and re-approval by the IIC, and will be released when the risks are no longer
relevant.
The IFRS 9 Impairment Committee:
• oversees the appropriateness of all Business Model Assessment and Solely
Payments of Principal and Interest (SPPI) tests
• reviews and approves ECL for financial assets classified as stages 1, 2
and 3 for each financial reporting period
• reviews and approves stage allocation rules and thresholds
• approves material adjustments in relation to ECL for fair value through
other comprehensive income (FVOCI) and amortised cost financial assets
• reviews, challenges and approves base macroeconomic forecasts and the
multiple macroeconomic scenarios approach that are utilised in the
forward-looking ECL calculations
The IIC consists of senior representatives from Risk and Finance. It meets at
least twice every quarter - once before the models are run to approve key
inputs into the calculation, and once after the models are run to approve the
ECL provisions and any judgemental management overlays that may be necessary.
The IIC is supported by an Expert Panel which also reviews and challenges the
base case projections and multiple macroeconomic scenarios. The Expert Panel
consists of members of Enterprise Risk Management (which includes the Scenario
Design team), Finance, Group Economic Research and country representatives of
major jurisdictions.
Traded Risk
Market Risk (audited)
Market Risk is the potential for fair value loss due to adverse moves in
financial markets. The Group's exposure to Market Risk arises predominantly
from the following sources:
• Trading book:
- The Group provides clients with access to markets, facilitation of which
entails the Group taking moderate Market Risk positions. All trading teams
support client activity. There are no proprietary trading teams. Hence, income
earned from Market Risk-related activities is primarily driven by the volume
of client activity.
• Non-trading book:
- Treasury is required to hold a liquid assets buffer, much of which is held
in high-quality marketable debt securities
- The Group underwrites and sells down loans, and invests in select
investment grade debt securities with no trading intent
- The Group has capital invested and related income streams denominated in
currencies other than US dollars. To the extent that these income streams are
not hedged, the Group is subject to Structural Foreign Exchange Risk which is
reflected in reserves.
A summary of our current policies and practices regarding Market Risk
management is provided in the 'Principal Risks' section.
Page 60
The primary categories of Market Risk for the Group are:
• Interest Rate Risk: arising from changes in yield curves and implied
volatilities
• Foreign Exchange Risk: arising from changes in currency exchange rates and
implied volatilities
• Commodity Risk: arising from changes in commodity prices and implied
volatilities
• Credit Spread Risk: arising from changes in the price of debt instruments
and credit-linked derivatives and driven by factors other than the level of
risk-free interest rates
• Equity Risk: arising from changes in the prices of equities and implied
volatilities
Market Risk movements (audited)
Value at Risk (VaR) allows the Group to manage Market Risk across the trading
book and most of the fair valued non-trading books.
The average level of total trading and non-trading VaR in 2024 was $41.8
million, 22 per cent lower than 2023 ($53.3 million). The year end level of
total trading and non-trading VaR in 2024 was $43.3 million, 3 per cent lower
than 2023 ($44.5 million), due to a reduction in market volatility.
For the trading book, the average level of VaR in 2024 was $21.1 million, 2
per cent lower than in 2023 ($21.5 million). Trading activities have remained
relatively unchanged, and client driven.
Daily Value at Risk (VaR at 97.5%, one day) (audited)
Trading1 and non-trading2 2024 2023
Average High Low Year end Average High Low Year end
$million
$million
$million
$million
$million
$million
$million
$million
Interest Rate Risk 32.8 43.9 18.6 38.8 39.5 54.1 23.2 30.5
Credit Spread Risk 20.4 31.3 12.8 16.6 33.8 48.0 25.0 31.7
Foreign Exchange Risk 9.2 15.0 5.0 7.4 7.0 12.2 4.2 7.4
Commodity Risk 5.3 10.0 2.9 4.6 5.8 9.7 3.7 4.3
Equity Risk 0.4 0.9 - - 0.1 0.4 - -
Diversification effect3 (26.3) NA NA (24.1) (32.9) NA NA (29.4)
Total 41.8 53.1 29.4 43.3 53.3 65.5 44.2 44.5
Trading¹ 2024 2023
Average High Low Year end Average High Low Year end
$million
$million
$million
$million
$million
$million
$million
$million
Interest Rate Risk 12.7 22.0 7.0 12.0 13.1 20.4 7.7 11.6
Credit Spread Risk 6.6 9.6 4.8 5.4 9.4 12.4 7.4 9.4
Foreign Exchange Risk 9.2 15.0 5.0 7.4 7.0 12.2 4.2 7.4
Commodity Risk 4.8 10.0 2.4 4.3 5.8 9.7 3.7 4.4
Equity Risk - - - - - - - -
Diversification effect3 (12.2) NA NA (8.3) (13.8) NA NA (11.5)
Total 21.1 33.1 13.0 20.8 21.5 30.6 14.7 21.3
Non-trading2 2024 2023
Average High Low Year end Average High Low Year end
$million
$million
$million
$million
$million
$million
$million
$million
Interest Rate Risk 28.0 35.5 17.4 32.5 34.2 43.6 19.7 23.9
Credit Spread Risk 17.2 24.8 10.0 15.7 28.3 40.1 21.5 24.4
Foreign Exchange Risk - - - - - - - -
Commodity Risk 1.3 1.8 0.6 0.8 0.1 0.5 0.3 0.5
Equity Risk 0.4 0.9 - - 0.1 0.4 - -
Diversification effect3 (12.7) NA NA (10.2) (18.7) NA NA (13.2)
Total 34.2 44.3 28.6 38.8 44.0 53.4 32.0 35.6
Page 61
The following table sets out how trading and non-trading VaR is distributed
across the Group's businesses:
2024 2023
Average High Low Year end Average High Low Year end
$million
$million
$million
$million
$million
$million
$million
$million
Trading1 and non-trading2 41.8 53.1 29.4 43.3 53.3 65.5 44.2 44.5
Trading1
Macro Trading4 17.0 29.9 10.0 17.1 13.8 20.2 9.2 15.4
Global Credit 6.8 11.1 4.3 5.8 12.8 18.2 8.5 10.1
XVA 3.3 4.4 2.4 2.4 4.8 7.0 3.4 4.5
Diversification effect3 (6.0) NA NA (4.5) (9.9) NA NA (8.7)
Total 21.1 33.1 13.0 20.8 21.5 30.6 14.7 21.3
Non-trading2
Treasury 32.9 40.8 26.9 38.6 43.4 50.2 31.1 34.9
Global Credit 5.0 13.4 2.4 8.8 3.9 13.6 2.0 4.0
Listed Private Equity 0.4 0.9 - - 0.1 0.4 - -
Diversification effect3 (4.1) NA NA (8.6) (3.4) NA NA (3.3)
Total 34.2 43.3 28.6 38.8 44.0 53.4 32.0 35.6
1 The trading book for Market Risk is defined in accordance with the
UK onshored Capital Requirements Regulation Part 3 Title I Chapter 3, which
restricts the positions permitted in the trading book
2 The non-trading book VaR does not include the loan underwriting
business
3 The total VaR is non-additive across risk types due to
diversification effects, which is measured as the difference between the sum
of the VaR by individual risk type or business and the combined total VaR. As
the maximum and minimum occur on different days for different risk types or
businesses, it is not meaningful to calculate a portfolio diversification
benefit for these measures
4 Macro Trading comprises the Rates, FX and Commodities businesses
Risks not in VaR
In 2024, the main market risks not reflected in VaR were:
• basis risks for which the historical market price data is limited and is
therefore proxied, giving rise to potential proxy basis risk that is not
captured in VaR
• potential depeg risk from currencies currently pegged or managed, where
the historical one-year VaR observation period may not reflect the possibility
of a change in the currency regime or a sudden depegging
• potential understatement of VaR when abrupt increases in market volatility
are not adequately captured by the VaR model.
Additional capital is set aside to cover such 'risks not in VaR'.
Backtesting
In 2024, there were no regulatory backtesting negative exceptions at Group
level (in 2023 there were five).
An enhancement to the VaR model will be implemented from January 2025 to
increase the model's responsiveness to abrupt upturns in market volatility.
The graph below illustrates the performance of the VaR model used in capital
calculations. It compares the 99 percentile profit and loss confidence level
given by the VaR model with the hypothetical profit and loss of each day given
the actual market movement ignoring any intra-day trading activity.
Trading loss days
2024 2023
Number of loss days reported for Markets trading book total product income1 12 16
1 Includes credit valuation adjustment (CVA) and funding valuation
adjustment (FVA), and excludes Treasury business (non-trading), periodic
valuation changes for Capital Markets, expected loss provisions, overnight
indexed swap (OIS) discounting and accounting adjustments such as debit
valuation adjustments
Page 62
Average daily income earned from Market Risk-related activities¹ (audited)
Trading: The average level of total trading daily income in 2024 was $13.3
million, 10.8 per cent higher than 2023 ($12 million). The increase is largely
attributable higher client demand for derivative products across Greater China
and North Asia coupled with larger holdings of government and corporate bonds
in anticipation of increased demand by clients.
Non-trading: The average level of total non-trading daily income in 2024 was
$2.7 million, attributable to translation gains on the revaluation of FX
positions in Egypt, and FX revaluation gains across currencies in the Markets
Credit Trading business.
Trading 2024 2023
$million
$million
Interest Rate Risk 5.2 4.5
Credit Spread Risk 1.7 1.2
Foreign Exchange Risk 5.6 5.5
Commodity Risk 0.8 0.8
Equity Risk - -
Total 13.3 12.0
Non-trading $million $million
Interest Rate Risk 0.6 (0.1)
Credit Spread Risk 2.1 (0.7)
Equity Risk - 0.1
Total 2.7 (0.7)
1 Reflects total product income which is the sum of client income and
own account income. Includes elements of trading income, interest income and
non funded income which are generated from Market Risk-related activities.
Rates, XVA and Treasury income are included under Interest Rate Risk while
Credit Trading income is included under Credit Spread Risk
Structural foreign exchange exposures
The table below sets out the principal structural foreign exchange exposures
(net of investment hedges) of the Group.
2024 2023
$million
$million
Hong Kong dollar 4,232 4,662
Renminbi 3,593 3,523
Indian rupee 3,480 3,309
Singapore dollar 3,306 2,415
Malaysian ringgit 1,539 1,540
Korean won 1,363 2,114
Bangladeshi taka 1,113 1,007
Euro 1,112 1,125
Taiwanese dollar 1,087 1,222
UAE dirham 807 709
Thai baht 763 782
Pakistani rupee 392 306
Indonesian rupiah 230 293
Other 3,407 3,206
26,424 26,213
As at 31 December 2024, the Group had taken net investment hedges using
derivative financial instruments to partly cover its exposure to the Hong Kong
dollar of $5,359 million (31 December 2023: $5,603 million), Korean won of
$3,048 million (31 December 2023: $2,884 million), Indian rupee of $1,784
million (31 December 2023: $1,809 million), Renminbi of $1,640 million (31
December 2023: $1,516 million), UAE dirham of $1,470 million (31 December
2023: $1,470 million), Taiwanese dollar of $1,092 million (31 December 2023:
$1,025 million), Singapore dollar of $0 million (2023: $1,047 million) and
South African rand of $0 million (31 December 2023:$64 million). An analysis
has been performed on these exposures to assess the impact of a 1 per cent
fall in the US dollar exchange rates, adjusted to incorporate the impacts of
correlations of these currencies to the US dollar. The impact on the positions
above would be an increase of $262 million (31 December 2023: $260 million).
Changes in the valuation of these positions are taken to reserves. For
analysis of the Group's capital position and requirements, refer to the
'Capital review' section.
Page 63
Counterparty Credit Risk
Counterparty Credit Risk is the potential for loss in the event of the default
of a derivative counterparty, after taking into account the value of eligible
collaterals and risk mitigation techniques. The Group's counterparty credit
exposures are included in the Credit Risk section.
Derivative financial instruments Credit Risk mitigation
The Group enters into master netting agreements, which in the event of default
result in a single amount owed by or to the counterparty through netting the
sum of the positive and negative mark-to-market values of applicable
derivative transactions.
In addition, the Group enters into credit support annexes (CSAs) with
counterparties where collateral is deemed a necessary or desirable mitigant to
the exposure. Cash collateral includes collateral called under a variation
margin process from counterparties if total uncollateralised mark-to-market
exposure exceeds the threshold and minimum transfer amount specified in the
CSA. With certain counterparties, the CSA is reciprocal and requires us to
post collateral if the overall mark-to-market values of positions are in the
counterparty's favour and exceed an agreed threshold.
Liquidity and Funding Risk
Liquidity and Funding Risk is the risk that the Group may not have sufficient
stable or diverse sources of funding to meet its obligations as they fall due.
The Group's Liquidity and Funding Risk framework requires each country to
ensure that it operates within predefined liquidity limits and remains in
compliance with Group liquidity policies and practices, as well as local
regulatory requirements.
The Group achieves this through a combination of setting Risk Appetite and
associated limits, policy formation, risk measurement and monitoring,
prudential and internal stress testing, governance and review.
Throughout 2024, the Group retained a robust liquidity position across key
metrics. The Group continues to focus on improving the quality and
diversification of its funding mix and remains committed to supporting its
clients.
Primary sources of funding (audited)
The Group's funding strategy is largely driven by its policy to maintain
adequate liquidity at all times, in all geographic locations and for all
currencies. This is done to ensure the Group can meet all of its obligations
as they fall due. The Group's funding profile is therefore well diversified
across different sources, maturities and currencies.
The Group's assets are funded predominantly by customer deposits, supplemented
with wholesale funding, which is diversified by type and maturity.
The Group maintains access to wholesale funding markets in all major financial
centres in which it operates. This seeks to ensure that the Group has market
intelligence, maintains stable funding lines and can obtain optimal pricing
when performing cashflow management activities.
In 2024, the Group issued approximately $9.1 billion worth of securities from
its holding company, Standard Chartered PLC (2023 $8.1 billion of senior debt
securities). The issuances included $1.6 billion of Additional Tier 1
securities and $7.5 billion of senior debt securities across multiple
currencies. Over this same period, there were Additional Tier 1 calls of
$0.6 billion, Tier 2 redemptions (calls & maturities) of around $1.6
billion and senior calls of $6.3 billion. In the next 12 months, approximately
$7.8 billion of the Group's Additional Tier 1, senior and subordinated debt
securities are either falling due for repayment contractually or callable by
the Group.
Liquidity and Funding Risk metrics
The Group continually monitors key liquidity metrics, both on a country basis
and consolidated across the Group.
The following liquidity and funding Board Risk Appetite metrics define the
maximum amount and type of risk that the Group is willing to assume in pursuit
of its strategy: liquidity coverage ratio (LCR), liquidity stress survival
horizons, recovery capacity and net stable funding ratio (NSFR). In addition
to the Board Risk Appetite, there are further limits that apply at Group and
country level such as external wholesale borrowing (WBE) and cross currency
limits.
Page 64
Liquidity coverage ratio (LCR)
The LCR is a regulatory requirement set to ensure the Group has sufficient
unencumbered high-quality liquid assets to meet its liquidity needs in a
30-calendar-day liquidity stress scenario.
The Group monitors and reports its liquidity positions under the Liquidity
Coverage Ratio per PRA rulebook and has maintained its LCR above the
prudential requirement. The Group maintained robust liquidity ratios
throughout 2024.
At the reporting date, the Group LCR was 138 per cent (31 December 2023: 145
per cent), with a surplus to both Board-approved Risk Appetite and regulatory
requirements.
Adequate liquidity was held across our footprint to meet all local prudential
LCR requirements where applicable.
The Liquidity buffer reported is after deductions made to reflect the impact
of limitations in the transferability of entity liquidity around the Group.
This resulted in an adjustment of $35 billion to LCR HQLA as at 31 December
2024.
2024 2023
$million
$million
Liquidity buffer 170,306 185,643
Total net cash outflows 123,226 128,111
Liquidity coverage ratio 138% 145%
Stressed coverage
The Group intends to maintain a prudent and sustainable funding and liquidity
position, in all countries and currencies, such that it can withstand a severe
but plausible liquidity stress.
Our approach to managing liquidity and funding is reflected in the Board-level
Risk Appetite Statement which includes the following:
"The Group should have sufficient stable and diverse sources of funding to
meet its contractual and contingent obligations as they fall due."
The Group's internal liquidity adequacy assessment process ('ILAAP') stress
testing framework covers the following stress scenarios:
• Standard Chartered-specific - Captures the liquidity impact from an
idiosyncratic event affecting Standard Chartered only with the rest of the
market assumed to be operating normally.
• Market wide - Captures the liquidity impact from a market-wide crisis
affecting all participants in a country, region or globally.
• Combined - Assumes both Standard Chartered-specific and Market-wide events
affect the Group simultaneously and hence is the most severe scenario.
All scenarios include, but are not limited to, modelled outflows for retail
and wholesale funding, off-balance sheet funding risk, cross-currency funding
risk, intraday risk, franchise risk and risks associated with a deterioration
of a firm's credit rating. Concentration risk approach captures single name
and industry concentration.
ILAAP stress testing results show that, as at 31 December 2024, Group and all
countries were able to survive for a period of time with positive surpluses as
defined under each scenario. The results take into account currency
convertibility and portability constraints while calculating the liquidity
surplus at Group level.
Standard Chartered Bank's credit ratings as at 31 December 2024 were A+ with
stable outlook (Fitch), A+ with stable outlook (S&P) and A1 with positive
outlook (Moody's). As of 31 December 2024, the estimated contractual outflow
of a three-notch long-term ratings downgrade is $1.0 billion.
External wholesale borrowing
A risk trigger is set to prevent excessive reliance on wholesale borrowing.
Within the definition of wholesale borrowing, triggers are applied to all
branches and operating subsidiaries in the Group.
Page 65
Advances-to-deposits ratio
This is defined as the ratio of total loans and advances to customers relative
to total customer deposits. An advances-to-deposits ratio below 100 per cent
demonstrates that customer deposits exceed customer loans as a result of the
emphasis placed on generating a high level of funding from customers.
The Group's advances-to-deposits ratio has remained stable in 2024 at 53.3 per
cent. Deposits from customers as at 31 December 2024 are $486,261 million (31
December 2023: $486,666 million).
2024 2023
$million
$million
Total loans and advances to customers1,2 259,269 259,481
Total customer accounts3 486,261 486,666
Advances-to-deposits ratio 53.3% 53.3%
1 Excludes reverse repurchase agreement and other similar secured
lending of $9,660 million and includes loans and advances to customers held at
fair value through profit and loss of $7,084 million
2 Loans and advances to customers for the purpose of the
advances-to-deposits ratio excludes $19,187 million of approved balances held
with central banks, confirmed as repayable at the point of stress (31 December
2023: $20,710 million)
3 Includes customer accounts held at fair value through profit or
loss of $21,772 million (31 December 2023: $17,248 million)
Net stable funding ratio (NSFR)
The NSFR is a PRA regulatory requirement that stipulates institutions to
maintain a stable funding profile in relation to an assumed duration of their
assets and off-balance sheet activities over a one-year horizon. It is the
ratio between the amount of available stable funding (ASF) and the amount of
required stable funding (RSF). ASF factors are applied to balance sheet
liabilities and capital, based on their perceived stability and the amount of
stable funding they provide. Likewise, RSF factors are applied to assets and
off-balance sheet exposures according to the amount of stable funding they
require. The regulatory requirements for NSFR are to maintain a ratio of at
least 100 per cent. The average ratio for the past four quarters is 135 per
cent.
Liquidity pool
The liquidity value of the Group's LCR eligible liquidity pool at the
reporting date was $170 billion. The figures in the table below account for
haircuts, currency convertibility and portability constraints per PRA rules
for transfer restrictions (amounting to $35 billion as at 31 December 2024),
and therefore are not directly comparable with the consolidated balance sheet.
A liquidity pool is held to offset stress outflows as defined in the LCR per
PRA rulebook.
2024 2023
$million
$million
Level 1 securities
Cash and balances at central banks 76,094 81,675
Central banks, governments /public sector entities 74,182 71,768
Multilateral development banks and international organisations 14,386 16,917
Other 343 1,291
Total Level 1 securities 165,005 171,651
Level 2 A securities 4,367 13,268
Level 2 B securities 934 724
Total LCR eligible assets 170,306 185,643
Liquidity analysis of the Group's balance sheet (audited)
Contractual maturity of assets and liabilities
The following table presents assets and liabilities by maturity groupings
based on the remaining period to the contractual maturity date as at the
balance sheet date on a discounted basis. Contractual maturities do not
necessarily reflect actual repayments or cashflows.
Within the tables below, cash and balances with central banks, interbank
placements and investment securities that are fair valued through other
comprehensive income are used by the Group principally for liquidity
management purposes.
Page 66
As at the reporting date, assets remain predominantly short-dated, with 59 per
cent maturing in less than one year.
2024
One month Between one month and three months Between three months and Between Between Between Between More than Total
or less
$million
six months
six months and nine months
nine months and one year
one year and two years
two years and five years
five years and undated
$million
$million
$million
$million
$million
$million
$million
$million
Assets
Cash and balances at central banks 55,646 - - - - - - 7,801 63,447
Derivative financial instruments 22,939 15,556 12,217 7,265 4,328 7,067 7,448 4,652 81,472
Loans and advances to banks1,2 22,381 21,722 10,588 6,771 4,986 8,407 3,715 1,990 80,560
Loans and advances to customers1,2 65,688 58,765 25,739 15,479 16,192 31,240 31,766 94,688 339,557
Investment securities1 13,016 25,886 21,546 14,789 14,688 32,815 41,423 62,418 226,581
Other assets1 12,601 32,130 1,333 381 931 71 64 10,560 58,071
Total assets 192,271 154,059 71,423 44,685 41,125 79,600 84,416 182,109 849,688
Liabilities
Deposits by banks1,3 24,293 2,345 1,621 848 571 4,342 1,939 3 35,962
Customer accounts1,4 379,926 37,502 25,863 10,152 10,123 9,695 47,367 2,635 523,263
Derivative financial instruments 21,680 17,115 11,773 7,018 4,353 6,660 8,144 5,321 82,064
Senior debt5 609 1,755 4,074 2,132 932 7,926 18,784 17,886 54,098
Other debt securities in issue1 2,734 2,663 6,550 4,535 5,015 851 1,206 688 24,242
Other liabilities 12,173 43,574 3,020 1,441 155 4,494 682 2,854 68,393
Subordinated liabilities and other borrowed funds - 64 23 180 13 359 1,978 7,765 10,382
Total liabilities 441,415 105,018 52,924 26,306 21,162 34,327 80,100 37,152 798,404
Net liquidity gap (249,144) 49,041 18,499 18,379 19,963 45,273 4,316 144,957 51,284
2023
Assets
Cash and balances at central banks 63,752 - - - - - - 6,153 69,905
Derivative financial instruments 12,269 10,632 6,910 3,611 2,921 4,650 6,038 3,403 50,434
Loans and advances to banks1,2 28,814 23,384 10,086 4,929 5,504 1,583 2,392 1,098 77,790
Loans and advances to customers1,2 86,695 55,009 25,492 15,392 14,537 25,987 26,545 95,829 345,486
Investment securities1 12,187 28,999 17,131 18,993 20,590 24,244 44,835 50,168 217,147
Other assets1 17,611 31,729 1,286 409 587 67 93 10,300 62,082
Total assets 221,328 149,753 60,905 43,334 44,139 56,531 79,903 166,951 822,844
Liabilities
Deposits by banks1,3 26,745 1,909 1,398 503 778 1,326 2,848 2 35,509
Customer accounts1,4 384,444 47,723 28,288 13,647 11,806 7,787 38,578 2,349 534,622
Derivative financial instruments 13,111 12,472 6,655 4,001 3,433 5,142 6,932 4,315 56,061
Senior debt5 130 1,111 1,537 1,389 624 11,507 20,127 14,443 50,868
Other debt securities in issue1 3,123 5,822 6,109 3,235 3,037 492 482 195 22,495
Other liabilities 14,929 26,447 1,695 544 883 1,830 1,809 12,763 60,900
Subordinated liabilities and other borrowed funds 980 68 19 172 453 312 1,936 8,096 12,036
Total liabilities 443,462 95,552 45,701 23,491 21,014 28,396 72,712 42,163 772,491
Net liquidity gap (222,134) 54,201 15,204 19,843 23,125 28,135 7,191 124,788 50,353
1 Loans and advances, investment securities, deposits by banks,
customer accounts and debt securities in issue include financial instruments
held at fair value through profit or loss, see Note 13 Financial instruments
2 Loans and advances include reverse repurchase agreements and other
similar secured lending of $98.8 billion (31 December 2023: $97.6 billion)
3 Deposits by banks include repurchase agreements and other similar
secured borrowing of $8.7 billion (31 December 2023: $5.6 billion)
4 Customer accounts include repurchase agreements and other similar
secured borrowing of $37.0 billion (31 December 2023: $48.0 billion)
5 Senior debt maturity profiles are based upon contractual maturity,
which may be later than call options over the debt held by the Group
Page 67
Behavioural maturity of financial assets and liabilities
The cashflows presented in the previous section reflect the cashflows that
will be contractually payable over the residual maturity of the instruments.
However, contractual maturities do not necessarily reflect the timing of
actual repayments or cashflow. In practice, certain assets and liabilities
behave differently from their contractual terms, especially for short-term
customer accounts, credit card balances and overdrafts, which extend to a
longer period than their contractual maturity. On the other hand, mortgage
balances tend to have a shorter repayment period than their contractual
maturity date. Expected customer behaviour is assessed and managed on a
country basis using qualitative and quantitative techniques, including
analysis of observed customer behaviour over time.
Maturity of financial liabilities on an undiscounted basis (audited)
The following table analyses the contractual cashflows payable for the Group's
financial liabilities by remaining contractual maturities on an undiscounted
basis. The financial liability balances in the table below will not agree with
the balances reported in the consolidated balance sheet as the table
incorporates all contractual cashflows, on an undiscounted basis, relating to
both principal and interest payments. Derivatives not treated as hedging
derivatives are included in the 'On demand' time bucket and not by contractual
maturity.
Within the 'More than five years and undated' maturity band are undated
financial liabilities, the majority of which relate to subordinated debt, on
which interest payments are not included as this information would not be
meaningful, given the instruments are undated. Interest payments on these
instruments are included within the relevant maturities up to five years.
2024
One month Between one month and three months Between three months and Between Between Between Between More than Total
or less
$million
six months
six months and nine months
nine months and one year
one year and two years
two years and five years
five years and undated
$million
$million
$million
$million
$million
$million
$million
$million
Deposits by banks 24,303 2,360 1,660 862 589 4,347 1,939 4 36,064
Customer accounts 380,377 37,790 26,277 10,384 10,438 9,937 47,642 3,396 526,241
Derivative financial instruments¹ 80,055 13 12 10 3 216 592 1,163 82,064
Debt securities in issue 3,622 4,551 11,007 7,056 6,319 10,261 23,184 21,337 87,337
Subordinated liabilities and other borrowed funds 19 134 46 206 14 392 2,345 13,800 16,956
Other liabilities 10,421 44,933 2,894 1,408 152 4,433 682 4,802 69,725
Total liabilities 498,797 89,781 41,896 19,926 17,515 29,586 76,384 44,502 818,387
2023
Deposits by banks 26,759 1,921 1,417 513 790 1,328 2,848 4 35,580
Customer accounts 385,361 48,140 28,763 14,049 12,190 8,118 39,000 3,036 538,657
Derivative financial instruments¹ 53,054 517 46 44 103 202 887 1,208 56,061
Debt securities in issue 3,507 6,995 8,015 5,070 4,002 13,663 23,413 16,396 81,061
Subordinated liabilities and other borrowed funds 1,043 134 46 208 570 395 2,389 14,367 19,152
Other liabilities 12,200 26,291 1,560 515 884 1,832 1,810 11,513 56,605
Total liabilities 481,924 83,998 39,847 20,399 18,539 25,538 70,347 46,524 787,116
1 Derivatives are on a discounted basis
Interest Rate Risk in the Banking Book
The following table provides the estimated impact to a hypothetical base case
projection of the Group's earnings under the following scenarios:
• A 50 basis point parallel interest rate shock (up and down) to the current
market-implied path of rates, across all yield curves
• A 100 basis point parallel interest rate shock (up and down) to the
current market-implied path of rates, across all yield curves
These interest rate shock scenarios assume all other economic variables remain
constant. The sensitivities shown represent the estimated change to a
hypothetical base case projected net interest income (NII), plus the change in
interest rate implied income and expense from FX swaps used to manage banking
book currency positions, under the different interest rate shock scenarios.
Page 68
The base case projected NII is based on the current market-implied path of
rates and forward rate expectations. The NII sensitivities below stress this
base case by a further 50 or 100bps. Actual observed interest rate changes
will likely differ from market expectation. Accordingly, the shocked NII
sensitivity does not represent a forecast of the Group's net interest income.
The interest rate sensitivities are indicative stress tests and based on
simplified scenarios, estimating the aggregate impact of an unanticipated,
instantaneous parallel shock across all yield curves over a one-year horizon,
including the time taken to implement changes to pricing before becoming
effective. The assessment assumes that the size and mix of the balance sheet
remain constant and that there are no specific management actions in response
to the change in rates. No assumptions are made in relation to the impact on
credit spreads in a changing rate environment.
Significant modelling and behavioural assumptions are made regarding scenario
simplification, market competition, pass-through rates, asset and liability
re-pricing tenors, and price flooring. In particular, the assumption that
interest rates of all currencies and maturities shift by the same amount
concurrently, and that no actions are taken to mitigate the impacts arising
from this are considered unlikely. Reported sensitivities will vary over time
due to a number of factors including changes in balance sheet composition,
market conditions, customer behaviour and risk management strategy. Therefore,
while the NII sensitivities are a relevant measure of the Group's interest
rate exposure, they should not be considered an income or profit forecast.
Estimated one-year impact to earnings from a parallel shift in yield curves at 2024
the beginning of the period of:
USD bloc HKD bloc SGD bloc KRW bloc CNY bloc INR bloc EUR bloc Other currency bloc¹ Total
$million
$million
$million
$million
$million
$million
$million
$million
$million
+ 50 basis points 20 30 10 20 20 30 10 70 210
- 50 basis points (40) (30) (20) (20) (30) (30) (20) (80) (270)
+ 100 basis points 30 60 20 30 30 40 30 150 390
- 100 basis points (90) (50) (40) (50) (50) (40) (40) (190) (550)
Estimated one-year impact to earnings from a parallel shift in yield curves at 2023
the beginning of the period of:
USD bloc HKD bloc SGD bloc KRW bloc CNY bloc INR bloc EUR bloc Other currency bloc¹ Total
$million
$million
$million
$million
$million
$million
$million
$million
+ 50 basis points 90 10 50 10 30 20 30 110 350
- 50 basis points (150) (30) (50) (20) (40) (30) (30) (120) (470)
+ 100 basis points 180 10 100 20 60 40 50 230 690
- 100 basis points (280) (40) (100) (40) (80) (60) (60) (230) (890)
1 The largest exposures within the Other currency bloc are GBP,JPY, MYR,
TWD
As at 31 December 2024, the Group estimates the one-year impact of an
instantaneous, parallel increase across all yield curves of 50 basis points to
increase projected NII by $210 million. The equivalent impact from a parallel
decrease of 50 basis points would result in a reduction in projected NII of
$270 million. The Group estimates the one-year impact of an instantaneous,
parallel increase across all yield curves of 100 basis points to increase
projected NII by $390 million. The equivalent impact from a parallel decrease
of 100 basis points would result in a reduction in projected NII of $550
million.
The benefit from rising interest rates is primarily from reinvesting at higher
yields and from assets re-pricing faster and to a greater extent than
deposits. NII sensitivity in falling rate scenarios has decreased versus 31
December 2023, due to an increase in programmatic hedging as well as actions
taken in discretionary portfolios to increase asset duration.
Over the course of 2024 the notional of interest rate swaps and HTC-accounted
bond portfolios used to reduce NII sensitivity through the cycle increased
from $47 billion to $64 billion. As at December 2024, the portfolios had a
weighted average maturity of 3.0 years, which reflects the behaviouralised
lives of the rate-insensitive deposit and equity balances that they hedge, and
a yield of 3.5 per cent.
Page 69
Operational and Technology Risk
Operational and Technology Risk profile
The implementation of standardised non-financial risk, control and causal
taxonomies is enabling improved risk aggregation and reporting, and has
provided opportunities for simplifying the process for risk identification and
assessment in the Group.
Operational and Technology Risk is elevated in areas such as Change
Mismanagement Risk and Third-Party Risk Management, which are subject to
ongoing control enhancement programmes. Other key areas of focus are Systems
Health/Technology risk, Operational Resilience and Regulatory Compliance. To
address these areas, the Group has focused on improving the sustainable
operating environment and has initiated several programmes to enhance the
control environment. The Group continues to monitor and manage Operational and
Technology risks associated with the external environment such as geopolitical
factors, the increasing risk of cyber-attacks and inappropriate use of
Artificial Intelligence. This enables the Group to keep pace with the new
business developments, while ensuring that its risk and control frameworks
evolve accordingly. The Group continues to strengthen its risk management to
understand the full spectrum of risks in the operating environment, enhance
its defences and improve resilience.
Operational and Technology risk events and losses
Operational losses are one indicator of the effectiveness and robustness of
our non-financial risk and control environment.
The Group's profile of operational loss events in 2024 and 2023 is summarised
in the table below, which shows the distribution of gross operational losses
by Basel business line. There has been a sharp increase in Corporate Items in
2024 due to a single large event pertaining to Finance Accounting Adjustment.
Distribution of Operational losses by Basel business line % Loss
2024 2023¹
Agency Services 0.0% 3.9%
Asset Management 0.0% 0.2%
Commercial Banking 1.4% 8.0%
Corporate Finance 0.1% 7.2%
Corporate Items 72.5% 34.3%
Payment and Settlements 7.6% 16.6%
Retail Banking 17.0% 21.3%
Retail Brokerage 0.0% 0.0%
Trading and Sales 1.4% 8.6%
1 Losses in 2023 have been restated to include incremental events
recognised in 2024
The Group's profile of operational loss events in 2024 and 2023 is also
summarised by Basel event type in the table below. It shows the distribution
of gross operational losses by Basel event type.
Distribution of Operational losses by Basel event type % Loss
2024 2023¹
Business disruption and system failures 1.8% 4.7%
Clients products and business practices 14.1% 2.9%
Damage to physical assets 0.0% 0.0%
Employment practices and workplace safety 0.1% 0.6%
Execution delivery and process management 81.5% 77.3%
External fraud 2.4% 14.4%
Internal fraud 0.1% 0.2%
1 Losses in 2023 have been restated to include incremental events
recognised in 2024
Other principal risks
The losses arising from operational failures for other principal and
integrated risks are reported as operational losses. Operational losses do not
include operational risk-related credit impairments.
Page 70
Capital review
The Capital review provides an analysis of the Group's capital and leverage
position, and requirements.
Capital summary
The Group's capital, leverage and minimum requirements for own funds and
eligible liabilities (MREL) position is managed within the Board-approved risk
appetite. The Group is well capitalised with low leverage and high levels of
loss-absorbing capacity.
2024 2023
CET1 capital 14.2% 14.1%
Tier 1 capital 16.9% 16.3%
Total capital 21.5% 21.2%
Leverage ratio 4.8% 4.7%
MREL ratio 34.2% 33.3%
Risk-weighted assets (RWA) $million 247,065 244,151
The Group's capital, leverage and MREL positions were all above current
requirements and Board-approved risk appetite. For further detail see the
Capital section in the Standard Chartered PLC Pillar 3 Disclosures for FY
2024. The Group's CET1 capital increased 19 basis points to 14.2 per cent of
RWA since FY2023. Profits, movements in FVOCI, FX translation reserves and
decrease in regulatory deductions were partly offset by RWA growth and
distributions (including ordinary share buybacks of $2.5 billion during the
year).
The PRA updated the Group's Pillar 2A requirement during Q4 2024. As at 31
December 2024 the Group's Pillar 2A was 3.7 per cent of RWA, of which at least
2.1 per cent must be held in CET1 capital. The Group's minimum CET1 capital
requirement was 10.5 per cent at 31 December 2024.
The Group CET1 capital ratio at 31 December 2024 reflects the share buybacks
of $2.5 billion announced during the year. The CET1 capital ratio also
includes an accrual for the FY 2024 dividend. The Board has recommended a
final dividend for FY 2024 of $679 million or 28 cents per share resulting in
a full year 2024 dividend of 37 cents per share, a 37 per cent increase on the
2023 dividend. In addition, the Board has announced a further share buyback of
$1.5 billion, the impact of this will reduce the Group's CET1 capital by
around 61 basis points in the first quarter of 2025.
The Group expects to manage CET1 capital dynamically within our 13-14 per cent
target range, in support of our aim of delivering future sustainable
shareholder distributions.
The Group's MREL leverage requirement as at 31 December 2024 was 27.6 per cent
of RWA. This is composed of a minimum requirement of 23.7 per cent of RWA and
the Group's combined buffer (comprising the capital conservation buffer, the
G-SII buffer and the countercyclical buffer). The Group's MREL ratio was 34.2
per cent of RWA and 9.7 per cent of leverage exposure at 31 December 2024.
During 2024, the Group successfully raised $9.1 billion of MREL eligible
securities from its holding company, Standard Chartered PLC. Issuance include
$1.6 billion of Additional Tier 1 and $7.5 billion of callable senior debt.
The Group raised an additional $1.0 billion of Additional Tier 1 and $2.5
billion in senior securities post the balance sheet date, i.e. not included in
the FY 2024 MREL position.
The Group is a G-SII, with a 1.0 per cent G-SII CET1 capital buffer. The
Standard Chartered PLC G-SII disclosure is published at:
sc.com/en/investors/financial-results.
Page 71
Capital base1 (audited)
2024 2023
$million
$million
CET1 capital instruments and reserves
Capital instruments and the related share premium accounts 5,201 5,321
Of which: share premium accounts 3,989 3,989
Retained earnings 24,950 24,930
Accumulated other comprehensive income (and other reserves) 8,724 9,171
Non-controlling interests (amount allowed in consolidated CET1) 235 217
Independently audited year-end profits 4,072 3,542
Foreseeable dividends (923) (768)
CET1 capital before regulatory adjustments 42,259 42,413
CET1 regulatory adjustments
Additional value adjustments (prudential valuation adjustments) (624) (730)
Intangible assets (net of related tax liability) (5,696) (6,128)
Deferred tax assets that rely on future profitability (excludes those arising (31) (41)
from temporary differences)
Fair value reserves related to net losses on cash flow hedges (4) (91)
Deduction of amounts resulting from the calculation of excess expected loss (702) (754)
Net gains on liabilities at fair value resulting from changes in own credit 278 (100)
risk
Defined-benefit pension fund assets (149) (95)
Fair value gains arising from the institution's own credit risk related to (97) (116)
derivative liabilities
Exposure amounts which could qualify for risk weighting of 1250% (44) (44)
Total regulatory adjustments to CET1 (7,069) (8,099)
CET1 capital 35,190 34,314
Additional Tier 1 capital (AT1) instruments 6,502 5,512
AT1 regulatory adjustments (20) (20)
Tier 1 capital 41,672 39,806
Tier 2 capital instruments 11,449 11,965
Tier 2 regulatory adjustments (30) (30)
Tier 2 capital 11,419 11,935
Total capital 53,091 51,741
Total risk-weighted assets (unaudited) 247,065 244,151
1 Capital base is prepared on the regulatory scope of consolidation
Page 72
Movement in total capital (audited)
2024 2023
$million
$million
CET1 at 1 January 34,314 34,157
Ordinary shares issued in the period and share premium - -
Share buyback (2,500) (2,000)
Profit for the period 4,072 3,542
Foreseeable dividends deducted from CET1 (923) (768)
Difference between dividends paid and foreseeable dividends (469) (372)
Movement in goodwill and other intangible assets 432 (326)
Foreign currency translation differences (525) (477)
Non-controlling interests 18 28
Movement in eligible other comprehensive income 636 464
Deferred tax assets that rely on future profitability 10 35
Decrease/(increase) in excess expected loss 52 (70)
Additional value adjustments (prudential valuation adjustment) 106 124
IFRS 9 transitional impact on regulatory reserves including day one 2 (106)
Exposure amounts which could qualify for risk weighting - 59
Fair value gains arising from the institution's own Credit Risk related to 19 (26)
derivative liabilities
Others (54) 50
CET1 at 31 December 35,190 34,314
AT1 at 1 January 5,492 6,484
Net issuances (redemptions) 1,015 (1,000)
Foreign currency translation difference and others (25) 8
AT1 at 31 December 6,482 5,492
Tier 2 capital at 1 January 11,935 12,510
Regulatory amortisation 1,189 1,416
Net issuances (redemptions) (1,517) (2,160)
Foreign currency translation difference (191) 146
Tier 2 ineligible minority interest (3) 19
Others 6 4
Tier 2 capital at 31 December 11,419 11,935
Total capital at 31 December 53,091 51,741
The main movements in capital in the period were:
• CET1 capital increased by $0.9 billion as retained profits of $4.1
billion, movement in FVOCI of $0.6 billion and a reduction in regulatory
deductions and other movements of $0.6 billion were partly offset by share
buybacks of $2.5 billion, distributions paid and foreseeable of $1.4 billion,
foreign currency translation impact of $0.5 billion.
• AT1 capital increased by $1.0 billion following the issuance of $1.0
billion of 7.88 per cent securities and $0.6 billion of 5.30 per cent
securities partly offset by the redemption of $0.6 billion of 5.38 per cent
securities.
• Tier 2 capital decreased by $0.5 billion due to the redemption of $1.6
billion of Tier 2 during the year partly offset by the reversal of regulatory
amortisation and foreign currency translation impact.
Page 73
Risk-weighted assets by business
2024
Credit risk Operational risk Market risk Total risk
$million
$million
$million
$million
Corporate & Investment Banking 112,100 19,987 24,781 156,868
Wealth & Retail Banking 41,002 9,523 - 50,525
Ventures 2,243 142 21 2,406
Central & Other items 33,958 (173) 3,481 37,266
Total risk-weighted assets 189,303 29,479 28,283 247,065
2023
Corporate & Investment Banking 102,675 18,083 21,221 141,979
Wealth & Retail Banking 42,559 8,783 - 51,342
Ventures 1,885 35 3 1,923
Central & Other items 44,304 960 3,643 48,907
Total risk-weighted assets 191,423 27,861 24,867 244,151
Movement in risk-weighted assets
Credit risk Operational risk Market risk Total risk
$million
$million
$million
Corporate & Investment Banking Wealth & Retail Banking Ventures Central & Other items Total
$million
$million
$million
$million
$million
At 1 January 2023 110,103 42,091 1,350 43,311 196,855 27,177 20,679 244,711
Assets growth & mix (4,424) 728 535 1,183 (1,978) - - (1,978)
Asset quality (391) 390 - 2,684 2,683 - - 2,683
Risk-weighted assets efficiencies - - - (688) (688) - - (688)
Model Updates (597) (151) - (151) (899) - 500 (399)
Methodology and policy changes - (196) - - (196) - (800) (996)
Acquisitions and disposals (1,630) - - - (1,630) - - (1,630)
Foreign currency translation (386) (303) - (2,035) (2,724) - - (2,724)
Other, Including non-credit risk movements - - - - - 684 4,488 5,172
At 31 December 2023 102,675 42,559 1,885 44,304 191,423 27,861 24,867 244,151
Assets growth & mix 11,412 341 358 (5,803) 6,308 - - 6,308
Asset quality (1,349) 112 - (1,935) (3,172) - - (3,172)
Risk-weighted assets efficiencies - - - - - - - -
Model Updates 1,620 (1) - - 1,619 - (400) 1,219
Methodology and policy changes 38 39 - - 77 - (1,300) (1,223)
Acquisitions and disposals - - - - - - - -
Foreign currency translation (2,296) (1,207) - (1,374) (4,877) - - (4,877)
Other, Including non-credit risk movements - (841) - (1,234) (2,075) 1,618 5,116 4,659
At 31 December 2024 112,100 41,002 2,243 33,958 189,303 29,479 28,283 247,065
Movements in risk-weighted assets
RWA increased by $2.9 billion, or 1.2 per cent from 31 December 2023 to $247.1
billion. This was mainly due to decrease in Credit Risk RWA of $2.1 billion,
an increase in Market Risk RWA of $3.4 billion and Operational Risk RWA of
$1.6 billion.
Corporate & Investment Banking
Credit Risk RWA increased by $9.4 billion, or 9.2 per cent from 31 December
2023 to $112.1 billion mainly due to:
• $11.4 billion increase from changes in asset growth & mix, of which:
- $9.0 billion increase from asset growth
- $3.1 billion increase from derivatives
- $0.8 billion decrease from optimisation actions
• $1.6 billion increase from industry-wide regulatory changes to align IRB
model performance from adjustment to commercial real estate counterparties
• $2.3 billion decrease from foreign currency translation
• $1.3 billion decrease mainly due to an improvement in asset quality
reflecting client upgrades
Page 74
Wealth & Retail Banking
Credit Risk RWA decreased by $1.6 billion, or 3.7 per cent from 31 December
2023 to $41.0 billion mainly due to:
• $1.2 billion decrease from foreign currency translation
• $0.8 billion decrease from reclassification of credit cards in Asia
• $0.3 billion increase from changes in asset growth & mix
• $0.1 billion increase mainly due to deterioration in asset quality mainly
in Asia
Ventures
Ventures is comprised of Mox Bank Limited, Trust Bank and SC Ventures. Credit
Risk RWA increased by $0.4 billion, or 19 per cent from 31 December 2023 to
$2.2 billion from asset balance growth, mainly from SC Ventures.
Central & Other items
Central & Other items RWA mainly relate to the Treasury Market's liquidity
portfolio, equity investments and current & deferred tax assets.
Credit Risk RWA decreased by $10.3 billion, or 23.4 per cent from 31 December
2023 to $34.0 billion mainly due to:
• $5.8 billion decrease from changes in asset growth & mix primarily
from optimisation activities
• $1.9 billion decrease due to improvement in asset quality mainly from
sovereign upgrades in Asia and Africa
• $1.4 billion decrease from foreign currency translation
• $1.2 billion decrease due to reporting enhancements
Market Risk
Total Market Risk RWA increased by $3.4 billion, or 13.7 per cent from 31
December 2023 to $28.3 billion primarily driven by:
• $1.7 billion increase in Standardised Approach (SA) Specific Interest Rate
Risk RWA mainly due to increases in the Trading Book government bond portfolio
• $2.7 billion increase in Internal Models Approach (IMA) RWA from increases
in VaR and Stressed VaR RWA due mainly to increased interest rate exposures,
offset by a reduction of addons for Risks not in VaR
• $1.3 billion in the first quarter decrease due to a reduction in the IMA
RWA multiplier resulting from fewer back-testing exceptions
Operational Risk
• Operational Risk RWA increased by $1.6 billion, or 5.8 per cent from 31
December 2023 to $29.5 billion, mainly due to a marginal increase in average
income as measured over a rolling three-year time horizon for certain
products.
Leverage ratio
The Group's leverage ratio, which excludes qualifying claims on central banks,
was 4.8 per cent at FY2024, which was above the current minimum requirement of
3.7 per cent. The leverage ratio was 10 basis points higher than FY2023.
Leverage exposure increased by $21.2 billion from decrease in claims on
central banks of $15.5 billion, an increase in Derivatives of $15.9 billion,
securities financing transactions of $1.2 billion, decrease in asset amounts
deducted in determining Tier 1 capital (Leverage) of $0.6 billion, partly
offset by decrease in Off-balance sheet items of $5.0 billion, Other Assets of
$4.7 billion, and securities financing transaction add-on of $2.4 billion.
Tier 1 capital increased by $1.9 billion as CET1 capital increased by $0.9
billion and AT1 capital increased by $1.0 billion following the issuance of
$1.6 billion partly offset by the redemption of $0.6 billion AT1 securities.
Page 75
Leverage ratio
31.12.24 31.12.23
$million
$million
Tier 1 capital (end point) 41,672 39,806
Derivative financial instruments 81,472 50,434
Derivative cash collateral 11,046 10,337
Securities financing transactions (SFTs) 98,801 97,581
Loans and advances and other assets 658,369 664,492
Total on-balance sheet assets 849,688 822,844
Regulatory consolidation adjustments1 (76,197) (92,709)
Derivatives adjustments
Derivatives netting (63,934) (39,031)
Adjustments to cash collateral (10,169) (9,833)
Net written credit protection 2,075 1,359
Potential future exposure on derivatives 51,323 42,184
Total derivatives adjustments (20,705) (5,321)
Counterparty risk leverage exposure measure for SFTs 4,198 6,639
Off-balance sheet items 118,607 123,572
Regulatory deductions from Tier 1 capital (7,247) (7,883)
Total exposure measure excluding claims on central banks 868,344 847,142
Leverage ratio excluding claims on central banks (%) 4.8% 4.7%
Average leverage exposure measure excluding claims on central banks 894,296 853,968
Average leverage ratio excluding claims on central banks (%) 4.7% 4.6%
Countercyclical leverage ratio buffer 0.1% 0.1%
G-SII additional leverage ratio buffer 0.4% 0.4%
1 Includes adjustment for qualifying central bank claims and
unsettled regular way trades
Page 76
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report and the Group
and Company financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare Group and Company financial
statements for each financial year.
Under that law:
• the Group financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and International Financial
Reporting Standards as adopted by the European Union
• the Company financial statements have been properly prepared in accordance
with UK-adopted International Accounting Standards as applied in accordance
with section 408 of the Companies Act 2006, and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of their profit or loss for that period.
In preparing each of the Group and Company financial statements, the directors
are required to:
• select suitable accounting policies and then apply them consistently
• make judgements and estimates that are reasonable, relevant and reliable
• state whether they have been prepared in accordance with UK-adopted
International Accounting Standards and International Financial Reporting
Standards as adopted by the European Union
• assess the Group and the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern, and
• use the going concern basis of accounting unless they either intend to
liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a Strategic Report, a Directors' Report, a Directors' Remuneration
Report and a Corporate Governance Statement that comply with that law and
those regulations.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements differs from legislation in other jurisdictions.
Responsibility statement of the directors in respect of the annual financial
report
We confirm that to the best of our knowledge:
• The financial statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole, and
• The Strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included
in the consolidation taken as a whole, together with a description of the
emerging risks and uncertainties that they face
Page 77
We consider the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Group's position and performance, business model
and strategy.
By order of the Board.
Diego De Giorgi
Group Chief Financial Officer
21 February 2025
Page 78
Shareholder information
Dividend and Interest Payment Dates
Ordinary Shares Final Dividend
Results and dividend announced 21 February 2025
Ex-dividend date 27 (UK) 26 (HK) March 2025
Record date for dividend 28 March 2025
Last date to amend currency election instructions for cash dividend* 24 April 2025
Dividend payment date 19 May 2025
* In either United States dollars, sterling or Hong Kong dollars
Preference Shares 1st half yearly dividend 2nd half yearly dividend
73∕8 per cent non-cumulative irredeemable preference shares of £1 1 April 2025 1 October 2025
81∕4 per cent non-cumulative irredeemable preference shares of £1 each 1 April 2025 1 October 2025
6.409 per cent non-cumulative redeemable preference shares of $5 each 30 January and 30 April 2025 30 July and 30 October 2025
7.014 per cent non-cumulative redeemable preference shares of $5 each 30 January 2025 30 July 2025
Annual General Meeting
The Annual General Meeting (AGM) will be held on Thursday, 8 May 2025 at
11.00am UK time (6.00pm Hong Kong time). Further details regarding the format,
location and business to be transacted at the meeting will be disclosed within
the 2025 Notice of AGM.
Interim results
The interim results will be announced to the London Stock Exchange and the
Stock Exchange of Hong Kong Limited and put on the Company's website.
Country-by-Country Reporting
In accordance with the requirements of the Capital Requirements
(Country-by-Country Reporting) Regulations 2013, the Group will publish
additional country-by-country information in respect of the year ended 31
December 2024, on or before 31 December 2025. We have also published our UK
Tax Strategy.
Pillar 3 Reporting
In accordance with the Pillar 3 disclosure requirements, the Group will
publish the Pillar 3 Disclosures in respect of the year ended 31 December
2024, on or before 21 February 2025.
ShareCare
ShareCare is available to shareholders on the Company's UK register who have a
UK address and bank account. It allows you to hold your Standard Chartered PLC
shares in a nominee account. Your shares will be held in electronic form so
you will no longer have to worry about keeping your share certificates safe.
If you join ShareCare, you will still be invited to attend the Company's AGM
and you will receive any dividend at the same time as everyone else. ShareCare
is free to join and there are no annual fees to pay.
Donating shares to ShareGift
Shareholders who have a small number of shares often find it uneconomical to
sell them. An alternative is to consider donating them to the charity
ShareGift (registered charity 1052686), which collects donations of unwanted
shares until there are enough to sell and uses the proceeds to support UK
charities. There is no implication for capital gains tax (no gain or loss)
when you donate shares to charity and UK taxpayers may be able to claim income
tax relief on the value of their donation.
Bankers' Automated Clearing System (BACS)
Dividends can be paid straight into your bank or building society account.
Registrars and shareholder enquiries
If you have any enquiries relating to your shareholding and you hold your
shares on the UK register, please contact our registrar at
investorcentre.co.uk/contactus. Alternatively, please contact Computershare
Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ or
call the shareholder helpline number on 0370 702 0138. If you hold your shares
on the Hong Kong branch register and you have enquiries, please contact
Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre,
183 Queen's Road East, Wan Chai, Hong Kong.
Page 79
Substantial shareholders
The Company and its shareholders have been granted partial exemption from the
disclosure requirements under Part XV of the Securities and Futures Ordinance
(SFO). As a result of this exemption, shareholders, directors and chief
executives, no longer have an obligation under Part XV of the SFO (other than
Divisions 5, 11 and 12 thereof) to notify the Company of substantial
shareholding interests, and the Company is no longer required to maintain a
register of interests of substantial shareholders under section 336 of the
SFO, nor a register of directors' and chief executives' interests under
section 352 of the SFO. The Company is, however, required to file with The
Stock Exchange of Hong Kong Limited any disclosure of interests made in the
UK.
Taxation
No tax is currently withheld from payments of dividends by Standard Chartered
PLC. Shareholders and prospective purchasers should consult an appropriate
independent professional adviser regarding the tax consequences of an
investment in shares in light of their particular circumstances, including the
effect of any national, state or local laws.
Chinese translation
If you would like a Chinese language version of the 2024 Annual Report, please
contact Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell
Centre, 183 Queen's Road East, Wan Chai, Hong Kong.
二〇二四年年報之中文譯本可向香港中央證券登記有限公司索取,
地址：香港灣仔皇后大道東183號合和中心17M樓。
Shareholders on the Hong Kong branch register who have asked to receive
corporate communications in either Chinese or English can change this election
by contacting Computershare. If there is a dispute between any translation and
the English version of this Annual Report, the English text shall prevail.
Electronic communications
If you hold your shares on the UK register and in future you would like to
receive the Annual Report electronically rather than by post, please register
online at: investorcentre.co.uk. Click on 'register now' and follow the
instructions. You will need to have your Shareholder or ShareCare reference
number to hand. You can find this on your share certificate or ShareCare
statement. Once you have registered and confirmed your email communication
preference, you will receive future notifications via email enabling you to
submit your proxy vote online. In addition, as a member of Investor Centre,
you will be able to manage your shareholding online and change your bank
mandate or address information.
Page 80
Important notices
Forward-looking statements
Forward-looking statements
The information included in this document may contain 'forward-looking
statements' based upon current expectations or beliefs as well as statements
formulated with assumptions about future events. Forward-looking statements
include, without limitation, projections, estimates, commitments, plans,
approaches, ambitions and targets (including, without limitation, ESG
commitments, ambitions and targets). Forward-looking statements often use
words such as 'may', 'could', 'will', 'expect', 'intend', 'estimate',
'anticipate', 'believe', 'plan', 'seek', 'aim', 'continue' or other words of
similar meaning to any of the foregoing. Forward-looking statements may also
(or additionally) be identified by the fact that they do not relate only to
historical or current facts.
By their very nature, forward-looking statements are subject to known and
unknown risks and uncertainties and other factors that could cause actual
results, and the Group's plans and objectives, to differ materially from those
expressed or implied in the forward-looking statements. Readers should not
place reliance on, and are cautioned about relying on, any forward-looking
statements.
There are several factors which could cause the Group's actual results and its
plans and objectives to differ materially from those expressed or implied in
forward-looking statements. The factors include (but are not limited to):
changes in global, political, economic, business, competitive and market
forces or conditions, or in future exchange and interest rates; changes in
environmental, geopolitical, social or physical risks; legal, regulatory and
policy developments, including regulatory measures addressing climate change
and broader sustainability-related issues; the development of standards and
interpretations, including evolving requirements and practices in ESG
reporting; the ability of the Group, together with governments and other
stakeholders to measure, manage, and mitigate the impacts of climate change
and broader sustainability-related issues effectively; risks arising out of
health crises and pandemics; risks of cyber-attacks, data, information or
security breaches or technology failures involving the Group; changes in tax
rates or policy; future business combinations or dispositions; and other
factors specific to the Group, including those identified in the Annual Report
and the financial statements of the Group. To the extent that any
forward-looking statements contained in this document are based on past or
current trends and/or activities of the Group, they should not be taken as a
representation that such trends or activities will continue in the future.
No statement in this document is intended to be, nor should be interpreted as,
a profit forecast or to imply that the earnings of the Group for the current
year or future years will necessarily match or exceed the historical or
published earnings of the Group. Each forward-looking statement speaks only as
of the date that it is made. Except as required by any applicable laws or
regulations, the Group expressly disclaims any obligation to revise or update
any forward-looking statement contained within this document, regardless of
whether those statements are affected as a result of new information, future
events or otherwise.
Please refer to the Annual Report and the financial statements of the Group
for a discussion of certain of the risks and factors that could adversely
impact the Group's actual results, and cause its plans and objectives, to
differ materially from those expressed or implied in any forward-looking
statements.
Non-IFRS performance measures and alternative performance measures
The Group financial statements have been prepared in accordance with
UK-adopted international accounting standards and International Financial
Reporting Standards (IFRS) as adopted by the European Union. Standard
Chartered PLC's financial statements have been prepared in accordance with
UK-adopted international accounting standards (IAS) as applied in conformity
with section 408 of the Companies Act 2006. This document may contain
financial measures and ratios not specifically defined under IFRS or IAS
and/or alternative performance measures as defined in the European Securities
and Market Authority guidelines. Such measures may exclude certain items which
management believes are not representative of the underlying performance of
the business and which distort period-on-period comparison. These measures are
not a substitute for IAS or IFRS measures and are based on a number of
assumptions that are subject to uncertainties and change. Please refer to the
Annual Report and the financial statements of the Group for further
information, including reconciliations between the underlying and reported
measures.
Page 81
Financial instruments
Nothing in this document shall constitute, in any jurisdiction, an offer or
solicitation to sell or purchase any securities or other financial
instruments, nor shall it constitute a recommendation or advice in respect of
any securities or other financial instruments or any other matter.
Caution regarding climate and environment related information
Some of the climate and environment related information in this document is
subject to certain limitations, and therefore the reader should treat the
information provided, as well as conclusions, projections and assumptions
drawn from such information, with caution. The information may be limited due
to a number of factors, which include (but are not limited to): a lack of
reliable data; a lack of standardisation of data; and future uncertainty. The
information includes externally sourced data that may not have been verified.
Furthermore, some of the data, models and methodologies used to create the
information is subject to adjustment which is beyond our control, and the
information is subject to change without notice.
General
You are advised to exercise your own independent judgement (with the advice of
your professional advisers as necessary) with respect to the risks and
consequences of any matter contained in this document. The Group, its
affiliates, directors, officers, employees or agents expressly disclaim any
liability and responsibility for any decisions or actions which you may take
and for any damage or losses you may suffer from your use of or reliance on
the information contained in this document.
Basis of Preparation and Caution Regarding Data Limitations
This section is specifically relevant to, amongst others, the sustainability
and climate models, calculations and disclosures throughout this report. The
information contained in this document has been prepared on the following
basis:
i. disclosures in the Strategic report, Sustainability review, Directors'
report, Risk review and Capital review and Supplementary information are
unaudited unless otherwise stated;
ii. all information, positions and statements set out in this document are
subject to change without notice;
iii. the information included in this document does not
constitute any investment, accounting, legal, regulatory or tax advice or an
invitation or recommendation to enter into any transaction;
iv. the information included in this document may have been
repaired using models, methodologies and data which are subject to certain
limitations. These limitations include: the limited availability of reliable
data, data gaps, and the nascent nature of the methodologies and technologies
underpinning this data; the limited standardisation of data (given, amongst
other things, limited international coordination on data and methodology
standards); and future uncertainty (due, amongst other things, to changing
projections relating to technological development and global and regional
laws, regulations and policies, and the current inability to make use of
strong historical data);
v. models, external data and methodologies used in information included in
this document are or could be subject to adjustment which is beyond our
control;
vi. any opinions and estimates should be regarded as
indicative, preliminary and for illustrative purposes only. Expected and
actual outcomes may differ from those set out in this document (as explained
in the "Forward-looking statements" section above);
vii. some of the related information appearing in this document may have been
obtained from public and other sources and, while the Group believes such
information to be reliable, it has not been independently verified by the
Group and no representation or warranty is made by the Group as to its
quality, completeness, accuracy, fitness for a particular purpose or
noninfringement of such information;
viii. for the purposes of the information included in this document, a number
of key judgements and assumptions have been made. It is possible that the
assumptions drawn, and the judgement exercised may subsequently turn out to be
inaccurate. The judgements and data presented in this document are not a
substitute for judgements and analysis made independently by the reader;
Page 82
ix. any opinions or views of third parties expressed in this document are
those of the third parties identified, and not of the Group, its affiliates,
directors, officers, employees or agents. By incorporating or referring to
opinions and views of third parties, the Group is not, in any way, endorsing
or supporting such opinions or views;
x. whilst the Group bears primary responsibility for the information
included in this document, it does not accept responsibility for the external
input provided by any third parties for the purposes of developing the
information included in this document;
xi. the data contained in this document reflects available information and
estimates at the relevant time;
xii. where the Group has used any methodology or tools developed by a third
party, the application of the methodology or tools (or consequences of its
application) shall not be interpreted as conflicting with any legal or
contractual obligations and such legal or contractual obligations shall take
precedence over the application
of the methodology or tools;
xiii. where the Group has used any underlying data provided or sourced by a
third party, the use of the data shall not be interpreted as conflicting with
any legal or contractual obligations and such legal or contractual obligations
shall take precedence over the use of the data;
xiv. this Important Notice is not limited in applicability to those sections
of the document where limitations to data, metrics and methodologies are
identified and where this Important Notice is referenced. This Important
Notice applies to the whole document;
xv. further development of reporting, standards or other principles could
impact the information included in this document or any metrics, data and
targets included in this document (it being noted that ESG reporting and
standards are subject to rapid change and development); and
xvi. while all reasonable care has been taken in preparing the information
included in this document, neither the Group nor any of its affiliates,
directors, officers, employees or agents make any representation or warranty
as to its quality, accuracy or completeness, and they accept no responsibility
or liability for the contents of this information, including any errors of
fact, omission or opinion expressed. You are advised to exercise your own
independent judgement (with the advice of your professional advisers as
necessary) with respect to the risks and consequences of any matter contained
in this document.
The Group, its affiliates, directors, officers, employees or agents expressly
disclaim any liability and responsibility for any decisions or actions which
you may take and for any damage or losses you may suffer from your use of or
reliance on the information contained in this document.
Copyright in all materials, text, articles and information contained in this
document (other than third party materials, text, articles and information) is
the property of, and may only be reproduced with permission of an authorised
signatory of, the Group.
Copyright in materials, text, articles and information created by third
parties and the rights under copyright of such parties are hereby
acknowledged. Copyright in all other materials not belonging to third parties
and copyright in these materials as a compilation vests and shall remain at
all times copyright of the Group and should not be reproduced or used except
for business purposes on behalf of the Group or save with the express prior
written consent of an authorised signatory of the Group.
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