REG - Standard Chrtrd PLC - SCPLC Final Results 2023
23/02/2024 07:00
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RNS Number : 2463E Standard Chartered PLC 23 February 2024
Standard Chartered PLC
4Q'23 and FY'23 Results
23 February 2024
Registered in England under company No. 966425
Registered Office: 1 Basinghall Avenue, London, EC2V 5DD, UK
4
Table of contents
Performance highlights
Statement of results 7
Group Chairman's statement 8
Group Chief Executive's review 11
Group Chief Financial Officer's review 15
Supplementary financial information 26
Underlying versus reported results reconciliations 48
Group Chief Risk Officer's review 54
Risk review 63
Capital review 68
Financial statements 74
Other supplementary information 79
Shareholder information 86
Table of contents
Performance highlights
4
Statement of results
7
Group Chairman's statement
8
Group Chief Executive's review
11
Group Chief Financial Officer's review
15
Supplementary financial information
26
Underlying versus reported results reconciliations
48
Group Chief Risk Officer's review
54
Risk review
63
Capital review
68
Financial statements
74
Other supplementary information
79
Shareholder information
86
This announcement contains inside information.
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By their very nature, forward-looking statements are subject to known and
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Chartered's Annual Report and 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
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Please refer to Standard Chartered's Annual Report and the financial
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and objectives, to differ materially from those expressed or implied in any
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General
You are advised to exercise your own independent judgement (with the advice of
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the information contained in this document
Page 3
Standard Chartered PLC - full-year and fourth quarter 2023 results
All figures are presented on an underlying basis and comparisons are made to
2022 on a reported currency basis, unless otherwise stated. A reconciliation
of restructuring and other items excluded from underlying results is set out
on pages 48-53.
Bill Winters, Group Chief Executive, said:
" We produced strong results in 2023, continuing to demonstrate the value of
our franchise and delivering our financial objective of a 10% RoTE for the
year. We will now build on this success, taking action to deliver sustainably
higher returns with a focus on driving income growth and improving operational
leverage and targeting 12% RoTE in 2026. We have increased full year
dividends, up 50%, and have announced a new $1bn share buyback, bringing our
total shareholder distributions to $5.5bn since January 2022. We will continue
to actively manage the Group's capital position with a target to return at
least $5bn over the next three years"
Selected information on 4Q'23 financial performance with comparisons to 4Q'22
unless otherwise stated
• Operating income up 7% to $4.0bn, up 7% at constant currency ('ccy')
- Net interest income ('NII') up 6% to $2.4bn; Non NII up 8% to $1.6bn
- Net interest margin ('NIM') 1.70%, up 3bps quarter-on-quarter ('QoQ')
(normalised NIM 3Q'23: 1.67%), primarily mix improvements
- Financial Markets ('FM') down 8% at ccy from subdued market volatility
- Wealth Management ('WM') up 16% at ccy with continued strong Affluent
new-to-bank ('NTB') client onboarding and net new money ('NNM')
• Operating expenses up 2% at ccy to $2.8bn; down $16m QoQ
• Credit impairment charge down $232m QoQ to $62m including CPBB flows of
$131m, partly offset by a net release of $105m in CCIB
- High risk assets of $10.6bn, up $1.2bn since 30.9.23 substantially from
a change in instrument on an existing sovereign exposure with no increase in
risk
• Underlying profit before tax of $1.1bn, up 74% at ccy
• Goodwill and Other impairment of $153m reflects a reduction in the
carrying value of the Group's investment in China Bohai Bank ('Bohai')
• Other items of $262m reflect net gain from sale of Aviation Finance
business
• The Group's balance sheet remains strong, liquid and well diversified
- Loans and advances to customers of $287bn, up $6bn or 2% since 30.9.23;
down $5bn or 2% on an underlying basis
- Customer deposits of $469bn, up $16bn or 4% since 30.9.23; up $10bn or
2% at ccy
- Liquidity coverage ratio 145% (30.9.23: 156%) back to historical levels;
Advances-to-deposit ratio 53.3% (30.9.23: 54.5%)
• Risk-weighted assets ('RWA') of $244bn, up $3bn or 1% since 30.9.23
- Credit risk RWA up $3bn; includes change in asset mix and credit
migration, partly offset by efficiency actions and Aviation Finance sale
• The Group remains strongly capitalised
- Common equity tier 1 ('CET1') ratio 14.1% (30.9.23: 13.9%), above 13-14%
target range
- $1bn share buyback starting imminently is expected to reduce CET1 ratio
by approximately 40bps
Selected information on FY'23 financial performance with comparisons to FY'22 unless otherwise stated
• Return on Tangible Equity ('RoTE') of 10.1%, up 2%pts
• Operating income up 10% to $17.4bn, up 13% at ccy
- NII up 23% at ccy to $9.6bn with NIM up 26bps to 1.67%; Non NII up 2% at
ccy to $7.8bn
- FM down 2% at ccy, up 3% excluding non-repeat of $244m gain on
mark-to-market liabilities in FY'22
- WM up 10% at ccy supported by robust leading indicators in Affluent NTB
client onboarding and NNM
• Operating expenses up 7% to $11bn, up 8% at ccy; increase due to
inflation, business growth and targeted investments, partially funded by
productivity saves
- Positive 4% income-to-cost jaws in FY'23, with cost-to-income ratio
improving 2% pts to 63%
• Credit impairment charge of $528m, down $308m. Annualised loan-loss rate
('LLR') of 17bps, down 4bps
• China Commercial Real Estate portfolio: total expected credit loss
provisions $1.2bn, stage 3 exposures of $1.4bn with cover ratio including
collateral of 88% and a remaining management overlay $141m
Page 4
Standard Chartered PLC - full-year and fourth quarter 2023 results continued
• Underlying profit before tax of $5.7bn, up 27% at ccy
• Goodwill and Other impairment of $850m primarily reflects a reduction in
the carrying value of Bohai
• Tax charge of $1.6bn: underlying effective tax rate of 29%, reduced by
1%pt
• Proposed final dividend of $560m or 21c per share will result in a
full-year dividend of $728m or 27c, up 50%
• Underlying earnings per share ('EPS') increased 31.0 cents or 32% to
128.9 cents; Reported EPS increased 22.7 cents or 26% to 108.6 cents
• Tangible net asset value per share increased 144 cents or 12% to 1,393
cents
Update on 2022-2024 strategic actions for FY'23 unless otherwise stated
• Drive improved returns in CCIB: Income return on risk-weighted assets of
7.8%, ahead of 2024 target of 6.5%; $24bn RWA optimised since 1.1.22,
exceeding the $22bn target a year ahead of plan
• Transform profitability in CPBB: Cost-to-income ratio of 60%, improved
by 9%pts year-on-year ('YoY'), delivering the target of 60% a year ahead of
plan; $0.4bn of gross expense savings since 1.1.22, 2022-2024 target $0.5bn
• Seize China opportunity: China onshore and offshore profit before tax up
3x YoY to $1.3bn, nearly achieving the $1.4bn target a year ahead of plan
• Create operational leverage: $0.9bn gross productivity saves since
1.1.22, 2022-2024 target $1.3bn; Cost-to-income ratio improved by 2%pts YoY to
63%, 2024 target 60%
• Deliver substantial shareholder returns: $5.5bn of total distributions
announced since 1.1.22, ahead of >$5bn 2022 to 2024 target
Other updates
• Aviation exit: Sale of the Aviation Finance business completed in
November 2023; increased CET1 ratio by 20bps in 4Q'23
• Sustainability: Sustainable Finance income $720m, up 42% YoY; mobilised
$87bn in Sustainable Finance from 1.1.21 to 30.9.23
• Africa and Middle East exits: Closed the representative office in
Lebanon; completed the sale of the Jordan branch; and signed agreements to
sell the remaining 7 businesses
Taking further action to deliver sustainably higher returns
• Deliver strong income growth
- NII expected to grow in 2024 and beyond
- Financial Markets and Wealth Management two engines of Non NII growth
- Improve operational leverage through a programme called Fit for Growth
- Aiming to simplify, standardise and digitise key elements of the Group
- Addressing structural inefficiencies and complexities whilst protecting
income
- Improving productivity, client and employee experience
- Creating capacity to reinvest in incremental growth initiatives
• Return substantial capital to shareholders
Guidance
We have updated our guidance for 2024 and have provided additional guidance
for 2025 and 2026 as follows:
• Income:
- Operating income to increase 5-7% for 2024-2026; around the top of 5-7%
range in 2024
- Net interest income for 2024 of $10bn to $10.25bn, at ccy
• Expenses:
- Operating expenses to be below $12bn in 2026, at ccy
- Expense saves of around $1.5bn and cost to achieve of no more than
$1.5bn from 2024 to 2026
- Positive income-to-cost jaws, excluding UK bank levy, at ccy in each
year from 2024 to 2026
Page 5
Standard Chartered PLC - full-year and fourth quarter 2023 results continued
• Assets and RWA:
- Low single-digit percentage growth in loans and advances to customers
and RWA each year from 2024 to 2026 (pre-Basel 3.1 day-1 impact)
- Basel 3.1 day-1 impact, pending clarification of rules no more than 5%
incremental RWA
• Continue to expect LLR to normalise towards the historical through the
cycle 30 to 35bps range
• Capital:
- Continue to operate dynamically within the full 13-14% CET1 target range
- Plan to return at least $5bn to shareholders cumulative 2024 to 2026
- Continue to increase full-year dividend per share over time
• RoTE increasing steadily from 10%, targeting 12% in 2026 and to progress
thereafter
Page 6
Statement of results
2023 2022 Change
$million
$million
¹ %
Underlying performance(6)
Operating income 17,378 15,762 10
Operating expenses (11,136) (10,409) (7)
Credit impairment (528) (836) 37
Other impairment (130) (39) nm⁹
Profit from associates and joint ventures 94 167 (44)
Profit before taxation 5,678 4,645 22
Profit attributable to ordinary shareholders² 3,581 2,903 23
Return on ordinary shareholders' tangible equity (%) 10.1 7.7 240bps
Cost-to-income ratio (excluding bank levy) (%) 63.4 65.4 195bps
Reported performance⁸
Operating income 18,019 16,318 10
Operating expenses (11,551) (10,913) (6)
Credit impairment (508) (836) 39
Goodwill and other impairment (1,008) (439) (130)
Profit from associates and joint ventures 141 156 (10)
Profit before taxation 5,093 4,286 19
Taxation (1,631) (1,384) (18)
Profit for the period 3,462 2,902 19
Profit attributable to parent company shareholders 3,469 2,948 18
Profit attributable to ordinary shareholders(2) 3,017 2,547 18
Return on ordinary shareholders' tangible equity (%) 8.4 6.8 160bps
Cost-to-income ratio (%) 64.1 66.9 280bps
Net interest margin (%) (adjusted)⁷ 1.67 1.41 26bps
Balance sheet and capital
Total assets 822,844 819,922 -
Total equity 50,353 50,016 1
Average tangible equity attributable to ordinary shareholders(2) 36,098 37,186 (3)
Loans and advances to customers 286,975 310,647 (8)
Customer accounts 469,418 461,677 2
Risk-weighted assets 244,151 244,711 -
Total capital 51,741 53,151 (3)
Total capital ratio (%) 21.2 21.7 (50)bps
Common Equity Tier 1 34,314 34,157 -
Common Equity Tier 1 ratio (%) 14.1 14.0 10bps
Advances-to-deposits ratio (%)3 53.3 57.4 (410)bps
Liquidity coverage ratio (%) 145.0 147.0 (200)bps
Leverage ratio (%) 4.7 4.8 (10)bps
Cents Cents Change¹
Information per ordinary share
Earnings per share- underlying(4) 128.9 97.9 31.0
- reported(4) 108.6 85.9 22.7
Net asset value per share(5) 1,629 1,453 175
Tangible net asset value per share(5) 1,393 1,249 144
Number of ordinary shares at period end (millions) 2,637 2,867 (8)
1 Variance is better/(worse) other than assets, liabilities and
risk-weighted assets. Change is percentage points difference between two
points rather than percentage change for total capital ratio (%), common
equity tier 1 ratio (%), net interest margin (%), advances-to-deposits ratio
(%), liquidity coverage ratio (%), UK leverage ratio (%). Change is cents
difference between two points rather than percentage change for earnings per
share, net asset value per share and tangible net asset value per share
2 Profit/(loss) attributable to ordinary shareholders is after the
deduction of dividends payable to the holders of non-cumulative redeemable
preference shares and Additional Tier 1 securities classified as equity
3 When calculating this ratio, total loans and advances to customers
excludes reverse repurchase agreements and other similar secured lending,
excludes approved balances held with central banks, confirmed as repayable at
the point of stress and includes loans and advances to customers held at fair
value through profit and loss. Total customer accounts include customer
accounts held at fair value through profit or loss
4 Represents the underlying or reported earnings divided by the basic
weighted average number of shares.
5 Calculated on period end net asset value, tangible net asset value and
number of shares
6 Underlying performance for relevant periods in 2022 has been restated
for removal of (i) AME exits (ii) Aviation Finance and (iii) DVA. No change to
reported performance
7 Net interest margin is calculated as adjusted net interest income
divided by average interest-earning assets, annualised
8 Reported performance/results within financial report means amounts
reported under UK-adopted IAS and EU IFRS. In prior periods Reported
performance/results were described as Statutory performance/results
9 Not meaningful
Page 7
Group Chairman's statement
Embedding a culture of excellence to deliver sustained value
During 2023, the Group continued to improve profitability, delivering on our
objective to achieve a double-digit Return on Tangible Equity (RoTE) for the
full year. Our high-growth markets, where we are intent on making further
investment, continue to deliver strongly despite an uncertain picture for the
global economy.
This performance came against a backdrop of rising interest rates in many
large economies, which undoubtedly gave a strong tailwind for the business.
However, it is also a product of our clear strategy, discipline and tireless
execution - a significant achievement for our colleagues, led by our Group
Chief Executive Bill Winters and his Management Team. Their skills and
dedication remain essential to our performance, and my deepest thanks go to
all of them.
We have recently bid a fond farewell to Andy Halford, who formally stepped
down as Group Chief Financial Officer on 3 January 2024. Since his arrival in
the role in 2014, Andy has been a much-valued colleague and friend and made a
phenomenal contribution by helping to steer the business through a challenging
external environment. Under his watch we strengthened our foundations, reset
our risk appetite and redefined the Group's strategy.
He leaves with our very best wishes, and will continue in an advisory role
until his retirement in August. It is with pleasure that we welcome Diego De
Giorgi who joins us as Andy's successor. I am looking forward to working
closely with Diego and Bill to drive further excellence for clients and higher
value for shareholders.
Advancing our strategic and financial goals
I have said before that our objective is to grow income in a strong, safe and
sustainable manner, while maintaining both cost and capital discipline, and I
am delighted to say that was the case last year. We are confident that our
improved RoTE, which reached 10.1 per cent in 2023, will be a milestone on the
way to further long-term success for the Group, underpinned by strong
performance across the business. We grew income 13 per cent on a constant
currency basis while maintaining a strong capital and liquidity position and
positive income-to-cost jaws. We expect our RoTE to steadily increase from 10
per cent, and are targeting 12 per cent in 2026 and to progress thereafter.
The strength of our financial performance affirms that the strategy that we
set out in 2021 is working. We remain focused on investment in high-growth
markets and have made significant progress against our strategic priorities
across Network, Affluent, Mass Retail, and Sustainability.
I am acutely aware of the underperformance of our share price in recent
months, which I believe does not reflect the progress we are making. Both the
Board and the Management Team are absolutely focused on delivering sustained,
long-term value for our shareholders. I believe our solid performance in 2023
gives us a good base from which to do this. As Bill details in the following
pages, we have further sharpened the actions we will take to accelerate
performance and future growth.
Firstly, we will continue to rely on our stronger capabilities to further
enhance returns in our Corporate, Commercial & Institutional Banking and
Consumer, Private & Business Banking businesses, with a focus on driving
income growth in high-returning areas. Secondly, we will improve operational
leverage within the Group, addressing structural inefficiencies and
complexities whilst protecting income. Finally, we will continue to return
substantial capital to shareholders. This year, we are pleased to be able to
provide an increased full-year dividend of 27 cents per share and are
announcing a further share buyback of $1 billion.
Alongside the importance of delivering improved financial performance, our
Purpose and brand promise to be here for good remain cornerstones of our
business. We are keenly aware of our role in supporting our clients and
communities as they anticipate and respond to economic and social challenges.
This is why we remain true to our Stands - Accelerating Zero, Resetting
Globalisation and Lifting Participation - which are delivered through the
execution of our strategy, and which give us an active framework for positive
impact across our footprint.
We updated our net zero roadmap in April 2023, committing to an absolute
emissions target and trajectory for the oil and gas sector. In this year's
Annual Report, we disclose the targets and science-based methodologies for our
financed emissions in eleven of the twelve high-emitting sectors identified as
decarbonisation priorities by the Net Zero Banking Alliance, demonstrating our
commitment to support the transition of the real-world economy.
Page 8
Group Chairman's statement continued
We have also recently announced our decision to become an early adopter of the
Taskforce on Nature-related Financial Disclosures, highlighting the rising
importance of nature and biodiversity as a necessary consideration in
sustainability. Given that our footprint represents some of the most complex
and diverse natural capital in the world, working across our business and with
our clients to preserve, restore and enhance nature is critically important.
It is my honour to be able to act as a voice for our Stands on behalf of the
Group as Co-Chair of the United Nations' Global Investors for Sustainable
Development Alliance, as well as at various global platforms and by engaging
with stakeholders across our markets.
Driving higher standards
The Board remains committed to firmly embedding a culture of excellence across the organisation, building high
standards through a 'one bank' culture of ambition, action and accountability that puts our clients at the heart of all
we do. We are at our best when we harness the full talent and potential of the diverse markets in which we operate.
Both the Board and the Management Team are dedicated to maintaining our status as an employer of choice. That means offering our colleagues a variety of ways to build their skillset, attracting the best talent through our doors with a diverse set of career paths within the Group and progressive employee policies, such as the standardised parental leave announced last year.
As the world continues to change around us, we also recognise the ongoing importance of technology and continuous improvement in maintaining our competitive edge, and in building an innovation-led culture that allows colleagues to try new things within an effective and comprehensive risk management framework. We are intent on capturing the benefits of new, game-changing technologies like artificial intelligence, whilst protecting the information and financial security of our clients.
It has been an extremely active year for the Board, with frequent in-depth
briefings on geopolitical, cyber and sectoral risks, and a sharp focus on
corporate governance. We continue to build out our resilience in both the
financial and non-financial dimensions of risk and compliance across our
varied markets. This gives us the confidence to achieve our strategic goals
and act decisively to grasp new business opportunities.
We continue to maintain a diverse range of skillsets and backgrounds on our
Board. Jasmine Whitbread, long-standing director and impactful former chair of
the Culture and Sustainability Committee, stepped down from the Board at last
year's AGM. As announced on 16 February 2024, Gay Huey Evans will step down
from the Board with effect from 29 February 2024 after serving nine years and
contributing significantly to the Board and its Committees, especially as
Chair of the former Board Financial Crime Risk Committee. Carlson Tong,
another much-valued Board member, will step down from the Board on 9 May 2024,
ahead of the AGM. I would like to thank Jasmine, Gay and Carlson for their
many contributions during their time with us.
On 16 February 2024, we announced that Diane Jurgens will join the Board from
1 March 2024. Diane is a highly experienced and respected technologist who
will bring significant technology and transformation expertise and insight to
the Board having operated across a variety of sectors and the Group's key
markets.
Our dynamic markets
In 2023 I continued to spend time across our markets, seeing their dynamism first-hand and experiencing the ambition of our colleagues as they work together for greater growth.
Guided by our Purpose - to drive commerce and prosperity through our unique diversity - we are investing heavily in fast-growing economies and trade corridors in Asia, Africa and the Middle East, and bringing innovative digital products to new clients. A good example of this is Solv, our e-commerce platform for small and medium-size enterprises. We're also positioning ourselves to be a positive force in the expansion of sectors that will deliver a more sustainable global economy, like renewables and electric vehicles.
I'm more confident than ever that we are investing in the right places for
strong, safe and sustainable growth, and in our role as a connector bank in an
ever more complex and fragmenting world. We provide our clients with the right
solutions gained from deep experience of our markets, and continue to be a
trusted partner for them as they look to seize opportunities across our
footprint.
Page 9
Group Chairman's statement continued
Looking ahead with confidence
We expect to see a 'soft landing' for the world economy in 2024. This is no small achievement as we have witnessed the most aggressive period of monetary policy tightening in decades. This, plus other favourable supply side developments have led to a fall in inflation in most countries, engendering expectations of official interest rate cuts in many economies this year. Growth, in turn, remains resilient, with emerging markets expected to keep growing considerably faster than developed economies, and Asia continuing to lead global growth.
However, one cannot be complacent about the years ahead. The 'last mile' of inflation may prove stickier than expected, and geopolitical risks abound. As we begin 2024, the war between Ukraine and Russia continues, increasing uncertainty for nations in Europe and elsewhere. We see renewed conflict in the Middle East, bringing tragedy to many communities and disruption to the Red Sea, a key chokepoint in global supply chains.
2024 is also a year of major elections in the United States, India and probably the United Kingdom, as well as other markets in our footprint. These all have the potential to affect the economic situation.
With so much at stake, we must take care not to needlessly damage the means of growth and wealth creation. I have frequently spoken in defence of the open, rules-based trade as a lynchpin of global economic growth. This year, the challenges around it remain powerful, with the risk of further fragmentation.
I believe the system of global trade that has been created with such care over many decades is one of humanity's foremost achievements. It is not perfect by any means, but it has arguably brought more opportunity and prosperity to a greater number of people than any other force in history. Like every intricate system, it is easy to damage and hard to rebuild. Safeguarding and making it more inclusive and sustainable requires constant vigilance and cooperation from policymakers, legislators, and the private sector in an evolved, modernised multilateral system.
While the external landscape remains uncertain, we are confident that we are
well positioned to navigate the challenges and seize the opportunities ahead.
Our results in 2023 show we are doing just that. We remain focused on
continuing to deliver excellence for our clients, and sustained value for
shareholders, in 2024 and beyond.
Dr José Viñals
Group Chairman
23 February 2024
Page 10
Group Chief Executive's review
Delivering sustainably higher returns
We produced strong results in 2023, demonstrating the value of our franchise
and delivering our target to push past the 10 per cent Return on Tangible
Equity ('RoTE') milestone. But 10 per cent is not the extent of our ambition.
We have the right strategy, business model and intent to build on this
momentum. We have set out clear actions to deliver sustainably higher returns,
with RoTE increasing steadily from 10 per cent, targeting 12 per cent in 2026,
and to progress thereafter.
Full year 2023 income of $17.4 billion was up 13 per cent on a constant
currency basis, benefiting not only from rising interest rates but also
encouraging underlying business momentum. Good cost discipline has enabled us
to generate significantly positive income-to-cost jaws of 4 per cent for the
year, even with continued underlying investment. Loan impairment declined,
primarily due to reduced impairments from China commercial real estate and
sovereign risks, with the portfolio overall remaining resilient. All this has
helped us grow underlying profit before tax 27 per cent year-on-year, to $5.7
billion, the highest level for ten years.
We remain highly liquid and strongly capitalised. We finished the year with a
Common Equity Tier 1 ('CET1') ratio of 14.1 per cent, above the top of our
target range, allowing us to increase our full-year ordinary dividend by 50
per cent to 27 cents per share. We undertook in February 2022 to return over
$5 billion to shareholders by the end of 2024. With this full-year dividend
and the $1 billion share buyback announced today, we will have exceeded that
target well ahead of schedule.
As we start the new year, I would like to take a moment to thank my friend and
much valued colleague, Andy Halford, who decided to retire this year. Andy has
been a great partner to me and the Board and has successfully helped steer the
Group over the last ten years. I'd also like to extend a warm welcome to Diego
De Giorgi as he takes over as the Group Chief Financial Officer. Diego brings
with him over 30 years of financial services experience and I am sure he will
continue to build on the progress we have made.
Our strategy is driving success
Our strategy is designed to deliver our Purpose: to drive commerce and
prosperity through our unique diversity. We set out four strategic priorities
in early 2021: continue to grow our Network and Affluent client businesses,
return to growth in Mass Retail and advance on all fronts of our
Sustainability agenda. We are making good progress in every area.
• Income from our cross-border Network business grew 31 per cent in 2023,
with standout growth rates in our China offshore corridors to the Middle East
and ASEAN, up 67 per cent and 53 per cent respectively
• We increased the total number of Affluent clients to 2.3 million. This
helped drive significantly higher levels of net new money in 2023, with net
inflows of $29 billion, up 50 per cent, year-on-year, and deliver 24 per cent
growth in income from this client segment
• We grew our Mass Retail client base by over 1 million to 9.5 million.
We have continued to grow our digital banks, Mox in Hong Kong and Trust in
Singapore. They remain two of the fastest growing digital banks globally and
underline our ability to partner and launch differentiated customer
propositions. The Mass Retail business also serves a valuable strategic
purpose as a pipeline for future Affluent clients, with 224,000 of our Mass
Retail clients moving up to Affluent clients in 2023
• Our dedicated Chief Sustainability Office unit acts as a centre of
excellence and a catalyst for the execution of the Group-wide Sustainability
strategy and the achievement of our net zero roadmap, further details of which
are set out in the Annual Report. Our Sustainable Finance franchise generated
over $0.7 billion income in 2023, a year-on-year growth rate of 42 per cent
and we are well on our way to deliver a billion dollars in income by 2025. We
have mobilised $87 billion of sustainable finance since the beginning of 2021,
making good progress as we advance towards our $300 billion target by 2030
Page 11
Group Chief Executive's review continued
Great execution on our 2022 strategic actions
We set out five actions in 2022 designed to accelerate delivery of
double-digit RoTE. The strong execution of these actions over the last two
years, where we have either achieved our targets ahead of plan or they are
well on-track, has enabled us to reach that milestone in 2023.
• We are ahead of schedule to drive improved returns in Corporate,
Commercial & Institutional Banking ('CCIB'). We targeted around a 160
basis points improvement in income return on risk-weighted assets ('IRoRWA')
to 6.5 per cent in 2024. The team exceeded this target in 2023, delivering an
IRoRWA of 7.8 per cent. This was driven by particularly strong growth in
income from Financial Institution clients, which now accounts for 49 per cent
of CCIB income, delivering close to the 50 per cent target one year early. The
team has also successfully executed $24 billion in risk-weighted assets
optimisation over the last two years, exceeding the target of $22 billion. The
completion of the sale of the Aviation Finance business also created further
capacity for CCIB to grow higher returning business
• We are also ahead of our 2024 target to transform profitability in
Consumer, Private and Business Banking ('CPBB'). The team has achieved its 60
per cent cost-to-income target one year ahead of plan, with a nine-percentage
point improvement in 2023. They have delivered $0.4 billion of structural
expense savings from rationalising the branch network, process re-engineering,
headcount efficiencies and further automation
• We have continued to seize the China opportunity, with our China-related
business performing well, despite post-COVID domestic recovery tracking below
expectations. We set a target of doubling the operating profit before tax of
our onshore and offshore China business by the end of 2024 and we almost
achieved that in 2023, generating $1.3 billion. This was driven primarily by
offshore-related income, which delivers significantly higher returns, growing
42 per cent. Our onshore income, despite the domestic headwinds, grew 4 per
cent. Looking forward, we continue to be confident in the long-term
opportunities that China re-opening will generate for our unique franchise
• We continued to create operational leverage, and are on-track to deliver
the three-year $1.3 billion expense savings target, which has helped us absorb
inflationary pressure and continue to invest. Our cost-to-income ratio is down
7 percentage points since the end of 2021 to 63 per cent for 2023, so we are
well advanced towards our target of around 60 per cent by 2024
• Our equity generation and discipline on risk-weighted assets this year
have created capacity for us to continue to deliver substantial shareholder
distributions. With the final ordinary share dividend for 2023 and a new $1
billion share buyback programme starting imminently, means we are well ahead
of our total target of returning in excess of $5 billion by the end of 2024.
We will continue to actively manage the Group's capital position with the
target of a further capital return of at least $5 billion over the next three
years
Building on our achievements to deliver sustainably higher returns
Our unique footprint across the world's most dynamic markets gives us a
strategic advantage and underpins my confidence that we can continue to grow
even in a less supportive interest rate environment. Our objective is to
ensure that income growth translates into structurally higher profitability,
striking a balance between maintaining the diversity that our clients value,
while taking out unnecessary complexity that slows us and drags returns.
We are therefore taking further action in each of our three client businesses
to drive income growth:
• In CCIB we will seek to drive growth in high-returning businesses such
as cross-border income, targeting an 8 to 10 per cent underlying growth rate
over the next three years. Additionally, building on our strength as a top two
network trade bank, we are targeting to grow Trade and Working Capital income
by 6 to 8 per cent between 2024 and 2026. The team is also driving growth in
financing related income (Global Credit and Lending) with a particular focus
on accelerating the originate to distribute strategy, targeting an 8 to 10 per
cent CAGR to 2026
• In CPBB we will build on our strengths in the Affluent client business,
targeting to attract over $80 billion of net new money over the next three
years, a 19 per cent increase from the previous three years. We also intend on
accelerating the growth in our international client business, with the target
of increasing the number of international Affluent clients from 274,000 to
over 375,000 by 2026
• Building on the remarkable momentum in our two digital banks, Mox and
Trust, we are targeting for the Ventures segment to be RoTE accretive by 2026
Page 12
Group Chief Executive's review continued
By executing these actions, we expect to grow income at a compound annual rate
of between 5 and 7 per cent over the next three years, well above the
anticipated rate of growth for the global economy.
We are also taking action to transform the way we operate, addressing
structural inefficiencies and complexity whilst protecting income. Starting
this year, we will run a bank-wide programme called Fit for Growth, to
accelerate our previous efforts to simplify, standardise and digitise our
business. We will fundamentally improve our productivity, client and employee
experience and create capacity to reinvest in incremental growth initiatives.
This programme will save around $1.5 billion of cumulative expenses over the
next three years and we expect to incur a similar amount in terms of the cost
to achieve these permanent organisational and financial benefits. This will
help us to deliver positive income-to-cost jaws in each of the next three
years and keep operating expenses below $12 billion in 2026.
Continuing to deliver strong income growth, combined with improving
operational leverage and maintaining our responsible approach to risk and
capital, means we expect RoTE to increase steadily from 10 per cent, targeting
12 per cent in 2026 and to progress thereafter.
Uniquely positioned and confident in the future
We are in a privileged position to take advantage of significant growth
opportunities that will continue to come from the markets in our footprint,
generating value for our clients and the communities in which we operate.
Whilst we expect global growth to stay below potential at 2.9 per cent in
2024, as high interest rates put a drag on consumers as well as investment
spending, Asia is likely to be the fastest-growing region continuing to drive
global growth, expanding by 4.9 per cent. Easing inflation is likely to allow
major central banks to start cutting rates in the second half of 2024, with a
focus on supporting softening economic activity.
Downside risks to this outlook include a sharper than expected slowdown in
major economies, sustained inflationary pressures, a sluggish housing market
in China and increased geopolitical tensions. But we also see significant
opportunities emerging:
• Higher capex to meet sustainability targets and moves towards
digitalisation could boost productivity growth
• Within emerging markets, countries in Asia are best placed to take
advantage of digitalisation, including generative AI
• Relatively younger populations, as well as the adoption of digital
technology, will allow emerging markets to become increasingly important to
global growth.
Our share price reflects little of our optimism about prospects and seems
heavily influenced by the downside concerns mentioned above. The concerns are
real, and we take them seriously. We maintain a strong capital position and
liquidity to absorb any adverse impact on us and our clients. We believe that
the value of our franchise will become increasingly clear to the broader
market as we continue to grow our profits and exceed market expectations in
those very areas of most concern.
In conclusion: significant progress with ambition for more
We delivered a strong performance in 2023, achieving our 10 per cent RoTE
milestone, while maintaining a strong balance sheet and a robust capital
position. But we know we must do more.
We have made significant progress on our five strategic actions, with most
targets either delivered ahead of plan or well on-track, providing a strong
platform to grow and drive sustainably higher returns. And while much external
uncertainty persists, we are optimistic for the markets and strength of our
businesses in our footprint. But we are far from complacent, and my Management
Team and I remain focused on delivering on our targets, seizing the growth
opportunities we have, driving a culture of excellence and creating
exceptional long-term value for our clients, shareholders and communities.
Page 13
Group Chief Executive's review continued
Finally, I would like to acknowledge the remarkable efforts of our colleagues
again this year. Their impressive dedication to our customers and the
communities that we serve help to manifest our brand promise to be here for
good.
Bill Winters
Group Chief Executive
23 February 2024
Page 14
Group Chief Financial Officer's review
Summary of financial performance
The Group delivered on its key financial objective for 2023, achieving a 10
per cent underlying return on tangible equity supported by significant
progress on the five strategic actions set out in 2022. Underlying profit
before tax increased 27 per cent at constant currency as the Group delivered 4
per cent positive income-to-cost jaws. Income grew 13 per cent on a constant
currency basis as the Group took advantage of the favourable interest rate
environment. Expenses increased 8 per cent at constant currency, while the
Group incurred a loan loss rate of 17 basis points, well below its historical
average. The Group reduced the carrying value of its investment in China Bohai
Bank ('Bohai') by $850 million and booked a $262 million net gain from selling
its Aviation Finance business. The Group remains well-capitalised and highly
liquid with a liquidity coverage ratio of 145 per cent and a CET1 ratio of
14.1 per cent, above its target range, enabling the Board to announce a
further $1 billion share buyback programme. The terms of the buyback will be
published, and the programme will start shortly.
All commentary that follows is on an underlying basis and comparisons are made
to the equivalent period in 2022 on a reported currency basis, unless
otherwise stated.
• Operating income of $17.4 billion increased by 10 per cent year-on-year
or 13 per cent on a constant currency basis as the Group benefitted from the
positive impact of rising interest rates, and a partial recovery in Wealth
Management partly offset by losses from hedges
• Underlying net interest income increased 20 per cent or 23 per cent on a
constant currency basis as the net interest margin increased 26 basis points
or 18 per cent with the Group having increased its pricing on assets and the
yield on its Treasury portfolio more quickly than it repriced its liability
base, reflecting strong pricing discipline and passthrough rate management as
interest rates increased in key footprint currencies. This was partly offset
by an additional 15 basis points drag from short-term and structural hedges
due to rising interest rates, 16 basis points headwind from migration into
higher priced term deposits from lower rate paid current and savings accounts
('CASA') as well as adverse changes in the mix between Treasury and customer
assets
• Underlying non NII was stable, or 2 per cent higher on a constant
currency basis. This was in part due to a strong Wealth Management
performance, which was up 10 per cent on a constant currency basis as it
benefitted from a steady flow of new to bank clients and net new money. An
accounting asymmetry resulting from Treasury management of business as usual
FX positions also contributed to an increase in non NII, with a partial offset
from reduced net interest income
• Operating expenses excluding the UK bank levy increased 7 per cent, or 8
per cent on a constant currency basis, reflecting the Group's continued
investment into business growth initiatives, strategic investments and higher
inflation partly funded by cost efficiency actions. The Group generated 4 per
cent positive income-to-cost jaws at constant currency and the cost-to-income
ratio improved by 2 percentage points to 63 per cent
• Credit impairment was a $528 million charge, a reduction of $308 million
representing an annualised loan loss rate of 17 basis points. The impairment
charge includes $282 million in relation to the China commercial real estate
sector, $354 million in the Consumer, Private and Business Banking ('CPBB')
portfolio and $85 million from Ventures partly offset by a $45 million net
release from sovereign-related exposures and a net release in other Corporate
exposures
• Other impairment increased by $91 million to $130 million primarily
relating to write-off of software assets
• Profit from associates and joint ventures decreased 44 per cent to $94
million reflecting a lower profit share from Bohai
• Restructuring, other items and goodwill and other impairment totalled
$585 million. This included an impairment charge of $850 million reflecting a
reduction in the carrying value of the Group's investment in Bohai following a
refresh of the value-in-use calculation. Other items include the sale of the
Aviation Finance business, of which there was a gain on sale of $309 million
on the leasing business and a loss of $47 million in relation to a sale of a
portfolio of Aviation loans. Restructuring charges of $14 million include the
impact of actions to transform the organisation to improve productivity,
partly offset by profits from businesses classified as held-for-sale.
Movements in the Debit Valuation Adjustment ('DVA') were a positive $17
million
Page 15
Group Chief Financial Officer's review continued
• Taxation was $1,631 million on a reported basis, with an underlying
effective tax rate of 29.1 per cent down from 29.9 per cent in the prior year
reflecting a favourable change in the geographic mix of profits partly offset
by increased losses in the United Kingdom where the Group currently does not
recognise a tax benefit
• Underlying return on tangible equity increased by 240 basis points to
10.1 per cent reflecting an increase in profits and lower average tangible
equity benefitting from distributions to shareholders and movements in
reserves primarily through the course of 2022
• Underlying basic earnings per share ('EPS') increased 32 per cent to
128.9 cents and reported EPS of 108.6 cents increased by 26 per cent.
• A final ordinary dividend per share of 21 cents has been proposed taking
the full-year total to 27 cents, a 50 per cent increase. The Group also
completed two share buyback programmes totalling $2 billion which along with a
new share buyback programme of $1 billion to be announced imminently. Since 1
January 2022, total shareholder distributions announced total $5.5 billion
Summary of financial performance
4Q'23 4Q'22⁴ Change Constant currency change(1) 3Q'23 Change Constant currency change(1) FY23 FY22⁴ Change Constant currency change(1)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Underlying net interest income(5) 2,392 2,256 6 6 2,388 - - 9,557 7,967 20 23
Underlying non NII(5) 1,632 1,509 8 8 2,015 (19) (19) 7,821 7,795 - 2
Underlying operating income 4,024 3,765 7 7 4,403 (9) (8) 17,378 15,762 10 13
Other operating expenses (2,754) (2,630) (5) (2) (2,770) 1 - (11,025) (10,307) (7) (8)
UK bank levy (108) (107) (1) 5 - nm⁷ nm⁷ (111) (102) (9) (2)
Underlying operating expenses (2,862) (2,737) (5) (2) (2,770) (3) (4) (11,136) (10,409) (7) (8)
Underlying operating profit before impairment and taxation 1,162 1,028 13 22 1,633 (29) (29) 6,242 5,353 17 22
Credit impairment (62) (340) 82 77 (294) 79 76 (528) (836) 37 32
Other impairment (41) (38) (8) (3) (26) (58) (52) (130) (39) nm⁷ nm⁷
(Loss)/profit from associates and joint ventures (3) (2) (50) (50) 3 nm⁷ nm⁷ 94 167 (44) (43)
Underlying profit/(loss) before taxation 1,056 648 63 74 1,316 (20) (20) 5,678 4,645 22 27
Restructuring (63) (90) 30 31 (7) nm⁷ nm⁷ (14) (99) 86 89
Goodwill and Other Impairment(3) (153) (322) 52 52 (697) 78 78 (850) (322) (164) (164)
DVA 35 (133) 126 127 21 67 67 17 42 (60) (60)
Other items⁶ 262 20 nm⁷ nm⁷ - nm⁷ nm⁷ 262 20 nm⁷ nm⁷
Reported profit before taxation 1,137 123 nm⁷ nm⁷ 633 80 76 5,093 4,286 19 24
Taxation (199) (387) 49 49 (494) 60 59 (1,631) (1,384) (18) (25)
Profit/(loss) for the period 938 (264) nm⁷ nm⁷ 139 nm⁷ nm⁷ 3,462 2,902 19 24
Net interest margin (%)(2) 1.70 1.58 12 1.63 7 1.67 1.41 26
Underlying return on tangible equity (%)(2,3) 9.4 2.7 672 7.0 240 10.1 7.7 240
Underlying earnings per share (cents)(2,3) 30.4 7.7 nm⁷ 23.2 31 128.9 97.9 32
1. Comparisons presented on the basis of the current period's transactional
currency rate, ensuring like-for-like currency rates between the two periods
2. Change is the basis points ('bps') difference between the two periods
rather than the percentage change
3. Goodwill and other impairment include $850 million (2022: $308 million)
impairment charge relating to the Group's investment in its associate China
Bohai Bank ('Bohai')
4. Underlying performance for relevant periods in 2022 has been restated for
the removal of (i) exit markets and businesses in AME (ii) Aviation Finance
and (iii) DVA. No change to reported performance
5. To be consistent with how we the compute Net Interest Margin ('NIM'), and
to align with the way we manage our business, we have changed our definition
of Underlying Net Interest Income ('NII') and Underlying non NII. The
adjustments made to NIM, including interest expense relating to funding our
trading book, will now be shown against Underlying Non NII rather than
Underlying NII. Prior periods have been restated. There is no impact on total
income
6. Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $309 million on the leasing business and a loss of
$47 million in relation to a sale of a portfolio of Aviation loans
7. Not meaningful
Page 16
Group Chief Financial Officer's review continued
Reported financial performance summary
4Q'23 4Q'22 Change Constant currency change(1) 3Q'23 Change Constant currency change(1) FY23 FY22 Change Constant currency change(1)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Net interest income 1,860 2,023 (8) (7) 1,925 (3) (3) 7,769 7,593 2 5
Non NII 2,509 1,741 44 44 2,598 (3) (3) 10,250 8,725 17 20
Reported operating income 4,369 3,764 16 17 4,523 (3) (3) 18,019 16,318 10 13
Reported operating expenses (3,013) (2,889) (4) (2) (2,870) (5) (6) (11,551) (10,913) (6) (7)
Reported operating profit before impairment and taxation 1,356 875 55 70 1,653 (18) (18) 6,468 5,405 20 25
Credit impairment (55) (346) 84 80 (292) 81 78 (508) (836) 39 34
Goodwill & Other impairment (197) (393) 50 50 (734) 73 73 (1,008) (439) (130) (130)
Profit/(loss) from associates and 33 (13) nm³ nm³ 6 nm³ nm³ 141 156 (10) (10)
joint ventures
Reported profit before taxation 1,137 123 nm³ nm³ 633 80 75 5,093 4,286 19 24
Taxation (199) (387) 49 49 (494) 60 59 (1,631) (1,384) (18) (25)
Profit/(loss) for the period 938 (264) nm³ nm³ 139 nm³ nm³ 3,462 2,902 19 24
Reported return on tangible equity (%)(2) 10.0 (3.2) 1,320 (0.4) 1,040 8.4 6.8 160
Reported earnings per share (cents) 34.0 (10.1) nm³ (1.3) nm³ 108.6 85.9 26
1 Comparisons presented on the basis of the current period's
transactional currency rate, ensuring like-for-like currency rates between the
two periods
2 Change is the basis points ('bps') difference between the two
periods rather than the percentage change
3 Not meaningful
Operating income by product
4Q'23 4Q'22² Change Constant currency change(1) 3Q'23 Change Constant currency change(1) FY23 FY22² Change Constant currency change(1)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Transaction Banking 1,481 1,254 18 18 1,496 (1) (1) 5,837 3,874 51 54
Trade & Working capital 304 316 (4) (4) 325 (6) (7) 1,294 1,343 (4) (1)
Cash Management 1,177 938 25 26 1,171 1 1 4,543 2,531 79 83
Financial Markets 1,041 1,147 (9) (8) 1,253 (17) (17) 5,099 5,345 (5) (2)
Macro Trading 538 628 (14) (13) 634 (15) (15) 2,827 2,965 (5) (1)
Credit Markets 409 436 (6) (6) 472 (13) (14) 1,803 1,761 2 5
Credit Trading 105 147 (29) (30) 137 (23) (26) 554 488 14 17
Financing Solutions & Issuance³ 304 289 5 6 335 (9) (9) 1,249 1,273 (2) -
Financing & Securities Services³ 94 83 13 17 147 (36) (32) 469 619 (24) (22)
Lending & Portfolio Management 111 112 (1) (6) 121 (8) (9) 498 558 (11) (9)
Wealth Management 412 358 15 16 526 (22) (21) 1,944 1,796 8 10
Retail Products 1,238 1,147 8 9 1,279 (3) (3) 4,969 4,027 23 26
CCPL & other unsecured lending 288 294 (2) (1) 297 (3) (3) 1,161 1,202 (3) (1)
Deposits 899 805 12 13 919 (2) (2) 3,437 2,021 70 74
Mortgage & Auto 17 12 42 13 31 (45) (42) 236 633 (63) (62)
Other Retail Products 34 36 (6) (11) 32 6 (3) 135 171 (21) (19)
Treasury (235) (173) (36) (38) (274) 14 14 (902) 337 nm⁴ nm⁴
Other (24) (80) 70 68 2 nm⁴ nm⁴ (67) (175) 62 52
Total underlying operating income 4,024 3,765 7 7 4,403 (9) (8) 17,378 15,762 10 13
1 Comparisons presented on the basis of the current period's
transactional currency rate, ensuring like-for-like currency rates between the
two periods
2. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
3. Shipping Finance is now reported under Financing Solutions &
Issuance which was reported under Financing & Securities Services in 2022
4 Not meaningful
The operating income by product commentary that follows is on an underlying
basis and comparisons are made to the equivalent period in 2022 on a constant
currency basis, unless otherwise stated.
Page 17
Group Chief Financial Officer's review continued
Transaction Banking income increased 54 per cent with Cash Management income
up 83 per cent reflecting strong pricing discipline and passthrough rate
management to take advantage of a rising interest rate environment. Trade
& Working Capital decreased 1 per cent, reflecting lower balance sheet and
contingent volumes due to a reduction in economic activity and clients'
preference for local currency financing provided by local banks. This was
partly offset by higher margins as the Group focused on higher-returning trade
products.
Financial Markets income decreased 2 per cent and was up 3 per cent excluding
the non-repeat of $244 million gain on mark-to-market liabilities in 2022.
Flow income grew by 7 per cent which was more than offset by the 15 per cent
reduction in episodic income, driven by subdued market volatility, reduced
issuances and the non-repeat of prior year fair value gains on mark-to-market
liabilities. Macro Trading was down 1 per cent with declines in FX and
Commodities partly offset by a double-digit increase in Rates from an expanded
product offering. Credit Markets income was up 5 per cent primarily from
higher Credit Trading income. Financing & Security Services income was
down 22 per cent as the benefit of higher interest rates on Security Services
balances was offset by negative movements in XVA and the non-repeat of
mark-to-market gains.
Lending and Portfolio Management income decreased 9 per cent reflecting the
impact of risk-weighted assets optimisation actions which contributed to lower
balances and an increase in portfolio management costs.
Wealth Management income grew 10 per cent with Bancassurance up 17 per cent
and Treasury Products up 16 per cent partly offset by lower income from Wealth
Management Lending which was down 15 per cent on the back of client
deleveraging and margin compression. There was continued strong growth in net
new sales, which totalled $14 billion and offset adverse market movements as
Wealth Management assets under management remained broadly stable.
Retail Products income increased 26 per cent. Deposits income was up 74 per
cent due to active passthrough rate management in a rising interest rate
environment partly offset by migration of Retail CASA balances into Time
Deposits. Mortgage & Auto income decreased 62 per cent on the back of
lower volumes and the impact of the Best Lending Rate cap in Hong Kong
restricting the ability to reprice mortgages, despite an increase in funding
costs from higher interest rates. CCPL income decreased 1 per cent reflecting
reduced margins from increased funding costs partly offset by increased
balances, driven by partnerships and the new digital banks.
Treasury income was a $902 million loss primarily due to losses from
structural and short-term hedges in a rising interest rate environment. The
remaining short-term hedges mature in February 2024.
Profit before tax by client segment and geographic region
4Q'23 4Q'22(2) Change Constant currency change(1) 3Q'23 Change Constant currency change(1) FY23 FY22(2) Change Constant currency change(1)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Corporate, Commercial & Institutional Banking 1,266 971 30 35 1,255 1 - 5,436 3,990 36 42
Consumer Private & Business Banking 445 398 12 15 669 (33) (33) 2,487 1,593 56 60
Ventures (133) (127) (5) (5) (117) (14) (16) (408) (363) (12) (12)
Central & other items (segment) (522) (594) 12 11 (491) (6) (6) (1,837) (575) nm³ nm³
Underlying profit/(loss) before taxation 1,056 648 63 74 1,316 (20) (20) 5,678 4,645 22 27
Asia 928 787 18 15 1,063 (13) (13) 4,740 3,616 31 32
Africa & Middle East 385 91 nm³ nm³ 273 41 39 1,311 792 66 90
Europe & Americas (229) (56) nm³ nm³ (90) (154) (163) (330) 834 (140) (139)
Central & other items (region) (28) (174) 84 90 70 (140) (133) (43) (597) 93 95
Underlying profit/(loss) before taxation 1,056 648 63 74 1,316 (20) (20) 5,678 4,645 22 27
1 Comparisons presented on the basis of the current period's
transactional currency rate, ensuring like-for-like currency rates between the
two periods
2. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
3 Not meaningful
The client segment and geographic region commentary that follows is on an
underlying basis and comparisons are made to the equivalent period in 2022 on
a constant currency basis, unless otherwise stated.
Page 18
Group Chief Financial Officer's review continued
Corporate, Commercial & Institutional Banking ('CCIB') profit increased 42
per cent. Income grew 20 per cent with Cash Management benefitting from
disciplined pricing initiatives in a rising interest rate environment partly
offset by lower episodic income within Financial Markets and lower Lending
income as CCIB delivered on its RWA optimisation initiatives. Expenses were 10
per cent higher while credit impairment decreased $302 million with lower
charges in relation to the China commercial real estate sector and releases on
historic provisions within the remaining portfolio.
Consumer, Private & Business Banking ('CPBB') profit increased 60 per
cent, with income up 22 per cent, benefitting from higher interest rates on
Retail Deposits income and a recovery in Wealth Management. This was partly
offset by lower Mortgage income negatively impacted by the Best Lending Rate
cap in Hong Kong. Expenses increased 6 per cent while credit impairment was
$92 million higher.
Ventures loss increased 12 per cent to $408 million, reflecting the Group's
continued investment in transformational digital initiatives. Income increased
five-fold to $156 million while expenses grew by 27 per cent. This resulted in
a lower operating loss before impairment year-on-year. The impairment charge
increased $69 million to $85 million reflecting increased bankruptcy related
write-offs in Mox where credit criteria have now been adjusted to reduce the
current elevated delinquency rate.
Central & other items (segment) recorded a loss of $1.8 billion as income
declined by $1.3 billion mostly reflecting the losses from structural and
short-term hedges booked within Treasury. Expenses increased by $43 million
while there was a net release in credit impairment primarily relating to
sovereign-related exposures. Associate income reduced by $65 million
reflecting lower profits at Bohai.
Asia profits increased 32 per cent as income grew 15 per cent, expenses
increased by 8 per cent and credit impairments reduced by $146 million. The
income growth reflects strong double-digit increases across Cash Management,
Retail Deposits and Wealth Management partly offset by lower Mortgage income
and a loss in Treasury Markets. The profit share from Bohai reduced by $65
million. The lower credit impairment charge reflects in part a lower level of
impairments booked in the year relating to the China commercial real estate
sector.
Africa & Middle East ('AME') profits increased 90 per cent as income
increased 26 per cent with strong growth in Cash Management and Retail Deposit
income partly offset by a loss in Treasury Markets following de-risking
actions in certain markets. Expenses grew 6 per cent while credit impairment
charges were a net release of $91 million, a $210 million reduction,
reflecting a non-repeat of the prior year's sovereign-related impairments and
releases relating to historic Corporate provisions.
Europe & Americas recorded a loss of $330 million as income reduced by 40
per cent, reflecting the increased cost of hedges within Treasury whilst
strong growth in Transaction Banking income was partly offset by lower
Financial Markets income. Expenses increased 12 per cent reflecting the impact
of inflation and higher investment spend. There was a $59 million reduction in
credit impairment releases.
Central & other items (region) recorded a loss of $43 million compared to
a $597 million loss in the prior year. This improvement is mainly due to
higher returns paid to Treasury on the equity provided to the regions in a
rising interest rate environment while expenses increased by 8 per cent.
Adjusted net interest income and margin
4Q'23 4Q'22 Change¹ 3Q'23 Change FY23 FY22 Change¹
$million
$million
%
$million
%
$million
$million
$%
Adjusted net interest income(2) 2,397 2,256 6 2,380 1 9,547 7,976 20
Average interest-earning assets 558,183 568,302 (2) 579,713 (4) 572,520 565,370 1
Average interest-bearing liabilities 537,916 524,610 3 548,297 (2) 540,350 525,351 3
Gross yield (%)(3) 4.98 3.76 122 5.06 (8) 4.76 2.70 206
Rate paid (%)(3) 3.40 2.36 104 3.63 (23) 3.27 1.38 189
Net yield (%)(3) 1.58 1.40 18 1.43 15 1.49 1.32 17
Net interest margin (%)(3,4) 1.70 1.58 12 1.63 7 1.67 1.41 26
1 Variance is better/(worse) other than assets and liabilities which
is increase/(decrease)
2 Adjusted net interest income is reported net interest income less
funding costs for the trading book and financial guarantee fees on
interest-earning assets
3 Change is the basis points (bps) difference between the two periods
rather than the percentage change
4 Adjusted net interest income divided by average interest-earning
assets, annualised
Page 19
Group Chief Financial Officer's review continued
Adjusted net interest income increased 20 per cent driven by an 18 per cent
increase in the net interest margin, which averaged 167 basis points in the
year, 26 basis points year-on-year uplift benefiting from a rapid increase in
policy interest rates across many of our markets slightly offset by an adverse
change in asset mix. The net interest margin was also depressed by loss making
hedges within Treasury and an accounting asymmetry from Treasury's business as
usual management of FX positions within its portfolio.
• Average interest-earning assets grew 1 per cent, or 2 per cent excluding
the impact of currency translation and risk-weighted asset optimisation
actions, reflecting an increase in cash and balances at central banks partly
offset by lower customer loan balances. Gross yields increased 206 basis
points compared with the average in the prior year
• Average interest-bearing liabilities increased 3 per cent, or 4 per cent
excluding the impact of currency translation, reflecting an increase in
customer accounts while the rate paid on liabilities increased 189 basis
points compared with the average in the prior year
Credit risk summary
Income statement (Underlying view)
4Q'23 4Q'22(2) Change(1) 3Q'23 Change(1) FY23 FY22(2) Change(1)
$million
$million
%
$million
%
$million
$million
%
Total credit impairment charge/(release)(3) 62 340 (82) 294 (79) 528 836 (37)
Of which stage 1 and 2(3) 4 235 (98) 101 (96) 138 407 (66)
Of which stage 3(3) 58 105 (45) 193 (70) 390 429 (9)
1 Variance is increase/(decrease) comparing current
reporting period to prior reporting period
2 Underlying credit impairment has been restated for the
removal of (i) exit markets and businesses in AME and (ii) Aviation Finance.
No change to reported credit impairment
3 Refer Group Chief Risk Officer's section
Balance sheet
31.12.23 30.09.23 Change(1) 30.06.23 Change(1) 31.12.22 Change(1)
$million
$million
%
$million
%
$million
%
Gross loans and advances to customers(2) 292,145 286,531 2 295,508 (1) 316,107 (8)
Of which stage 1 273,692 266,590 3 277,711 (1) 295,219 (7)
Of which stage 2 11,225 12,431 (10) 10,110 11 13,043 (14)
Of which stage 3 7,228 7,510 (4) 7,687 (6) 7,845 (8)
Expected credit loss provisions (5,170) (5,522) (6) (5,371) (4) (5,460) (5)
Of which stage 1 (430) (458) (6) (451) (5) (559) (23)
Of which stage 2 (420) (440) (5) (400) 5 (444) (5)
Of which stage 3 (4,320) (4,624) (7) (4,520) (4) (4,457) (3)
Net loans and advances to customers 286,975 281,009 2 290,137 (1) 310,647 (8)
Of which stage 1 273,262 266,132 3 277,260 (1) 294,660 (7)
Of which stage 2 10,805 11,991 (10) 9,710 11 12,599 (14)
Of which stage 3 2,908 2,886 1 3,167 (8) 3,388 (14)
Cover ratio of stage 3 before/after collateral (%)(3) 60 / 76 62 / 79 (2) / (3) 59 / 78 1 / (2) 57 / 76 3 / 0
Credit grade 12 accounts ($million) 2,155 1,132 90 1,316 64 1,574 37
Early alerts ($million) 5,512 5,403 2 4,443 24 4,967 11
Investment grade corporate exposures (%)(3) 73 74 (1) 74 (1) 76 (3)
1 Variance is increase/(decrease) comparing current reporting period to
prior reporting period
2 Includes reverse repurchase agreements and other similar secured lending
held at amortised cost of $13,996 million at 31 December 2023, $10,267 million
at 30 September 2023, $10,950 million at 30 June 2023 and $24,498 million at
31 December 2022
3 Change is the percentage points difference between the two points
rather than the percentage change
Credit quality remained resilient, reflected in lower year-on-year credit
impairment charges and an improvement in a number of underlying credit
metrics. The Group continues to actively manage the credit portfolio whilst
remaining alert to a volatile and challenging external environment including
increased geopolitical tensions which has led to idiosyncratic stress in a
select number of markets and industry sectors.
Page 20
Group Chief Financial Officer's review continued
Credit impairment was a $528 million charge, down 37 per cent year-on-year,
representing a loan loss rate of 17 basis points. There was a $282 million
impairment charge relating to the China commercial real estate sector,
including a $32 million decrease in the management overlay which now totals
$141 million. The decrease in the management overlay reflects repayments and
loans moving into stage 3. The Group has provided $1.2 billion in total, in
relation to China commercial real estate sector primarily over the last three
years. There was a net release of $45 million relating to sovereign
downgrades. Excluding the China commercial real estate portfolio and
sovereign-related exposures, there was a net release relating to Corporate
exposures, primarily historical provisions. CPBB charge of $354 million
reflects an uptick in delinquency trends across the year and the $85 million
charge in Ventures is primarily from portfolio growth and increased bankruptcy
related write-offs in Mox where credit criteria have now been adjusted to
reduce the current elevated delinquency rate.
Gross stage 3 loans and advances to customers of $7.2 billion were 8 per cent
lower year-on-year as repayments, client upgrades and write-offs more than
offset new inflows. Credit-impaired loans represented 2.5 per cent of gross
loans and advances, flat on the prior year.
The stage 3 cover ratio before collateral of 60 per cent increased by 3
percentage points, while the cover ratio post collateral at 76 per cent was
flat on the prior year, with the cover ratio before collateral increasing due
to an increase in stage 3 provisions in relation to the China commercial real
estate sector and a reduction in gross stage 3 balances.
Credit grade 12 balances have increased by 37 per cent to $2.2 billion
substantially from a change in instrument on an existing sovereign exposure
with no increase in risk. Excluding this temporary inflow, credit grade 12
balances declined 24 per cent reflecting both improvements into stronger
credit grades and downgrades to stage 3. Early Alert accounts of $5.5 billion
have increased by 11 per cent, reflecting new inflows relating to a select
number of clients including sovereign-related exposures. The Group is
continuing to carefully monitor its exposures in vulnerable sectors and select
markets, given the unusual stresses caused by the currently challenging
macro-economic environment.
The proportion of investment grade corporate exposures fell by 3 percentage
points to 73 per cent, mainly due to a reduction in repurchase agreement
balances across various central clearing counterparties.
Restructuring, goodwill impairment and other items
FY23 FY22¹ 4Q'23
Restructuring Goodwill DVA Other items³ Restructuring Goodwill DVA Other items Restructuring Goodwill DVA Other items³
$million
and other impairment²
$million
$million
$million
and other impairment²
$million
$million
$million
and other impairment
$million
$million
$million
$million
$million
Operating income 362 - 17 262 494 - 42 20 48 - 35 262
Operating expenses (415) - - - (504) - - - (151) - - -
Credit impairment 20 - - - - - - - 7 - - -
Other impairment (28) (850) - - (78) (322) - - (3) (153) - -
Profit from associates and 47 - - - (11) - - - 36 - - -
joint ventures
Loss before taxation (14) (850) 17 262 (99) (322) 42 20 (63) (153) 35 262
1. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Goodwill and other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank ('Bohai')
3. Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $309 million on the leasing business and a loss of
$47 million in relation to a sale of a portfolio of Aviation loans
The Group's reported performance is adjusted for profits or losses of a
capital nature, amounts consequent to investment transactions driven by
strategic intent, other infrequent and/or exceptional transactions that are
significant or material in the context of the Group's normal business earnings
for the period and items which management and investors would ordinarily
identify separately when assessing underlying performance period-by period.
Page 21
Group Chief Financial Officer's review continued
In 2022 the Group announced the exit of seven markets in the AME region and
will focus solely on the CCIB segment in two more markets. In 2023, the Group
completed the sale of its Jordan business, closed its Lebanon representative
office and signed agreements for sale of the remaining exit markets.
Additionally, the Group sold its global Aviation Finance leasing business to
Aircraft Leasing Company ('AviLease') for proceeds of approximately $3.6
billion including $0.7 billion consideration and $2.9 billion repayment of net
intra-group financing, giving rise to a gain on disposal of $309 million. The
$1 billion Aviation loan business was sold separately, giving rise to a loss
on disposal of $47 million. Both of these transactions are recorded in Other
Items. As a result of these disposals, effective 1st January 2023, the Group
has not included the exit markets and the Aviation Finance business within the
Group's underlying operating profit before taxation but reported them within
restructuring.
The Group has also classified movements in the debit valuation adjustment
('DVA') out of its underlying operating profit before taxation and into Other
Items. To aid comparisons with prior periods the Group has removed the exit
markets, Aviation Finance business and DVA from its underlying operating
profit before taxation for 2022.
Restructuring loss of $14 million reflects the impact of actions to transform
the organisation to improve productivity, primarily additional redundancy
charges, technology simplification and optimising the Group's property
footprint. This was partly offset by the profits from the AME exit markets and
Aviation Finance business before the completion of their exit from the Group.
Other impairment of $850 million is in relation to a further reduction in the
carrying value of the Group's investment in its associate Bohai, to align to a
lower value-in-use computation following banking industry challenges and
property market uncertainties in Mainland China, that may impact Bohai's
future profitability. The carrying value of the Group's investment in Bohai
has reduced to $0.7 billion from $1.5 billion.
Movements in DVA were a positive $17 million driven by the widening of the
Group's asset swap spreads on derivative liability exposures. The portfolio
subject to DVA did not change materially during the year.
Balance sheet and liquidity
31.12.23 30.09.23 Change(1) 30.06.23 Change(1) 31.12.22 Change(1)
$million
$million
%
$million
%
$million
%
Assets
Loans and advances to banks 44,977 46,111 (2) 44,602 1 39,519 14
Loans and advances to customers 286,975 281,009 2 290,137 (1) 310,647 (8)
Other assets 490,892 498,713 (2) 503,972 (3) 469,756 4
Total assets 822,844 825,833 - 838,711 (2) 819,922 -
Liabilities
Deposits by banks 28,030 29,744 (6) 28,560 (2) 28,789 (3)
Customer accounts 469,418 453,157 4 469,567 - 461,677 2
Other liabilities 275,043 294,576 (7) 290,903 (5) 279,440 (2)
Total liabilities 772,491 777,477 (1) 789,030 (2) 769,906 -
Equity 50,353 48,356 4 49,681 2 50,016 1
Total equity and liabilities 822,844 825,833 - 838,711 (2) 819,922 -
Advances-to-deposits ratio (%)(2) 53.3% 54.5% 53.6% 57.4%
Liquidity coverage ratio (%) 145% 156% 164% 147%
1 Variance is increase/(decrease)comparing current reporting period
to prior reporting periods
2 The Group now excludes $20,710 million held with central banks
(30.09.23: $21,241 million, 30.06.23: $24,749 million, 31.12.22: $20,798
million) that has been confirmed as repayable at the point of stress
Page 22
Group Chief Financial Officer's review continued
The Group's balance sheet remains strong, liquid and well diversified.
• Loans and advances to customers decreased 8 per cent, or $24 billion to
$287 billion as at 31 December 2023 but declined 1 per cent on an underlying
basis. The underlying reduction excludes the impact of $12 billion decrease in
Treasury and securities backed loans held to collect, $7 billion reduction
from risk-weighted asset optimisation actions undertaken by CCIB and a $1
billion reduction from currency translation
• Customer accounts increased $8 billion to $469 billion and up 2%
excluding the $2 billion impact of currency translation. Retail time deposits
increased $18 billion and Cash Management balances increased $11 billion
partly offset by a $18 billion decrease in Corporate Term Deposits
• Other assets increased 4 per cent, or $21 billion from 31 December 2022
with a $41 billion increase in financial assets held at fair value through
profit or loss, primarily reverse repurchase agreements and debt securities
and other eligible bills. Cash and balances at central banks increased $12
billion. This was partly offset by a $13 billion reduction in derivative
balances and a $8 billion reduction in investment securities fair valued
through other comprehensive income
• Other liabilities decreased 2 per cent, or $4 billion from 31 December
2022 with a $14 billion decrease in derivative balances partly offset by a $10
billion increase in repurchase agreements
The advances-to-deposits ratio decreased to 53.3 per cent from 57.4 per cent
at 31 December 2022 reflecting the reduction in loans and advances to
customers. The liquidity coverage ratio decreased 2 percentage points to 145
per cent as at 31 December 2023 after increasing in the first half of the year
as the banking industry as a whole navigated turbulent external market
conditions and remains well above the minimum regulatory requirement of 100
per cent.
Risk-weighted assets
31.12.23 30.09.23 Change(1) 30.06.23 Change(1) 31.12.22 Change(1)
$million
$million
%
$million
%
$million
%
By risk type
Credit risk 191,423 188,294 2 197,151 (3) 196,855 (3)
Operational risk 27,861 27,861 - 27,861 - 27,177 3
Market risk 24,867 25,351 (2) 24,105 3 20,679 20
Total RWAs 244,151 241,506 1 249,117 (2) 244,711 -
1 Variance is increase/(decrease) comparing current reporting period
to prior reporting periods
Total risk-weighted assets ('RWA') of $244.2 billion were broadly flat in
comparison to 31 December 2022.
• Credit risk RWA decreased by $5.4 billion to $191.4 billion. There was a
$10.3 billion reduction from optimisation actions, relating to the CCIB
low-returning portfolio, a $2.1 billion reduction from other RWA efficiency
actions, $2.7 billion reduction from currency translation, and a $1.1 billion
reduction from model and methodology changes. The impairment of Bohai further
reduced RWAs by $2.1 billion and the sale of the Aviation Finance business by
a further $1.6 billion. This was partly offset by a $11.8 billion increase
from asset mix and $2.7 billion increase relating to adverse credit migration
• Operational risk RWA increased $0.7 billion primarily due to an increase
in average income as measured over a rolling three-year time horizon, with
higher 2022 income replacing lower 2019 income
• Market risk RWA increased by $4.2 billion to $24.9 billion reflecting an
increase in traded risk positions and market volatility
Page 23
Group Chief Financial Officer's review continued
Capital base and ratios
31.12.23 30.09.23 Change¹ 30.06.23 Change¹ 31.12.22 Change¹
$million
$million
%
$million
%
$million
%
CET1 capital 34,314 33,569 2 34,896 (2) 34,157 -
Additional Tier 1 capital (AT1) 5,492 5,492 - 5,492 - 6,484 (15)
Tier 1 capital 39,806 39,061 2 40,388 (1) 40,641 (2)
Tier 2 capital 11,935 12,051 (1) 12,281 (3) 12,510 (5)
Total capital 51,741 51,112 1 52,669 (2) 53,151 (3)
CET1 capital ratio (%)(2) 14.1 13.9 0.2 14.0 0.1 14.0 0.1
Total capital ratio (%)(2) 21.2 21.2 0.0 21.1 0.1 21.7 (0.5)
Leverage ratio (%)(2) 4.7 4.7 - 4.8 (0.1) 4.8 (0.1)
1 Variance is increase/(decrease) comparing current reporting period
to prior reporting periods
2 Change is percentage points difference between two points rather
than percentage change
The Group's CET1 ratio of 14.1 per cent was 10 basis points higher than the
ratio as at 31 December 2022. The Group was able to fund $2.7 billion of
capital returns to ordinary shareholders from underlying profits. The CET1
ratio remains 3.5 percentage points above the Group's latest regulatory
minimum of 10.5 per cent and above the top of the 13-14 per cent target range.
As well as the 169 basis points of CET1 accretion from underlying profits, the
Group's CET1 ratio decreased 34 basis points from an underlying $5.9 billion
increase in risk-weighted assets as the Group exercised tight control over
capital consumption. A further 22 basis points uplift was the result of an
increase in Other Comprehensive Income from fair value gains on debt
instruments as long-term interest rates began to fall in the latter half of
the year. The sale of the Group's Aviation Finance business increased the CET1
ratio by 20 basis points.
Ordinary shareholder distributions reduced the CET1 ratio by approximately 111
basis points. The Group spent $2 billion purchasing 230 million ordinary
shares of $0.50 each during the year, representing a volume-weighted average
price per share of £7.06. These shares were subsequently cancelled, reducing
the total issued share capital by 7.9 per cent and the CET1 ratio by 82 basis
points. The Board has recommended a final dividend of 21 cents per share
resulting in a total 2023 ordinary dividend of 27 cents per share or $728
million, reducing the CET1 ratio by approximately 30 basis points. Payments
due to AT1 and preference shareholders cost approximately 17 basis points.
The Board has announced a share buyback for up to a maximum consideration of
$1 billion to further reduce the number of ordinary shares in issue by
cancelling the repurchased shares. The terms of the buyback will be published,
and the programme will start shortly and is expected to reduce the Group's
CET1 ratio in the first quarter of 2024 by approximately 40 basis points.
The $850 million impairment of Bohai also resulted in an RWA reduction of $2.1
billion, the net effect of which resulted in a reduction of the CET1 ratio by
23 basis points.
The Group's leverage ratio of 4.7 per cent is 6 basis points lower than at 31
December 2022. This is primarily driven by a decrease in Tier 1 capital of
$0.8 billion as CET1 capital increased by $0.2 billion and was more than
offset by the redemption of $1.0 billion Additional Tier 1 securities. The
reduction in Tier 1 capital was broadly offset by a $7.2 billion reduction in
leverage exposures. The Group's leverage ratio remains significantly above its
minimum requirement of 3.7 per cent.
Page 24
Group Chief Financial Officer's review continued
Outlook
We have updated our guidance for 2024 and have provided additional guidance
for 2025 and 2026 as follows:
• Income:
- Operating income to increase 5-7 per cent for 2024 to 2026; and around the
top of 5-7 per cent range in 2024
- Net interest income for 2024 of $10 billion to $10.25 billion, at constant
currency
• Expenses:
- Operating expenses to be below $12 billion in 2026, at constant currency
- Expense saves of around $1.5 billion and cost to achieve of no more than
$1.5 billion from 2024 to 2026
- Positive income-to-cost jaws, excluding UK bank levy, at constant currency
in each year from 2024 to 2026
• Assets and RWA:
- Low single-digit percentage growth in loans and advances to customers and
RWA each year from 2024 to 2026 (pre-Basel 3.1 day-1 impact)
- Basel 3.1 day-1 impact, pending clarification of rules expected to add no
more than 5 per cent incremental RWA
• Continue to expect the loan loss rate to normalise towards the
historical through- the-cycle 30 to 35 basis points range
• Capital:
- Continue to operate dynamically within the full 13-14 per cent CET1 target
range
- Plan to return at least $5 billion to shareholders cumulative 2024 to 2026
- Continue to increase full-year dividend per share over time
• RoTE increasing steadily from 10 per cent, targeting of 12 per cent in
2026 and to progress thereafter
Diego De Giorgi
Group Chief Financial Officer
23 February 2024
Page 25
Supplementary financial information
Underlying performance by client segment
2023
Corporate, Commercial & Institutional Banking Consumer, Ventures Central & Total
$million
Private &
$million
other items (segment)
$million
Business
$million
Banking
$million
Operating income 11,218 7,106 156 (1,102) 17,378
External 8,543 3,902 157 4,776 17,378
Inter-segment 2,675 3,204 (1) (5,878) -
Operating expenses (5,627) (4,261) (429) (819) (11,136)
Operating profit/(loss) before impairment losses and taxation 5,591 2,845 (273) (1,921) 6,242
Credit impairment (123) (354) (85) 34 (528)
Other impairment (32) (4) (26) (68) (130)
(Loss)/profit from associates and joint ventures - - (24) 118 94
Underlying profit/(loss) before taxation 5,436 2,487 (408) (1,837) 5,678
Restructuring 32 (60) (4) 18 (14)
Goodwill and other impairment(1) - - - (850) (850)
DVA 17 - - - 17
Other items(4) 262 - - - 262
Reported profit/(loss) before taxation 5,747 2,427 (412) (2,669) 5,093
Total assets 403,058 128,768 4,009 287,009 822,844
Of which: loans and advances to customers 189,395 126,117 1,035 28,939 345,486
loans and advances to customers 130,897 126,104 1,035 28,939 286,975
loans held at fair value through profit or loss (FVTPL)(2) 58,498 13 - - 58,511
Total liabilities 464,968 200,263 3,096 104,164 772,491
Of which: customer accounts(3) 328,211 195,678 2,825 7,908 534,622
Risk-weighted assets 141,979 51,342 1,923 48,907 244,151
Income return on risk-weighted assets (%) 7.8 14.0 10.3 (2.2) 28.6
Underlying return on tangible equity (%) 19.5 25.3 nm⁵ (27.0) 10.1
Cost-to-income ratio (%) 50.2 60.0 nm⁵ nm⁵ 63.4
1 Goodwill and other impairment include $850 million impairment charge
relating to the Group's investment in its associate China Bohai Bank (Bohai).
2 Loans held at FVTPL includes $51,299 million of reverse repurchase
agreements
3 Customer accounts includes $17,248 million of FVTPL and $47,956 million of
reverse repurchase agreements
4 Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $309 million on the leasing business and a loss of
$47 million in relation to a sale of a portfolio of Aviation loans
5 Not meaningful
Page 26
Supplementary financial information continued
2022¹
Corporate, Commercial & Institutional Consumer, Ventures Central & Total
Banking
Private &
$million
other items (segment)
$million
$million
Business
$million
Banking(
) $million
Operating income 9,608 5,969 29 156 15,762
External 8,462 4,942 29 2,329 15,762
Inter-segment 1,146 1,027 - (2,173) -
Operating expenses (5,193) (4,104) (336) (776) (10,409)
Operating profit/(loss) before impairment losses and taxation 4,415 1,865 (307) (620) 5,353
Credit impairment (425) (262) (16) (133) (836)
Other impairment - (10) (24) (5) (39)
(Loss)/profit from associates and joint ventures - - (16) 183 167
Underlying profit/(loss) before taxation 3,990 1,593 (363) (575) 4,645
Restructuring 14 (56) (1) (56) (99)
Goodwill and other impairment(2) - - - (322) (322)
DVA 42 - - - 42
Other items - - - 20 20
Reported profit/(loss) before taxation 4,046 1,537 (364) (933) 4,286
Total assets 401,567 133,956 2,451 281,948 819,922
Of which: loans and advances to customers 184,254 130,985 702 41,789 357,730
loans and advances to customers 139,756 130,957 702 39,232 310,647
loans held at fair value through profit or loss (FVTPL)(3) 44,498 28 - 2,557 47,083
Total liabilities 479,981 185,396 1,658 102,871 769,906
Of which: customer accounts(4) 332,176 180,659 1,548 5,846 520,229
Risk-weighted assets 143,582 50,730 1,358 49,041 244,711
Income return on risk-weighted assets (%) 6.2 11.4 4.2 0.3 6.1
Underlying return on tangible equity (%) 13.4 15.8 nm⁵ (14.2) 7.7
Cost-to-income ratio (%) 54.0 68.8 nm⁵ nm⁵ 65.4
1 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2 Goodwill and other impairment include $308 million impairment
charge relating to the Group's investment in its associate China Bohai Bank
(Bohai).
3 Loans held at FVTPL includes $40,537 million of reverse
repurchase agreements
4 Customer accounts includes $11,706 million of FVTPL and $46,846
million of reverse repurchase agreements
5 Not meaningful
Page 27
Supplementary financial information continued
Corporate, Commercial & Institutional Banking
4Q'23 4Q'22¹ Change(3) Constant currency change(3,4) 3Q'23 Change(3) Constant currency change(3,4) FY23 FY22¹ Change(3) Constant currency change(3,4)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Operating income 2,581 2,467 5 5 2,814 (8) (8) 11,218 9,608 17 20
Transaction Banking 1,435 1,216 18 18 1,449 (1) (1) 5,656 3,751 51 54
Trade & Working capital 292 305 (4) (5) 312 (6) (7) 1,246 1,288 (3) (1)
Cash Management 1,143 911 25 26 1,137 1 1 4,410 2,463 79 83
Financial Markets 1,041 1,147 (9) (8) 1,253 (17) (17) 5,099 5,345 (5) (2)
Macro Trading 538 628 (14) (13) 634 (15) (15) 2,827 2,965 (5) (1)
Credit Markets 409 436 (6) (6) 472 (13) (14) 1,803 1,761 2 5
Credit Trading 105 147 (29) (30) 137 (23) (26) 554 488 14 17
Financing Solutions & Issuance² 304 289 5 6 335 (9) (9) 1,249 1,273 (2) -
Financing & Securities Services² 94 83 13 17 147 (36) (32) 469 619 (24) (22)
Lending & Portfolio Management 105 107 (2) (4) 115 (9) (9) 469 521 (10) (8)
Wealth Management - 1 (100) nm(9) - nm(9) nm(9) - 1 (100) (100)
Retail Products - 1 (100) nm(9) - nm(9) nm(9) 1 1 nm(9) nm(9)
Deposits - 1 (100) nm(9) - nm(9) nm(9) 1 1 nm(9) nm(9)
Other - (5) 100 100 (3) 100 100 (7) (11) 36 56
Operating expenses (1,422) (1,352) (5) (3) (1,387) (3) (3) (5,627) (5,193) (8) (10)
Operating profit before impairment losses and taxation 1,159 1,115 4 8 1,427 (19) (19) 5,591 4,415 27 32
Credit impairment 105 (144) 173 172 (159) 166 162 (123) (425) 71 69
Other impairment 2 - nm(9) nm(9) (13) 115 114 (32) - nm(9) nm(9)
Underlying profit before taxation 1,266 971 30 35 1,255 1 nm(9) 5,436 3,990 36 42
Restructuring (52) (34) (53) (50) 11 nm(9) nm(9) 32 14 129 nm(9)
DVA 35 (133) 126 127 21 67 67 17 42 (60) (60)
Other items(8) 262 - nm(9) nm(9) - nm(9) nm(9) 262 - nm(9) nm(9)
Reported profit before taxation 1,511 804 88 96 1,287 17 16 5,747 4,046 42 49
Total assets 403,058 401,567 - 2 395,938 2 1 403,058 401,567 - 2
Of which: loans and advances to customers⁵ 189,395 184,254 3 4 177,542 7 6 189,395 184,254 3 4
Total liabilities 464,968 479,981 (3) (3) 471,272 (1) (2) 464,968 479,981 (3) (3)
Of which: customer accounts⁵ 328,211 332,176 (1) (1) 319,785 3 2 328,211 332,176 (1) (1)
Risk-weighted assets 141,979 143,582 (1) nm(9) 143,386 (1) nm(9) 141,979 143,582 (1) nm(9)
Income return on risk-weighted 7.3 6.7 60bps nm(9) 7.8 (50)bps nm(9) 7.8 6.2 160bps nm(9)
assets (%)⁶
Underlying return on tangible 18.5 13.6 490bps nm(9) 17.9 60bps nm(9) 19.5 13.4 610bps nm(9)
equity (%)⁶
Cost-to-income ratio (%)⁷ 55.1 54.8 (0.3) 1.3 49.3 (5.8) (6.0) 50.2 54.0 3.8 4.5
1 Underlying performance for relevant periods in 2022 has been restated for
the removal of (i) exit markets and businesses in AME (ii) Aviation Finance
and (iii) DVA. No change to reported performance
2 Shipping Finance is now reported under "Financing Solutions &
Issuance" which was reported under "Financing & Securities Services" in
2022.
3 Comparisons presented on the basis of the current period's transactional
currency rate, ensuring like-for-like currency rates between the two periods
4 Variance is better/(worse) other than risk-weighted assets, assets and
liabilities which is increase/(decrease)
5 Loans and advances to customers and customer accounts includes FVTPL and
reverse repurchase agreements
6 Change is the basis points (bps) difference between the two periods rather
than the percentage change
7 Change is the percentage points difference between the two periods rather
than the percentage change
8 Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $309 million on the leasing business and a loss of
$47 million in relation to a sale of a portfolio of Aviation loans
9 Not meaningful
Segment overview
Corporate, Commercial and Institutional Banking supports local and large
corporations, governments, banks and investors with their transaction banking,
financial markets and borrowing needs. We provide solutions to nearly 20,000
clients in some of the world's fastest-growing economies and most active trade
corridors. Our clients operate or invest across 45 markets across the globe.
Page 28
Supplementary financial information continued
Our strong and deep local presence enables us to help co-create bespoke
financing solutions and connect our clients multilaterally to investors,
suppliers, buyers and sellers. Our products and services enable our clients to
move capital, manage risk and invest to create wealth. Our clients represent a
large and important part of the economies we serve. Corporate, Commercial and
Institutional Banking is at the heart of the Group's shared Purpose to drive
commerce and prosperity through our unique diversity.
We are also committed to promote sustainable finance in our markets and
channelling capital to where the impact will be greatest. We are delivering on
our ambition to support sustainable economic growth, increasing support and
funding for financial offerings that have a positive impact on our communities
and environment.
Strategic priorities
• Deliver sustainable growth for clients by leveraging our network to
facilitate trade, capital and investment flows across our footprint markets
• Generate high-quality returns by improving funding quality and income
mix, growing capital-lite income and driving balance sheet velocity while
maintaining disciplined risk management
• Be a digital-first and data-driven bank, that delivers enhanced client
experiences
• Accelerate our sustainable finance offering to our clients through
product innovation and enabling transition to a low-carbon future
Progress
• Our underlying income performance is driven by our diversified product
suite and expanded client solutions supported by the higher interest rate
environment. Our cross-border income currently contributes to 61 per cent of
total CCIB income with growth across strategic corridors
• Robust balance sheet quality with investment-grade net exposures
representing 66 per cent of total corporate net exposures (2022: 70 per cent)
and high-quality operating account balances broadly stable at 65 per cent of
Transaction Banking and Securities Services customer balances (2022: 67 per
cent)
• We defended against liabilities attrition through active pricing
management
• Our client migration to the Straight to Bank NextGen platform is
successfully completed. We achieved digital adoption of 65.7 per cent (2022:
61.5 per cent) across Cash, Trade and FX, by driving client awareness and
adoption programs. Client experience remains at the centre of our digital
transformation, with our Net Promoter Score at 78.6 per cent (2022: 68.4 per
cent)
• We are ~70 per cent of the way towards delivering our $1 billion income
from sustainable finance franchise by 2025, and have mobilised $87 billion in
sustainable financing against our $300 billion commitment by 2030
Performance highlights
• Underlying profit before tax of $5,436 million up 42 per cent at
constant currency ("ccy"), primarily driven by higher income and lower credit
impairment charges, partially offset by higher expenses
• Underlying operating income of $11,218 million up 20 per cent at ccy
primarily due to strong performance in Cash Management from pricing discipline
in a rising interest rate environment. Financial Markets was down 2 per cent
at ccy, mainly from lower revenue
in FX and Commodities on the back of lower market volatility, subdued primary
issuances and non-repeat of the gains on mark-to-market liabilities in 2022.
Excluding the latter, Financial Markets was up 3 per cent
• Underlying operating expenses were up by 10 per cent at ccy largely due
to inflationary pressure, targeted investments and strategic hires to support
business growth
• Risk-weighted assets were down by $1.6 billion since 31 December 2022,
mainly as a result of optimisation initiatives partly offset by business
growth. We achieved $10.3 billion optimisation in risk-weighted assets in 2023
($24.2 billion since January 2022)
• Underlying RoTE increased from 13.4 per cent to 19.5 per cent
Page 29
Supplementary financial information continued
Consumer, Private & Business Banking
4Q'23 4Q'22(1) Change(3) Constant currency change(2,3) 3Q'23 Change(3) Constant currency change(2,3) FY23 FY22(1) Change(3) Constant currency change(2,3)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Operating income 1,701 1,533 11 11 1,849 (8) (8) 7,106 5,969 19 22
Transaction Banking 46 38 21 18 47 (2) - 181 123 47 50
Trade & Working capital 12 11 9 8 13 (8) 8 48 55 (13) (11)
Cash Management 34 27 26 21 34 - - 133 68 96 99
Lending & Portfolio Management 6 5 20 (38) 6 - (17) 29 37 (22) (19)
Wealth Management 412 357 15 16 526 (22) (21) 1,944 1,795 8 10
Retail Products 1,227 1,142 7 8 1,266 (3) (3) 4,927 4,013 23 26
CCPL & other unsecured lending 259 284 (9) (7) 270 (4) (3) 1,068 1,180 (9) (7)
Deposits 917 810 13 14 933 (2) (1) 3,488 2,029 72 76
Mortgage & Auto 17 12 42 13 31 (45) (42) 236 633 (63) (62)
Other Retail Products 34 36 (6) (11) 32 6 - 135 171 (21) (19)
Other 10 (9) nm⁷ 175 4 150 125 25 1 nm⁷ nm⁷
Operating expenses (1,121) (1,030) (9) (8) (1,065) (5) (6) (4,261) (4,104) (4) (6)
Operating profit before impairment losses and taxation 580 503 15 19 784 (26) (26) 2,845 1,865 53 57
Credit impairment (131) (96) (36) (43) (115) (14) (15) (354) (262) (35) (42)
Other impairment (4) (9) 56 67 - nm⁷ nm⁷ (4) (10) 60 50
Underlying profit/(loss) before taxation 445 398 12 15 669 (33) (33) 2,487 1,593 56 60
Restructuring (27) (17) (59) (42) (17) (59) (59) (60) (56) (7) 9
Reported profit/(loss) before taxation 418 381 10 13 652 (36) (36) 2,427 1,537 58 63
Total assets 128,768 133,956 (4) (4) 126,714 2 (1) 128,768 133,956 (4) (4)
Of which: loans and advances to customers(4) 126,117 130,985 (4) (3) 124,178 2 (1) 126,117 130,985 (4) (3)
Total liabilities 200,263 185,396 8 8 190,925 5 3 200,263 185,396 8 8
Of which: customer accounts(4) 195,678 180,659 8 9 186,131 5 4 195,678 180,659 8 9
Risk-weighted assets 51,342 50,730 1 nm⁷ 50,365 2 nm⁷ 51,342 50,730 1 nm⁷
Income return on risk-weighted 13.2 12.0 120bps nm⁷ 14.5 (130)bps nm⁷ 14.0 11.4 260bps nm⁷
assets (%)(5)
Underlying return on tangible 17.9 16.1 180bps nm⁷ 27.2 (930)bps nm⁷ 25.3 15.8 950bps nm⁷
equity (%)(5)
Cost-to-income ratio (%)(6) 65.9 67.2 1.3 2.0 57.6 (8.3) (8.4) 60.0 68.8 8.8 9.0
1 Underlying performance for relevant periods in 2022 has been
restated for the removal of exit markets and businesses in AME.
2 Comparisons presented on the basis of the current period's
transactional currency rate, ensuring like-for-like currency rates between the
two periods
3 Variance is better/(worse) other than risk-weighted assets, assets
and liabilities which is increase/(decrease)
4 Loans and advances to customers and customer accounts includes
FVTPL and reverse repurchase agreements
5 Change is the basis points (bps) difference between the two periods
rather than the percentage change
6 Change is the percentage points difference between the two periods
rather than the percentage change
7 Not meaningful
Segment overview
Consumer, Private and Business Banking serves more than 11 million clients in
many of the world's fastest-growing markets. Our client continuum spans from
Mass Retail to Affluent, including high net-worth clients served by our
Private Bank. We leverage digital banking channels with a human touch to
provide clients with differentiated products and services such as deposits,
payments, financing, wealth management and personalised advice. We also
support small business clients with their business banking needs.
We are committed to realising greater synergies from our international network
and the Group's other client segments, from delivering holistic propositions
to clients with cross-border investment needs to offering employee banking
services to Corporate, Commercial and Institutional Banking clients. Consumer,
Private and Business Banking also provides a source of high-quality liquidity
for the Group.
Page 30
Supplementary financial information continued
Strategic priorities
• Maximise the value of our international network, with wealth hubs in
Hong Kong, Singapore, UAE and Jersey, to provide Affluent clients with a
global wealth proposition built on deep local expertise and seamless
cross-border client experience
• Unlock synergies from nurturing clients up our client continuum, by
helping them grow and protect their wealth through expert advice and
best-in-class wealth propositions
• Grow Mass Retail profitably, via digital-first sales and service
business models, partnerships, and data analytics
• Continue to improve client experience and efficiency through
digitalisation, process simplification and operational excellence
Progress
• Accelerated Affluent growth momentum in New to Bank clients, NNM and
income across Priority Banking and Private Bank
• Rolled out Standard Chartered-INSEAD Wealth Academy to more markets with
over 900 senior frontline staff upskilled to be future-ready advisors
• Enhanced cross border digital capabilities to improve client experience
• Expanded myWealth suite of digital advisory tools to enable RMs to
provide personalised portfolio construction and investment ideas for clients
• Recognised as a leader in digital Wealth capabilities with 20 industry
awards received in 2023
• Enhanced digital capabilities in key markets focusing on frictionless
mobile experience, leading to an average rating of 4.6 on App Store and Play
Store in Hong Kong, Singapore, India, China and Pakistan
• Continued to transform our Mass Retail business by scaling sustainably
through partnerships, digital client engagement, and automation
• Eight Mass Retail partnerships live across our footprint in China,
Indonesia, Vietnam and Singapore, reaching more than 2.6 million clients
Performance highlights
• Underlying profit before tax of $2,487 million was up 60 per cent at ccy
driven by higher income, offsetting higher expenses and higher credit
impairments
• Underlying operating income of $7,106 million was up 19 per cent (up 22
percent at ccy). Asia was up 20 per cent at ccy and Africa and the Middle East
was up 36 per cent at ccy
• Strong income growth mainly from Deposits up 76 per cent at ccy with
improved margins and balance sheet growth coupled with 10 per cent (ccy)
growth from Wealth Management. This offsets lower income in Mortgages, and
Unsecured Lending largely due to margin compression impacted by a rising
interest rate environment
• Underlying RoTE increased from 15.8 per cent to 25.3 per cent
Page 31
Supplementary financial information continued
Ventures
4Q'23 4Q'22 Change(2) Constant currency change(1,2) 3Q'23 Change(2) Constant currency change(1,2) FY23 FY22 Change(2) Constant currency change(1,2)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Operating income 32 14 129 129 35 (9) (11) 156 29 nm(5) nm(5)
Retail Products 11 4 175 nm(5) 13 (15) (29) 41 13 nm(5) nm(5)
CCPL & other unsecured lending 29 10 190 nm(5) 27 7 4 93 22 nm(5) nm(5)
Deposits (18) (6) nm(5) nm(5) (14) (29) (29) (52) (9) nm(5) nm(5)
Other Retail Products - - nm(5) nm(5) - nm(5) (100) - - nm(5) nm(5)
Treasury 10 5 100 80 8 25 - 30 5 nm(5) nm(5)
Other 11 5 120 117 14 (21) - 85 11 nm(5) nm(5)
Operating expenses (109) (103) (6) (6) (109) - (1) (429) (336) (28) (27)
Operating profit before impairment losses and taxation (77) (89) 13 13 (74) (4) (7) (273) (307) 11 12
Credit impairment (32) (9) nm(5) nm(5) (30) (7) (7) (85) (16) nm(5) nm(5)
Other impairment (17) (24) 29 25 (9) (89) (100) (26) (24) (8) (8)
Profit from associates and joint ventures (7) (5) (40) (20) (4) (75) (50) (24) (16) (50) (50)
Underlying profit/(loss) before taxation (133) (127) (5) (5) (117) (14) (16) (408) (363) (12) (12)
Restructuring (3) - nm(5) nm(5) - nm(5) (100) (4) (1) nm(5) nm(5)
Reported profit/(loss) before taxation (136) (127) (7) (6) (117) (16) (16) (412) (364) (13) (12)
Total assets 4,009 2,451 64 74 3,398 18 21 4,009 2,451 64 74
Of which: loans and advances 1,035 702 47 47 1,014 2 1 1,035 702 47 47
to customers(3)
Total liabilities 3,096 1,658 87 86 2,581 20 18 3,096 1,658 87 86
Of which: customer accounts(3) 2,825 1,548 82 82 2,316 22 20 2,825 1,548 82 82
Risk-weighted assets 1,923 1,358 42 nm(5) 1,786 8 nm(5) 1,923 1,358 42 70
Income return on risk-weighted 7.9 5.5 240bps nm(5) 8.3 (40)bps nm(5) 10.3 4.2 610bps nm(5)
assets (%)(4)
Underlying return on tangible nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5)
equity (%)(4)
Cost-to-income ratio (%) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5) nm(5)
6 Comparisons presented on the basis of the current period's
transactional currency rate, ensuring like-for-like currency rates between the
two periods
2 Variance is better/(worse) other than risk-weighted assets, assets
and liabilities which is increase/(decrease)
7 Loans and advances to customers and customer accounts
includes FVTPL and reverse repurchase agreements
8 Change is the basis points (bps) difference between the
two periods rather than the percentage change
9 Not meaningful
Segment overview
Formed in 2022 the Ventures client segment is a consolidation of SC Ventures
and its related entities as well as the Group's two majority-owned digital
banks Mox in Hong Kong and Trust in Singapore.
• SC Ventures is the platform and catalyst for the Group to promote
innovation, invest in disruptive financial technology and explore alternative
business models. It represents a diverse portfolio of over 30 ventures and
more than 20 investments.
• Mox, a cloud-native, mobile only digital bank, was launched in Hong Kong
as a joint venture with HKT, PCCW and Trip.com in September 2020.
• Trust Bank is Singapore's first cloud-native bank and was launched in a
partnership with FairPrice Group in September 2022.
Page 32
Supplementary financial information continued
Strategic priorities
• SC Ventures' focus is on building and scaling new business models -
across the four themes of Online Economy & Lifestyle, SMEs & World
Trade, Digital Assets and Sustainability & Inclusion. We do this by
connecting ecosystems, partners and clients to create value and new sources of
revenue, providing optionality for the Bank. Through its fund SC Ventures
advances the Fintech agenda by identifying, partnering, and taking minority
interests in companies, which can be integrated into the Bank and Ventures.
Focus is on innovative, fast-growing, technology-focused companies which
accelerate transformation in the financial industry.
• Mox continues to grow the customer base and drive main bank
relationships across mass and mass affluent segments in Hong Kong. Mox's
vision is to set the global benchmark for digital banking from Hong Kong. It
aims to be the leading Hong Kong virtual bank for Cards, Digital Lending and
continues to further expand services, including the recent launch of Digital
Wealth Management services.
• Trust Bank aims to become the fourth largest digital retail bank in
Singapore by the end of 2024. To achieve this, it will scale through its
partner ecosystem and deepen its customer relationships with the mass and mass
affluent customer segments.
Progress
• Business performance in 2023 saw continued positive momentum for SC
Ventures - five ventures were launched, funds were raised amidst a challenging
environment, geographical reach was expanded, and the business exited two
investments successfully. As a result, the SC Ventures customer base grew by
25 per cent to reach 587,000 with Gross Transactional Value (GTV) growing by
15 per cent to $18 bn. One significant milestone for SC Ventures in 2023 was
the establishment of a partnership with SBI Holdings setting up a $100m
digital asset joint venture in the UAE, a region fast becoming a hub for
fintechs in the digital asset space. SC Ventures, through a number of
innovative fintech ventures (such as Shoal, Tawi and myZoi), continues to
drive sustainability, financial inclusion and financial literacy for the
underbanked.
• In 2023, Mox had a strong focus on expanding its card and digital
lending services and recorded a strong performance and an engaged customer
base. Mox has more than 523,000 customers, up 1.2 times YoY, with customers
holding an average of 3.1x products. It delivered close to three times YOY
growth in revenue with both deposits and lending expanding over 30 per cent
YOY basis. Mox reached 36 per cent (ranked #1) and 30 per cent of (ranked #2)
market share in lending and deposits respectively among all Hong Kong virtual
banks in H1. The bank was recognised in Forbes' World's Best Banks 2023, and
The Asian Banker Hong Kong Awards 2023 as the Best Digital-only Bank in Hong
Kong, and was ranked fifth in the World's Top 50 Digital Banks 2023 by The
Digital Banker. The Mox app is the top-rated Hong Kong virtual banking app in
Apple App Store. Mox consistently has the best Net Promoter Score (NPS) among
all Hong Kong virtual banks.
• Trust Bank continued to scale and, by reaching 12 per cent market share
a year after launch, became one of the world's fastest growing digital banks.
Product development remained on track, with the launch of unsecured loans,
supplementary credit cards, and broadening of the general insurance offering.
By the end of 2023, its customer base had grown 1.7 times YoY to 700,000
customers and deposit balances had grown 3.0 times YoY to $1.4bn. Customer
engagement remained strong with card activation of 85 per cent and more than
2m digital coupons redeemed by customers in the Trust ecosystem. In its first
year of operation, Trust was recognised as the best digital retail bank in
Singapore and Southeast Asia by The Digital Banker and was the number one
rated banking app in the Singapore Apple App Store.
Performance highlights
• Underlying loss before tax of $408 million was up $45 million, driven
mainly by higher expenses as we continue to invest in new and existing
ventures.
• Risk-weighted assets of $1.9 billion have increased $0.6 billion mainly
due to continued investment in new and existing ventures and minority
interests.
Page 33
Supplementary financial information continued
Central & other items (segment)
4Q'23 4Q'22 Change(2) Constant currency change(1,2) 3Q'23 Change(2) Constant currency change(1,2) FY23 FY22 Change(2) Constant currency change(1,2)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Operating income (290) (249) (16) (24) (295) 2 4 (1,102) 156 nm(6) nm(6)
Treasury (245) (178) (38) (40) (282) 13 13 (932) 332 nm(6) nm(6)
Other (45) (71) 37 24 (13) nm(6) (137) (170) (176) 3 (26)
Operating expenses (210) (252) 17 26 (209) - (1) (819) (776) (6) (4)
Operating loss before impairment losses and taxation (500) (501) - 4 (504) 1 2 (1,921) (620) nm(6) nm(6)
Credit impairment (4) (91) 96 96 10 (140) (123) 34 (133) 126 135
Other impairment (22) (5) nm(6) nm(6) (4) nm(6) nm(6) (68) (5) nm(6) nm(6)
Profit from associates and joint ventures 4 3 33 - 7 (43) (57) 118 183 (36) (35)
Underlying loss before taxation (522) (594) 12 11 (491) (6.3) (6) (1,837) (575) nm(6) nm(6)
Restructuring 19 (39) 149 154 (1) nm(6) nm(6) 18 (56) 132 135
Goodwill and other impairment(3) (153) (322) 52 52 (697) 78 78 (850) (322) (164) (164)
Other items - 20 (100) (100) - nm(6) nm(6) - 20 (100) (100)
Reported loss before taxation (656) (935) 30 29 (1,189) 45 45 (2,669) (933) (186) nm(6)
Total assets 287,162 281,948 2 2 299,783 (4) (6) 287,162 281,948 2 2
Of which: loans and advances to customers(4) 28,939 41,789 (31) (31) 26,686 8 5 28,939 41,789 (31) (31)
Total liabilities 104,164 102,871 1 2 112,699 (8) (8) 104,164 102,871 1 2
Of which: customer accounts(4) 7,908 5,846 35 36 7,590 4 3 7,908 5,846 35 36
Risk-weighted assets 48,907 49,041 - nm(6) 45,969 6 nm(6) 48,907 49,041 - nm(6)
Income return on risk-weighted (2.4) (1.9) (50)bps nm(6) (2.4) - nm(6) (2.2) 0.3 (250)bps nm(6)
assets (%)(5)
Underlying return on tangible (18.8) (38.4) 1,960bps nm(6) (38.5) 1,970bps nm(6) (27.0) (14.2) (1,280)bps nm(6)
equity (%)(5)
Cost-to-income ratio (%) (excluding nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6)
UK bank levy)
8 Comparisons presented on the basis of the current period's
transactional currency rate, ensuring like-for-like currency rates between the
two periods
2 Variance is better/(worse) other than risk-weighted assets, assets
and liabilities which is increase/(decrease)
8 Goodwill and other impairment include $850 million (2022:
$308 million) impairment charge relating to the Group's investment in its
associate China Bohai Bank (Bohai)
8 Loans and advances to customers and customer accounts
includes FVTPL and reverse repurchase agreements
8 Change is the basis points (bps) difference between the
two periods rather than the percentage change
8 Not meaningful
Performance highlights
Underlying loss before tax increased to $1,837 million from $575 million in
2022, driven by hedging to smooth overall bank income which dampens positive
interest margin in the business. This is partly offset by improved liquidity
pool returns from rising interest rates and positive FX basis.
Page 34
Supplementary financial information continued
Underlying performance by region
2023
Asia Africa & Europe & Central & Total
$million
Middle East
Americas
other items (region)
$million
$million
$million
$million
Operating income 12,429 2,806 1,397 746 17,378
Operating expenses (7,096) (1,571) (1,733) (736) (11,136)
Operating profit/(loss) before impairment losses and taxation 5,333 1,235 (336) 10 6,242
Credit impairment (644) 91 19 6 (528)
Other impairment (63) (15) (13) (39) (130)
Profit/(loss) from associates and joint ventures 114 - - (20) 94
Underlying profit/(loss) before taxation 4,740 1,311 (330) (43) 5,678
Restructuring (97) (2) 32 53 (14)
Goodwill and other impairment(1) (850) - - - (850)
DVA (16) 26 7 - 17
Other items(4) 35 (18) 263 (18) 262
Reported profit/(loss) before taxation 3,812 1,317 (28) (8) 5,093
Total assets 505,905 54,140 253,410 9,389 822,844
Of which: loans and advances to customers 256,400 25,870 63,216 - 345,486
loans and advances to customers 233,417 22,774 30,784 - 286,975
loans held at fair value through profit or loss (FVTPL)(2) 22,983 3,096 32,432 - 58,511
Total liabilities 461,568 40,612 181,417 88,894 772,491
Of which: customer accounts(3) 377,020 33,059 124,543 - 534,622
Risk-weighted assets 155,995 38,393 46,106 3,657 244,151
Income return on risk-weighted assets (%) 8.1 7.1 2.8 19.5 28.6
Underlying return on tangible equity (%) 16.4 16.6 (3.6) nm⁶ 10.1
Cost-to-income ratio (%) 57.1 56.0 124.1 nm⁶ 63.4
2022(5)
Asia Africa & Europe & Central & Total
$million
Middle East
Americas
other items (region)
$million
$million
$million
$million
Operating income 10,912 2,460 2,303 87 15,762
Operating expenses (6,675) (1,551) (1,548) (635) (10,409)
Operating profit/(loss) before impairment losses and taxation 4,237 909 755 (548) 5,353
Credit impairment (790) (119) 78 (5) (836)
Other impairment (10) 2 1 (32) (39)
Profit/(loss) from associates and joint ventures 179 - - (12) 167
Underlying profit/(loss) before taxation 3,616 792 834 (597) 4,645
Restructuring (46) 21 (13) (61) (99)
Goodwill and other impairment(1) (308) - - (14) (322)
DVA 20 8 14 - 42
Other items 20 - - - 20
Reported profit/(loss) before taxation 3,302 821 835 (672) 4,286
Total assets 488,399 53,086 268,960 9,477 819,922
Of which: loans and advances to customers 270,892 23,857 62,981 - 357,730
loans and advances to customers 257,171 21,570 31,906 - 310,647
loans held at fair value through profit or loss (FVTPL)(2) 13,721 2,287 31,075 - 47,083
Total liabilities 441,349 40,902 219,701 67,954 769,906
Of which: customer accounts(3) 346,832 31,860 141,537 - 520,229
Risk-weighted assets 150,816 40,716 50,174 3,005 244,711
Income return on risk-weighted assets (%) 6.7 5.5 4.5 4.0 6.1
Underlying return on tangible equity (%) 11.9 9.3 8.6 nm(6) 7.7
Cost-to-income ratio (%) 61.2 63.0 67.2 nm(6) 65.4
1 Goodwill and other impairment include $850 million (2022: $308 million)
impairment charge relating to the Group's investment in its associate China
Bohai Bank (Bohai)
2 Loans held at FVTPL includes $51,299 million (FY'22 $40,537 million) of
reverse repurchase agreements
3 Customer accounts includes $17,248 million (FY'22 $11,706 million) of
FVTPL and $47,956 million (FY'22 $46,846 million) of reverse repurchase
agreements
4 Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $309 million on the leasing business and a loss of
$47 million in relation to a sale of a portfolio of Aviation loans
5 Underlying performance for relevant periods in 2022 has been restated
for the removal of (i) exit markets and businesses in AME (ii) Aviation
Finance and (iii) DVA. No change to reported performance
6 Not meaningful
Page 35
Supplementary financial information continued
Asia
4Q'23 4Q'22⁶ Change(2) Constant currency change(1,2) 3Q'23 Change(2) Constant currency change(1,2) FY23 FY22⁶ Change(2) Constant currency change(1,2)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Operating income 2,905 2,682 8 8 3,169 (8) (8) 12,429 10,912 14 15
Operating expenses (1,772) (1,692) (5) (5) (1,797) 1 1 (7,096) (6,675) (6) (8)
Operating profit before impairment losses and taxation 1,133 990 14 12 1,372 (17) (18) 5,333 4,237 26 27
Credit impairment (151) (199) 24 24 (311) 51 51 (644) (790) 18 18
Other impairment (54) (7) nm⁸ nm⁸ (7) nm⁸ nm⁸ (63) (10) nm⁸ nm⁸
Profit from associates and joint ventures - 3 (100) (133) 9 (100) (111) 114 179 (36) (36)
Underlying profit/(loss) before taxation 928 787 18 15 1,063 (13) (13) 4,740 3,616 31 32
Restructuring (39) (23) (70) (77) (36) (8) (8) (97) (46) (111) (113)
Goodwill and other impairment(3) (153) (308) 50 50 (697) 78 78 (850) (308) (176) (176)
DVA 6 (45) 113 114 - nm⁸ nm⁸ (16) 20 (180) (180)
Other items(7) 35 20 75 75 - nm⁸ nm⁸ 35 20 75 75
Reported profit/(loss) before taxation 777 431 80 73 330 135 133 3,812 3,302 15 16
Total assets 505,905 488,399 4 4 498,242 2 - 505,905 488,399 4 4
Of which: loans and advances to customers(4) 256,400 270,892 (5) (5) 248,983 3 1 256,400 270,892 (5) (5)
Total liabilities 461,568 441,349 5 5 451,638 2 1 461,568 441,349 5 5
Of which: customer accounts(4) 377,020 346,832 9 9 356,439 6 4 377,020 346,832 9 9
Risk-weighted assets 155,995 150,816 3 nm⁸ 150,842 3 nm⁸ 155,995 150,816 3 nm⁸
Income return on risk-weighted 7.6 6.9 70bps nm⁸ 8.2 (60)bps nm⁸ 8.1 6.7 140bps nm⁸
assets (%)(5)
Underlying return on tangible 12.8 10.9 190bps nm⁸ 14.7 (190)bps nm⁸ 16.4 11.9 450bps nm⁸
equity (%)(5)
Cost-to-income ratio (%)(5) 61.0 63.1 2.1 1.7 56.7 (4.3) (4.5) 57.1 61.2 4.0 3.9
1 Comparisons presented on the basis of the current period's transactional
currency rate, ensuring like-for-like currency rates between the two periods
2 Variance is better/(worse) other than risk-weighted assets, assets and
liabilities which is increase/(decrease)
3 Goodwill and other impairment include $850 million (2022: $308 million)
impairment charge relating to the Group's investment in its associate China
Bohai Bank (Bohai)
4 Loans and advances to customers and customer accounts includes FVTPL and
reverse repurchase agreements
5 Change is the percentage points difference between the two periods
rather than the percentage change
6 Underlying performance for relevant periods in 2022 has been restated
for the removal of (i) Aviation Finance and (ii) DVA. No change to reported
performance
7 Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $59 million on the leasing business and a loss of
$24 million in relation to a sale of a portfolio of Aviation loans
8 Not meaningful
Region overview
The Asia region has a long-standing and deep franchise across some of the
world's fastest-growing economies. The region generates over two-thirds of the
Group's income from its extensive network of 21 markets. Of these, Hong Kong
and Singapore contributed the highest income, underpinned by a diversified
franchise and deeply rooted presence.
The region is highly interconnected, with three distinct and potent
sub-engines of Greater China, ASEAN and South Asia. Our global footprint and
strong regional presence, distinctive proposition, and continued investment
position us strongly to capture opportunities as they arise from the
continuing opening up of China's economy where we now earn two dollars
offshore from Chinese clients for every dollar we earn onshore, the growing
connectivity of ASEAN and the strong economic growth in India.
The region is benefiting from rising trade flows, especially intra-Asia,
continued strong investment, and a rising middle class which is driving
consumption growth and improving digital connectivity.
Page 36
Supplementary financial information continued
Strategic priorities
• Leverage our network strength to serve the inbound and outbound
cross-border trade and investment needs of our clients, particularly across
high-growth corridors e.g., China-ASEAN, China-South Asia, China-AME and
KR-ASEAN
• Capture and monetise opportunities arising from China's opening and
accelerate growth in Asia
• Turbocharge our Affluent and Wealth Management businesses through
differentiated propositions and service
• Continue to invest and advance in technology, digital capabilities and
partnerships to enhance client experience and build scale efficiently
• Support clients' sustainable finance and transition needs and continue
to strengthen our thought leadership status
Progress
• We continue to advance our China strategy both on- and off-shore, and
have also made a material increase in both the number of, and the income
contribution from New to Bank affluent Mainland China customers and adding new
clients through digital partnerships. The China business delivered record
income on-shore and has grown network income strongly along a number of key
corridors in ASEAN, up 53 per cent and ME up 67 per cent YoY. We have also
made progress with digital partnerships launching new partnerships JD.com and
KCB.
• Strong Asia cross border momentum including India Singapore corridor up
29 per cent YoY highlighting the role of Singapore as a financial hub for
clients in ASEAN as well as India
• Our two strong international financial hubs in Hong Kong and Singapore,
delivered strong income growth driven by Wealth Management with Affluent
clients, increased Financial Markets activity with Corporate and Institutional
clients and a material improvement in the net interest margin.
• Our digital agendas have progressed; and our virtual bank Mox has the
largest loan book and the 2nd largest deposits base among virtual banks in
Hong Kong, while our digital bank Trust, is becoming one of the world's
fasting growing digital banks; more than one in ten Singaporeans now bank with
Trust.
Performance highlights
• Underlying profit before tax of $4,740 million was up 32 per cent at
constant currency (ccy) on the back of higher income and lower credit
impairment, partially offset by 8 per cent (ccy) increase in operating
expenses
• Underlying operating income of $12,429 million was up 15 per cent at
ccy, mainly from strong double-digit increases across Cash Management and
Retail Deposits, underpinned by expansion in margins and Wealth Management
partly offset by lower Mortgage income and a loss in Treasury Markets
• Credit Impairment improved 18 per cent year-on-year ('YoY')
• Loans and advances to customers were down 5 per cent (reported and ccy);
Customer accounts were up 9 per cent (reported and ccy) YoY
• Risk-weighted assets up $5 billion YoY
• RoTE increased to 16.4 per cent from 11.9 per cent in FY22
Page 37
Supplementary financial information continued
Africa & Middle East
4Q'23 4Q'22⁵ Change² Constant currency change(1,2) 3Q'23 Change² Constant currency change(1,2) FY23 FY22⁵ Change² Constant currency change(1,2)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Operating income 688 642 7 13 677 2 2 2,806 2,460 14 26
Operating expenses (377) (407) 7 7 (398) 5 5 (1,571) (1,551) (1) (6)
Operating profit before impairment losses and taxation 311 235 32 52 279 11 13 1,235 909 36 63
Credit impairment 84 (145) 158 171 (2) nm⁷ nm⁷ 91 (119) 176 nm⁷
Other impairment (10) 1 nm⁷ nm⁷ (4) (150) (150) (15) 2 nm⁷ nm⁷
Underlying profit/(loss) before taxation 385 91 nm⁷ nm⁷ 273 41 39 1,311 792 66 90
Restructuring (18) (14) (29) (14) (19) 5 (14) (2) 21 (110) (150)
DVA 13 (13) nm⁷ nm⁷ 16 (19) (29) 26 8 nm⁷ nm⁷
Other items⁶ (18) - nm⁷ nm⁷ - nm⁷ nm⁷ (18) - nm⁷ nm⁷
Reported profit/(loss) before taxation 362 64 nm⁷ nm⁷ 270 34 29 1,317 821 60 87
Total assets 54,140 53,086 2 10 51,170 6 7 54,140 53,086 2 10
Of which: loans and advances to customers(3) 25,870 23,857 8 15 22,273 16 17 25,870 23,857 8 15
Total liabilities 40,612 40,902 (1) 5 41,534 (2) (2) 40,612 40,902 (1) 5
Of which: customer accounts(3) 33,059 31,860 4 9 32,276 2 2 33,059 31,860 4 9
Risk-weighted assets 38,393 40,716 (6) nm⁷ 38,529 - nm⁷ 38,393 40,716 (6) nm⁷
Income return on risk-weighted 7.1 6.1 100bps nm⁷ 6.8 30bps nm⁷ 7 5.5 160bps nm⁷
assets (%)(4)
Underlying return on tangible 20.5 4.8 1,570bps nm⁷ 13.1 740bps nm⁷ 17 9.3 730bps nm⁷
equity (%)(4)
Cost-to-income ratio (%)(4) 54.8 63.4 8.6 11.6 58.8 4.0 4.2 56.0 63.0 7.0 10.2
1 Comparisons presented on the basis of the current period's transactional
currency rate, ensuring like-for-like currency rates between the two periods
2 Variance is better/(worse) other than risk-weighted assets, assets and
liabilities which is increase/(decrease)
3 Loans and advances to customers and customer accounts includes FVTPL and
reverse repurchase agreements
4 Change is the percentage points difference between the two periods
rather than the percentage change
5 Underlying performance for relevant periods in 2022 has been restated
for the removal of (i) exit markets and businesses in AME and (ii) DVA. No
change to reported performance
6 Other items includes a loss of $18 million in relation to a sale of a
portfolio of Aviation loans
7 Not meaningful
Region overview
We have a rich heritage in Africa and the Middle East (AME) with deep client
relationships and historical contributions to the economy and the communities.
Our unique footprint in the region, as well as across centres in Asia, Europe,
and the Americas, enable us to seamlessly support our clients. AME is becoming
increasingly important for global trade and investment corridors, and we are
well placed to facilitate these flows.
Gulf Cooperation Council (GCC) markets are expected to outpace global growth
on the back of macro-economic tailwinds, higher government spend in
diversified areas, bilateral trade negotiations and evolving economic
partnerships. The macro-economic risk remains elevated in some markets in the
region due to a high level of sovereign debt and FX liquidity challenges, but
they remain integral to the economic corridors for our global clients.
Overall, AME's medium and long-term attractiveness remains compelling and
intact, and it is an important part of our global network proposition for our
clients.
Strategic priorities
• Provide best-in-class structuring and financing solutions and drive
creation through client initiatives
• Accelerate growth in differentiated international network and Affluent
client businesses
• Invest in market-leading digitisation initiatives in CPBB to protect and
grow market share in core markets, continue with our transformation agenda to
recalibrate our network and streamline structures
• Be an industry leader in the transition to net zero across the region
• Simplify footprint and refocus on strategic growth areas
Page 38
Supplementary financial information continued
Progress
• Topped the regional DCM league tables for the tenth consecutive year and
secured the first rank in GCC G3 Bond and Sukuk issuance
• Supported Sustainable Finance across our footprint through our
comprehensive product offering. ESG DCM volumes across the Middle East grew by
over 160 per cent year on year, on the back of some of the largest and most
innovative ESG deals in the region
• Strong cross-border income growth of 39 per cent with broad-based growth
across all our key corridors
• Further embedded our International Banking proposition, activating our
diverse footprint across Africa and the Middle East. This has resulted in more
than 150 per cent growth in Priority Banking client base across our
International Banking corridors for the region
• Enhanced our digital offering in Africa by becoming the first
international bank with digital fixed income solutions in Kenya, Nigeria and
Ghana, extending our micro-investment solution (SC Shillingi) to Uganda, and
launching digital personal loans in Kenya
• Our Saudi franchise saw strong growth following the branch set-up in
2021 while a new branch launched recently in Egypt provides additional growth
opportunities in the region
• The sale of the Jordan business has been completed and buyers have been
announced for select sub-Saharan African businesses that were identified for
exit as part of our strategic announcement in 2022
• Sustained productivity actions have resulted in an improved Cost to
Income Ratio at 56 per cent (vs. 63 per cent in FY'22) and an improvement in
productivity with income per headcount (up 18 per cent year-on-year)
Performance highlights
• Underlying profit before tax of $1,311 million, the highest annual
profit since 2015, was up 66 per cent (up 90 per cent at ccy), driven by
higher income and a net release in credit provisions partially offset by an
increase in expenses
• Underlying operating income of $2,806 million was up 14 per cent (up 26
per cent at ccy) with strong growth in Cash Management, Retail Deposits and
Financial Markets. Income was up 29 per cent (up 38 per cent at ccy) in Middle
East, North Africa, & Pakistan and up 1 per cent (up 14 per cent at ccy)
in Africa
• Credit Impairment net release of $91 million in FY23 compared to $119
million charge in FY22 reflecting a non-repeat of the prior year's sovereign
related impairments and releases relating to historic CCIB provisions
• Loans and advances to customers were up 8 per cent YoY (up 15 per cent
at ccy) and customer accounts were up 4 per cent (up 9 percent at ccy) since
31 December 2022
• Risk-weighted assets were 6 per cent lower than 31 December 2022,
despite the impact of sovereign downgrades, due to continuing RWA optimisation
activities, de-risking in markets with elevated macro-economic risk and
currency devaluation
• RoTE increased to 16.6 per cent from 9.3 per cent in FY22
Page 39
Supplementary financial information continued
Europe & Americas
4Q'23 4Q'22⁵ Change² Constant currency change(1,2) 3Q'23 Change² Constant currency change(1,2) FY23 FY22⁵ Change² Constant currency change(1,2)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Operating income 210 348 (40) (41) 337 (38) (39) 1,397 2,303 (39) (40)
Operating expenses (420) (415) (1) - (447) 6 6 (1,733) (1,548) (12) (12)
Operating profit before impairment losses and taxation (210) (67) nm⁶ (196) (110) (91) (97) (336) 755 (145) (144)
Credit impairment 5 13 (62) (50) 18 (72) (67) 19 78 (76) (74)
Other impairment (24) (2) nm⁶ nm⁶ 2 nm⁶ nm⁶ (13) 1 nm⁶ nm⁶
Underlying profit/(loss) before taxation (229) (56) nm⁶ nm⁶ (90) (154) (163) (330) 834 (140) (139)
Restructuring 19 (19) nm⁶ nm⁶ (6) nm⁶ nm⁶ 32 (13) nm⁶ nm⁶
DVA 16 (75) 121 123 5 nm⁶ nm⁶ 7 14 (50) (50)
Other items 263 - nm⁶ nm⁶ - nm⁶ nm⁶ 263 - nm⁶ nm⁶
Reported profit/(loss) before taxation 69 (150) 146 144 (91) 176 177 (28) 835 (103) (103)
Total assets 253,410 268,960 (6) (6) 267,503 (5) (6) 253,410 268,960 (6) (6)
Of which: loans and advances 63,216 62,981 - - 58,164 9 8 63,216 62,981 - -
to customers(3)
Total liabilities 181,417 219,701 (17) (18) 202,250 (10) (11) 181,417 219,701 (17) (18)
Of which: customer accounts(3) 124,543 141,537 (12) (13) 127,107 (2) (3) 124,543 141,537 (12) (13)
Risk-weighted assets 46,106 50,174 (8) nm⁶ 48,227 (4) nm⁶ 46,106 50,174 (8) nm⁶
Income return on risk-weighted assets (%)(4) 1.8 2.7 (90)bps nm⁶ 2.7 (90)bps nm⁶ 2.8 4.5 (170)bps nm⁶
Underlying return on tangible (10.4) (2.2) (820)bps nm⁶ (3.9) (650)bps nm⁶ (3.6) 8.6 (1,220)bps nm⁶
equity (%)(4)
Cost-to-income ratio (%)(4) 200.0 119.3 (80.7) (82.3) 132.6 (67.4) (70.9) 124.1 67.2 (56.9) (57.2)
1 Comparisons presented on the basis of the current period's
transactional currency rate, ensuring like-for-like currency rates between the
two periods
2 Variance is better/(worse) other than risk-weighted assets, assets
and liabilities which is increase/(decrease)
3 Loans and advances to customers and customer accounts includes
FVTPL and reverse repurchase agreements
4 Change is the percentage points difference between the two periods
rather than the percentage change
5 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) Aviation Finance and (ii) DVA. No change to
reported performance
6 Not meaningful
Region overview
The Group supports clients in Europe and the Americas through hubs in London,
Frankfurt and New York as well as a presence in several other markets in
Europe and Latin America. Our expertise in Asia, Africa and the Middle East
allows us to offer our clients in the region unique network and product
capabilities.
The region generates significant income for the Group's Corporate, Commercial
and Institutional Banking business. Clients based in Europe and the Americas
contribute over one-third of the Group's CCIB client income. Over
three-quarters of client income is booked in the network, generating
above-average returns.
In addition to being a key origination centre for CCIB, the region offers
local, on-the-ground expertise and solutions to help internationally minded
clients grow across Europe and the Americas. The region is home to the Group's
two biggest payment clearing centres and the largest trading floor.
Our Europe CPBB business focuses on serving clients with links to our
footprint markets.
Page 40
Supplementary financial information continued
Strategic priorities
• Leverage our network capabilities to connect new and existing Corporate
and Financial Institutions clients in the West to the fastest-growing and
highest-potential economies across our footprint
• Supercharge our FI Franchise
• Grow the business we capture from inbound trade flows from our East to
West Corridors
• Further develop our Sustainable Finance product offering and risk
management capabilities
• Enhance capital efficiency, maintain strong risk oversight and further
improve the quality of our funding base
• Expand assets under management in CPBB and continue to strengthen the
franchise
Progress
• Strong growth of 33 per cent in global cross-border network business
with Europe and the Americas CCIB clients across key footprint markets
• Financial Institutions segment growth of 32 per cent, now accounting for
60 per cent of the CCIB business for European and Americas clients.
• Material growth in income from sustainable finance products and
expansion of our sustainable product offering
• In CPBB we see positive momentum on Net New Money in 2023 coupled with
strong growth in mortgage balances for our high net worth clients
Performance highlights
• Underlying loss before tax of $330 million driven by lower income and
increased expenses
• Underlying operating income of $1,397 million was down 40 per cent
reflecting the increased cost of hedges within Treasury whilst strong growth
in Transaction Banking income was partly offset by lower Financial Markets
income
• Expenses increased by 12 per cent at ccy largely due to increased
investment spend and the impact of inflation
• Credit impairments for the region remain well controlled
• FY23 RoTE negative 3.6 per cent down from 8.6 per cent in FY22
Page 41
Supplementary financial information continued
Central & other items (region)
4Q'23 4Q'22⁴ Change² Constant currency change(1,2) 3Q'23 Change² Constant currency change(1,2) FY23 FY22⁴ Change² Constant currency change(1,2)
$million
$million
%
%
$million
%
%
$million
$million
%
%
Operating income 221 93 138 137 220 - - 746 87 nm(6) nm(6)
Operating expenses (293) (223) (31) (2) (128) (129) (129) (736) (635) (16) (8)
Operating loss before impairment losses and taxation (72) (130) 45 64 92 (178) (173) 10 (548) 102 103
Credit impairment - (9) 100 100 1 (100) (100) 6 (5) nm(6) nm(6)
Other impairment 47 (30) nm(6) nm(6) (17) nm(6) nm(6) (39) (32) (22) (18)
Loss from associates and joint ventures (3) (5) 40 60 (6) 50 67 (20) (12) (67) (54)
Underlying loss before taxation (28) (174) 84 90 70 (140) (133) (43) (597) 93 95
Restructuring (25) (34) 26 26 54 (146) (147) 53 (61) 187 183
Goodwill and other impairment - (14) 100 100 - nm(6) nm(6) - (14) 100 100
Other items(5) (18) - nm(6) nm(6) - nm(6) nm(6) (18) - nm(6) nm(6)
Reported loss before taxation (71) (222) 68 76 124 (157) (154) (8) (672) 99 100
Total assets 9,389 9,477 (1) (1) 8,918 5 5 9,389 9,477 (1) (1)
Total liabilities 88,894 67,954 31 31 82,055 8 8 88,894 67,954 31 31
Risk-weighted assets 3,657 3,005 22 nm(6) 3,908 (6) nm(6) 3,657 3,005 22 nm(6)
Income return on risk-weighted 21.0 13.9 51bps nm(6) 22.1 nm(6) nm(6) 19.5 4.0 1,550bps nm(6)
assets (%)(3)
Underlying return on tangible nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6)
equity (%)(3)
Cost-to-income ratio (%) (excluding bank levy)(3) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6) nm(6)
1 Comparisons presented on the basis of the current period's transactional
currency rate, ensuring like-for-like currency rates between the two periods
2 Variance is better/(worse) other than risk-weighted assets, assets and
liabilities which is increase/(decrease)
3 Change is the percentage points difference between the two periods
rather than the percentage change
4 Underlying performance for relevant periods in 2022 has been restated
for the removal of Aviation Finance. No change to reported performance line
5 Other items includes the sale of the Aviation Finance business, of which
there was a loss on sale of $18 million on the leasing business
6 Not meaningful
Performance highlights
Underlying loss before tax of $43 million compared to FY'22 loss of $597
million was mainly due to higher returns paid to Treasury on the equity
provided to the regions in a higher interest rate environment, partially
offset by increased expenses reflecting increased Ventures activity
Page 42
Supplementary financial information continued
Underlying performance by key market
2023
Hong Kong Korea China(3) Taiwan Singapore India Indonesia UAE UK US
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Operating income 4,167 1,074 1,158 558 2,455 1,206 241 794 102 870
Operating expenses (1,927) (731) (894) (331) (1,214) (865) (191) (392) (870) (634)
Operating profit/(loss) before impairment losses 2,240 343 264 227 1,241 341 50 402 (768) 236
and taxation
Credit impairment (372) (48) (113) (42) (48) (31) (8) 24 14 12
Other impairment (17) 1 (5) (5) (14) (11) (2) (5) (15) (5)
Profit from associates and joint ventures - - 114 - - - - - - -
Underlying profit/(loss) before taxation 1,851 296 260 180 1,179 299 40 421 (769) 243
Total assets employed 190,484 56,638 41,661 21,638 102,724 33,781 5,470 20,376 149,982 88,113
Of which: loans and advances to customers(1) 87,590 33,443 15,882 11,634 62,030 13,832 2,533 8,495 31,067 27,434
Total liabilities employed 183,112 46,666 38,252 20,365 109,825 26,532 4,355 17,214 92,168 72,583
Of which: customer accounts(1) 155,446 37,032 31,211 18,621 86,282 18,709 3,024 13,924 72,610 40,846
Underlying return on tangible equity (%) 21.8 10.1 6.9 20.6 26.4 7.8 7.8 23.0 (13.6) 6.8
Cost to income ratio (%) 46.2 68.1 77.2 59.3 49.5 71.7 79.3 49.4 nm(3) 72.9
2022(2)
Hong Kong Korea China Taiwan Singapore India Indonesia UAE UK US
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Operating income 3,441 1,140 1,154 473 1,909 1,222 214 621 1,013 1,031
Operating expenses (1,816) (733) (844) (336) (1,082) (766) (183) (369) (742) (603)
Operating profit before impairment losses 1,625 407 310 137 827 456 31 252 271 428
and taxation
Credit impairment (579) (55) (200) (15) 84 (31) 4 81 36 13
Other impairment (1) (1) (3) (1) (2) (1) - - 35 -
Profit from associates and joint ventures - - 179 - - - - - - -
Underlying profit before taxation 1,045 351 286 121 909 424 35 333 342 441
Total assets employed 171,086 68,903 39,508 21,919 97,914 30,412 5,237 19,624 187,832 67,019
Of which: loans and advances to customers(1) 85,359 49,264 15,652 11,283 59,872 15,025 2,403 7,913 39,356 19,951
Total liabilities employed 165,499 58,992 33,124 20,216 104,318 23,210 4,257 16,256 140,160 64,825
Of which: customer accounts(1) 138,713 43,620 24,347 18,509 79,409 15,199 2,924 12,710 104,482 28,424
Underlying return on tangible equity (%) 12.0 11.5 7.1 13.2 19.5 10.6 5.6 15.5 5.7 14.4
Cost to income ratio (%) 52.8 64.3 73.1 71.0 56.7 62.7 85.5 59.4 73.2 58.5
1 Loans and advances to customers and customer accounts includes
FVTPL and repurchase agreements
2 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii)DVA. No change to reported performance
3 Not meaningful
Page 43
Supplementary financial information continued
4Q'23
Hong Kong Korea China Taiwan Singapore India Indonesia UAE UK US
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Operating income 1,008 217 275 125 557 269 67 182 (103) 206
Operating expenses (489) (192) (234) (84) (312) (203) (51) (93) (218) (149)
Operating profit/(loss) before impairment losses 519 25 41 41 245 66 16 89 (321) 57
and taxation
Credit impairment (60) (3) (33) (9) (26) (18) - 3 7 2
Other impairment (16) 1 (4) (5) (11) (10) (2) (5) (15) (9)
Loss from associates and joint ventures - - (1) - - - - - - -
Underlying profit/(loss) before taxation 443 23 3 27 208 38 14 87 (329) 50
Total assets employed 190,484 56,638 41,661 21,638 102,724 33,781 5,470 20,376 149,982 88,113
Of which: loans and advances to customers(1) 87,590 33,443 15,882 11,634 62,030 13,832 2,533 8,495 31,067 27,434
Total liabilities employed 183,112 46,666 38,252 20,365 109,825 26,532 4,355 17,214 92,168 72,583
Of which: customer accounts(1) 155,446 37,032 31,211 18,621 86,282 18,709 3,024 13,924 72,610 40,846
Underlying return on tangible equity (%) 21.0 3.1 0.3 12.2 17.8 4.4 10.6 19.7 (25.3) 5.5
Cost to income ratio (%) 48.5 88.5 85.1 67.2 56.0 75.5 76.1 51.1 nm(3) 72.3
4Q'22(2)
Hong Kong Korea China Taiwan Singapore India Indonesia UAE UK US
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
Operating income 902 252 244 118 495 266 57 177 40 239
Operating expenses (450) (184) (214) (80) (290) (203) (51) (102) (203) (161)
Operating profit/(loss) before impairment losses 452 68 30 38 205 63 6 75 (163) 78
and taxation
Credit impairment (128) (27) (48) (6) (6) (19) - (1) 10 (7)
Other impairment 4 (1) (1) - 1 2 - 1 12 2
Profit from associates and joint ventures - - 3 - - - - - - -
Underlying profit/(loss) before taxation 328 40 (16) 32 200 46 6 75 (141) 73
Total assets employed 171,086 68,903 39,508 21,919 97,914 30,412 5,237 19,624 187,832 67,019
Of which: loans and advances to customers(1) 85,359 49,264 15,652 11,283 59,872 15,025 2,403 7,913 39,356 19,951
Total liabilities employed 165,499 58,992 33,124 20,216 104,318 23,210 4,257 16,256 140,160 64,825
Of which: customer accounts(1) 138,713 43,620 24,347 18,509 79,409 15,199 2,924 12,710 104,482 28,424
Underlying return on tangible equity (%) 15.3 5.4 (1.7) 14.4 18.0 5.1 4.7 14.8 (9.2) 8.2
Cost to income ratio (%) 49.9 73.0 87.7 67.8 58.6 76.3 89.5 57.6 507.5 67.4
1 Loans and advances to customers and customer accounts includes
FVTPL and repurchase agreements
2 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii)DVA. No change to reported performance
3 Not meaningful
Page 44
Supplementary financial information continued
Quarterly underlying operating income by product
4Q'23 3Q'23 2Q'23 1Q'23 4Q'22¹ 3Q'22¹ 2Q'22¹ 1Q'22¹
$million
$million
$million
$million
$million
$million
$million
$million
Transaction Banking 1,481 1,496 1,461 1,399 1,254 1,067 824 729
Trade & Working capital 304 325 334 331 316 335 336 356
Cash Management 1,177 1,171 1,127 1,068 938 732 488 373
Financial Markets 1,041 1,253 1,391 1,414 1,147 1,386 1,255 1,557
Macro Trading 538 634 825 830 628 736 662 939
Credit Markets 409 472 462 460 436 455 396 474
Credit Trading 105 137 140 172 147 152 84 105
Financing Solutions & Issuance(2) 304 335 322 288 289 303 312 369
Financing & Securities Services(2) 94 147 104 124 83 195 197 144
Lending & Portfolio Management 111 121 132 134 112 164 136 146
Wealth Management 412 526 495 511 358 454 456 528
Retail Products 1,238 1,279 1,240 1,212 1,147 1,099 944 837
CCPL & other unsecured lending 288 297 286 290 294 298 310 300
Deposits 899 919 848 771 805 620 355 241
Mortgage & Auto 17 31 74 114 12 140 235 246
Other Retail Products 34 32 32 37 36 41 44 50
Treasury (235) (274) (160) (233) (173) (5) 201 314
Other (24) 2 (4) (41) (80) (27) (33) (35)
Total underlying operating income 4,024 4,403 4,555 4,396 3,765 4,138 3,783 4,076
1 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Shipping Finance is now reported under "Financing Solutions &
Issuance" which was reported under "Financing & Securities Services" in
2022
Page 45
Supplementary financial information continued
Earnings per ordinary share
4Q'23 4Q'22¹ Change 3Q'23 Change FY'23 FY'22¹ Change
$million
$million
%
$million
%
$million
$million
%
Profit/(loss) for the period attributable to 938 (265) nm⁵ 139 nm⁵ 3,462 2,902 19
equity holders
Non-controlling interest (2) 36 nm⁵ 6 nm⁵ 7 46 (85)
Dividend payable on preference shares and (29) (62) 53 (180) 84 (452) (401) (13)
AT1 classified as equity
Profit/(loss) for the period attributable to 907 (291) nm⁵ (35) nm⁵ 3,017 2,547 18
ordinary shareholders
Items normalised:
Restructuring 63 90 (30) 7 nm⁵ 14 99 (86)
Goodwill and other impairment² 153 322 (52) 697 (78) 850 322 164
DVA (35) 133 nm⁵ (21) (67) (17) (42) 60
Net gains on sale of Businesses³ (262) (20) nm⁵ - nm⁵ (262) (20) nm⁵
Tax on normalised items (17) (13) (31) (4) nm⁵ (21) (3) nm⁵
Underlying profit 809 221 nm⁵ 644 26 3,581 2,903 23
Basic - Weighted average number of shares (millions) 2,664 2,890 (8) 2,772 (4) 2,778 2,966 (6)
Diluted - Weighted average number of shares (millions) 2,723 2,945 (8) 2,837 (4) 2,841 3,023 (6)
Basic earnings per ordinary share (cents)(4) 34.0 (10.1) 44.1 (1.3) 35.3 108.6 85.9 22.7
Diluted earnings per ordinary share (cents)(4) 33.3 (9.9) 43.2 (1.2) 34.5 106.2 84.3 21.9
Underlying basic earnings per ordinary share (cents)(4) 30.4 7.7 22.7 23.2 7.2 128.9 97.9 31.0
Underlying diluted earnings per ordinary share (cents)(4) 29.7 7.5 22.2 22.7 7.0 126.0 96.0 30.0
1 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Goodwill and Other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
3. Other items includes the sale of the Aviation Finance business, of
which there was a gain on sale of $309 million on the leasing business and a
loss of $47 million in relation to a sale of a portfolio of Aviation loans
4 Change is the percentage points difference between the two periods
rather than the percentage change
5 Not meaningful
Page 46
Supplementary financial information continued
Return on Tangible Equity
4Q'23 4Q'22¹ Change 3Q'23 Change FY'23 FY'22¹ Change
$million
$million
%
$million
%
$million
$million
%
Average parent company Shareholders' Equity(4) 43,456 43,145 1 43,135 1 43,549 44,237 (2)
Less Average preference share capital and share premium (1,494) (1,494) - (1,494) - (1,494) (1,494) -
Less Average intangible assets (6,106) (5,695) (7) (5,948) (3) (5,957) (5,557) (7)
Average Ordinary Shareholders' Tangible Equity 35,856 35,956 - 35,693 - 36,098 37,186 (3)
Profit/(loss) for the period attributable to 938 (266) nm(5) 139 nm(5) 3,462 2,902 19
equity holders
Non-controlling interests (2) 36 nm(5) 6 nm(5) 7 46 (85)
Dividend payable on preference shares and (29) (61) 52 (180) 84 (452) (401) (13)
AT1 classified as equity
Profit/(loss) for the period attributable to 907 (291) nm(5) (35) nm(5) 3,017 2,547 18
ordinary shareholders
Items normalised:
Restructuring 63 90 (30) 7 nm(5) 14 99 (86)
Goodwill and Other impairment(2) 153 322 (52) 697 (78) 850 322 164
Net gains on sale of Businesses(3) (262) (20) nm(5) - nm(5) (262) (20) nm(5)
Ventures FVOCI unrealised gains/(losses) 37 21 76 (11) nm(5) 69 (36) nm(5)
net of tax
DVA (35) 133 nm(5) (21) (67) (17) (42) 60
Tax on normalised items (17) (13) (31) (4) nm(5) (21) (3) nm(5)
Underlying profit for the period attributable to ordinary shareholders 846 242 nm(5) 633 34 3,650 2,867 27
Underlying Return on Tangible Equity 9.4% 2.7% 670bps 7.0% 240bps 10.1% 7.7% 240bps
Reported Return on Tangible Equity 10.0% (3.2)% 1,320bps (0.4)% 1,040bps 8.4% 6.8% 160bps
1 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Goodwill and Other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
3. Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $309 million on the leasing business and a loss of
$47 million in relation to a sale of a portfolio of Aviation loans
4 Excludes other equity instruments including AT1s
5 Not meaningful
Net Tangible Asset Value per Share
31.12.23 31.12.22 Change 30.09.23 Change
$million
$million
%
$million
%
Parent company shareholders equity 44,445 43,162 3 42,466 5
Less Preference share premium (1,494) (1,494) - (1,494) -
Less Intangible assets (6,214) (5,869) (6) (5,997) (z4)
Net shareholders tangible equity 36,737 35,799 3 34,975 5
Ordinary shares in issue, excluding own shares (millions) 2,637 2,867 (8) 2,724 (3)
Net Tangible Asset Value per share (cents)(1) 1,393 1,249 144 1,284 109
1 Change is cents difference between the two periods rather than
percentage change
Page 47
Underlying versus reported results reconciliations
Reconciliations between underlying and reported results are set out in the
tables below:
Operating income by client segment
2023
Corporate, Commercial & Institutional Banking Consumer Ventures Central & Total
$million
Private &
$million
other items (segment)
$million
Business
$million
Banking
$million
Underlying operating income 11,218 7,106 156 (1,102) 17,378
Restructuring 291 45 - 26 362
DVA 17 - - - 17
Other items² 262 - - - 262
Reported operating income 11,788 7,151 156 (1,076) 18,019
2022¹
Corporate, Commercial & Institutional Consumer Ventures Central & Total
Banking
Private &
$million
other items (segment)
$million
$million
Business
$million
Banking
$million
Underlying operating income 9,608 5,969 29 156 15,762
Restructuring 436 47 - 11 494
DVA 42 - - - 42
Other items - - - 20 20
Reported operating income 10,086 6,016 29 187 16,318
1 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2 Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $309 million on the leasing business and a loss of
$47 million in relation to a sale of a portfolio of Aviation loans
Operating income by region
2023
Asia Africa & Europe & Central & Total
$million
Middle East
Americas
other items
$million
$million
$million
(region)
$million
Underlying operating income 12,429 2,806 1,397 746 17,378
Restructuring 203 110 35 14 362
DVA (16) 26 7 - 17
Other items² 35 (18) 263 (18) 262
Reported operating income 12,651 2,924 1,702 742 18,019
20221
Asia Africa & Europe & Central & Total
$million
Middle East
Americas
other items
$million
$million
$million
(region)
$million
Underlying operating income 10,912 2,460 2,303 87 15,762
Restructuring 304 140 35 15 494
DVA 20 8 14 - 42
Other items 20 - - - 20
Reported operating income 11,256 2,608 2,352 102 16,318
1 Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2 Other items includes the sale of the Aviation Finance business, of
which there was a gain on sale of $309 million on the leasing business and a
loss of $47 million in relation to a sale of a portfolio of Aviation loans
Page 48
Underlying versus reported results reconciliations continued
Net interest income and Non NII
2023 20221
Underlying Restructuring Adjustment Reported Underlying Restructuring Adjustment Reported
$million
$million
for Financial Markets funding costs and financial guarantee fees on interest
$million
$million
$million
for Financial Markets funding costs and financial guarantee
$million
earning assets
fees on interest earning assets
$million
$million
Net interest income1,2 9,557 (10) (1,778) 7,769 7,967 9 (383) 7,593
Non NII1,2 7,821 651 1,778 10,250 7,795 547 383 8,725
Total income 17,378 641 - 18,019 15,762 556 - 16,318
1. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. To be consistent with how we the compute Net Interest Margin, we
have changed our definition of Underlying Net Interest Income (NII) and
Underlying Non NII. The adjustments made to NIM, including Interest expense
relating to funding our trading book, will now be shown against Underlying Non
NII to be updated as rather than Underlying NII. There is no impact on total
income
Profit before taxation (PBT)
2023
Underlying Restructuring Net gain on businesses Goodwill DVA Reported
$million
$million
disposed of³
and other Impairment2
$million
$million
$million
$million
Operating income 17,378 362 262 - 17 18,019
Operating expenses (11,136) (415) - - - (11,551)
Operating profit/(loss) before impairment losses and taxation 6,242 (53) 262 - 17 6,468
Credit impairment (528) 20 - - - (508)
Other impairment (130) (28) - (850) - (1,008)
Profit from associates and joint ventures 94 47 - - - 141
Profit/(loss) before taxation 5,678 (14) 262 (850) 17 5,093
20221
Underlying Restructuring Net gain on businesses Goodwill DVA Reported
$million
$million
disposed of
and other Impairment2
$million
$million
$million
$million
Operating income 15,762 494 20 - 42 16,318
Operating expenses (10,409) (504) - - - (10,913)
Operating profit/(loss) before impairment losses and taxation 5,353 (10) - - 42 5,405
Credit impairment (836) - - - - (836)
Other impairment (39) (78) - (322) - (439)
Profit from associates and joint ventures 167 (11) - - - 156
Profit/(loss) before taxation 4,645 (99) 20 (322) 42 4,286
1. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Goodwill and other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
3 Net gain on businesses disposed off includes the sale of the
Aviation Finance business, of which there was a gain on sale of $309 million
on the leasing business and a loss of $47 million in relation to a sale of a
portfolio of Aviation loans
Page 49
Underlying versus reported results reconciliations continued
Profit before taxation (PBT) by client segment
2023
Corporate, Commercial & Institutional Banking Consumer Ventures Central & Total
$million
Private &
$million
other items (segment)
$million
Business
$million
Banking
$million
Operating income 11,218 7,106 156 (1,102) 17,378
External 8,543 3,902 157 4,776 17,378
Inter-segment 2,675 3,204 (1) (5,878) -
Operating expenses (5,627) (4,261) (429) (819) (11,136)
Operating profit/(loss) before impairment losses 5,591 2,845 (273) (1,921) 6,242
and taxation
Credit impairment (123) (354) (85) 34 (528)
Other impairment (32) (4) (26) (68) (130)
Profit from associates and joint ventures - - (24) 118 94
Underlying profit/(loss) before taxation 5,436 2,487 (408) (1,837) 5,678
Restructuring 32 (60) (4) 18 (14)
Goodwill and other impairment2 - - - (850) (850)
DVA 17 - - - 17
Other items³ 262 - - - 262
Reported profit/(loss) before taxation 5,747 2,427 (412) (2,669) 5,093
2022¹
Corporate, Commercial & Institutional Consumer Ventures Central & Total
Banking
Private &
$million
other items (segment)
$million
$million
Business
$million
Banking
$million
Operating income 9,608 5,969 29 156 15,762
External 8,462 4,942 29 2,329 15,762
Inter-segment 1,146 1,027 - (2,173) -
Operating expenses (5,193) (4,104) (336) (776) (10,409)
Operating profit/(loss) before impairment losses 4,415 1,865 (307) (620) 5,353
and taxation
Credit impairment (425) (262) (16) (133) (836)
Other impairment - (10) (24) (5) (39)
Profit from associates and joint ventures - - (16) 183 167
Underlying profit/(loss) before taxation 3,990 1,593 (363) (575) 4,645
Restructuring 14 (56) (1) (56) (99)
Goodwill and other impairment2 - - - (322) (322)
DVA 42 - - - 42
Other items - - - 20 20
Reported profit/(loss) before taxation 4,046 1,537 (364) (933) 4,286
1. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Goodwill and other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
3 Other items includes the sale of the Aviation Finance business, of which
there was a gain on sale of $309 million on the leasing business and a loss of
$47 million in relation to a sale of a portfolio of Aviation loans
Page 50
Underlying versus reported results reconciliations continued
Profit before taxation (PBT) by region
2023
Asia Africa & Europe & Central & Total
$million
Middle East
Americas
other items (region)
$million
$million
$million
$million
Operating income 12,429 2,806 1,397 746 17,378
Operating expenses (7,096) (1,571) (1,733) (736) (11,136)
Operating profit/(loss) before impairment losses 5,333 1,235 (336) 10 6,242
and taxation
Credit impairment (644) 91 19 6 (528)
Other impairment (63) (15) (13) (39) (130)
Profit from associates and joint ventures 114 - - (20) 94
Underlying profit/(loss) before taxation 4,740 1,311 (330) (43) 5,678
Restructuring (97) (2) 32 53 (14)
Goodwill and other impairment2 (850) - - - (850)
DVA (16) 26 7 - 17
Other items³ 35 (18) 263 (18) 262
Reported profit/(loss) before taxation 3,812 1,317 (28) (8) 5,093
20221
Asia Africa & Europe & Central & Total
$million
Middle East
Americas
other items (region)
$million
$million
$million
$million
Operating income 10,912 2,460 2,303 87 15,762
Operating expenses (6,675) (1,551) (1,548) (635) (10,409)
Operating profit/(loss) before impairment losses 4,237 909 755 (548) 5,353
and taxation
Credit impairment (790) (119) 78 (5) (836)
Other impairment (10) 2 1 (32) (39)
Profit from associates and joint ventures 179 - - (12) 167
Underlying profit/(loss) before taxation 3,616 792 834 (597) 4,645
Restructuring (46) 21 (13) (61) (99)
Goodwill and other impairment2 (308) - - (14) (322)
DVA 20 8 14 - 42
Other items 20 - - - 20
Reported profit/(loss) before taxation 3,302 821 835 (672) 4,286
1. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Goodwill and other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
3 Other items includes the sale of the Aviation Finance business, of
which there was a gain on sale of $309 million on the leasing business and a
loss of $47 million in relation to a sale of a portfolio of Aviation loans
Page 51
Underlying versus reported results reconciliations continued
Return on tangible equity (RoTE)
2023 2022¹
$million
$million
Average parent company Shareholders' Equity(4) 43,549 44,237
Less Average preference share capital and share premium (1,494) (1,494)
Less Average intangible assets (5,957) (5,557)
Average Ordinary Shareholders' Tangible Equity 36,098 37,186
Profit for the period attributable to equity holders 3,462 2,902
Non-controlling interests 7 46
Dividend payable on preference shares and AT1 classified as equity (452) (401)
Profit for the period attributable to ordinary shareholders 3,017 2,547
Items normalised:
Restructuring 14 99
Goodwill & other impairment2 850 322
Net gains on sale of businesses³ (262) (20)
Ventures FVOCI unrealised losses/(gains) net of tax 69 (36)
DVA (17) (42)
Tax on normalised items (21) (3)
Underlying profit for the period attributable to ordinary shareholders 3,650 2,867
Underlying Return on Tangible Equity 10.1% 7.7%
Reported Return on Tangible Equity 8.4% 6.8%
1. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Goodwill and other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
3 Includes the sale of the Aviation Finance business, of which there was a
gain on sale of $309 million on the leasing business and a loss of $47 million
in relation to a sale of a portfolio of Aviation loans
4. Excludes other equity instruments including AT1s
2023
Corporate, Commercial & Institutional Banking Consumer Ventures Central & Total
%
Private &
%
other Items (Segment)
%
Business
%
Banking
%
Underlying RoTE 19.5 25.3 nm³ (27.0) 10.1
Provision for regulatory matters - - - - -
Restructuring
Of which: Income 1.4 0.6 - 0.3 1.0
Of which: Expenses (1.3) (1.4) nm³ (0.6) (1.1)
Of which: Credit impairment 0.1 - - 0.1 0.1
Of which: Other impairment (0.1) - - (0.2) (0.1)
Of which: Profit from associates and joint ventures - - - 0.6 0.1
Net gain on businesses disposed/held for sale² 1.3 - - - 0.7
Goodwill and other impairment¹ - - - (11.1) (2.3)
Ventures FVOCI Unrealised gains/(losses) net of Taxes - - - - (0.2)
DVA 0.1 - - - -
Tax on normalised items (0.4) 0.2 nm³ 1.1 0.1
Reported RoTE 20.6 24.7 nm³ (36.8) 8.4
1. Goodwill and other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
2. Includes the sale of the Aviation Finance business, of which there
was a gain on sale of $309 million on the leasing business and a loss of $47
million in relation to a sale of a portfolio of Aviation loans
3. Not meaningful
4. Segmental RoTE is the ratio of the current year's underlying profit to the
average tangible equity. Average Tangible Equity has been derived based on
average RWA
Page 52
Underlying versus reported results reconciliations continued
2022¹
Corporate, Commercial & Institutional Consumer Ventures Central & Total
Banking
Private &
%
other Items (Segment)
%
%
Business
%
Banking
%
Underlying RoTE 13.4 15.8 nm³ (14.2) 7.7
Provision for regulatory matters - - - - -
Restructuring
Of which: Income 1.9 0.6 - 0.1 1.3
Of which: Expenses (1.6) (1.4) nm³ (0.5) (1.4)
Of which: Credit impairment - - - - -
Of which: Other impairment (0.2) - - (0.3) (0.2)
Of which: Profit from associates and joint ventures - - - (0.1) -
Net loss on businesses disposed/held for sale - - nm³ 0.3 0.1
Goodwill and other impairment2 - - - (4.5) (0.9)
Ventures FVOCI Unrealised gains/(losses) net of Taxes - - - - 0.1
DVA 0.2 - - - 0.1
Tax on normalised items (0.1) 0.2 nm³ - -
Reported RoTE 13.6 15.2 nm³ (19.2) 6.8
1. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
2. Goodwill and other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
3. Not meaningful
4. Segmental RoTE is the ratio of the current year's underlying profit to the
average tangible equity. Average Tangible Equity has been derived based on
average RWA
Net charge-off ratio
2023 2022
Credit impairment (charge)/ Net average exposure Net Credit impairment (charge)/ Net average exposure¹ Net
release for the
$million
Charge-off
release for the
$million
Charge-off
year/ period
Ratio
year/ period
Ratio¹
$million
%
$million
%
Stage 1 42 320,649 (0.01)% 5 321,099 (0.00)%
Stage 2 (262) 11,674 2.24% (325) 13,162 2.47%
Stage 3 (386) 3,117 12.38% (423) 3,074 13.76%
Total exposure (606) 335,440 0.18% (743) 337,335 0.22%
1 Prior year has been restated
Earnings per ordinary share (EPS)
2023
Underlying Restructuring DVA Net gain Goodwill and other impairment² Tax on normalised items Reported
$ million
$ million
$ million
on sale of businesses¹
$ million
$ million
$ million
$ million
Profit for the year attributable to 3,581 (14) 17 262 (850) 21 3,017
ordinary shareholders
Basic - Weighted average number of shares (millions) 2,778 2,778
Basic earnings per ordinary share (cents) 128.9 108.6
20223
Underlying Restructuring DVA Net loss Goodwill impairment2 Tax on normalised items Reported
$ million
$ million
$ million
on sale of businesses
$ million
$ million
$ million
$ million
Profit for the year attributable to 2,903 (99) 42 20 (322) 3 2,547
ordinary shareholders
Basic - Weighted average number of shares (millions) 2,966 2,966
Basic earnings per ordinary share (cents) 97.9 85.9
1. Includes the sale of the Aviation Finance business, of which there
was a gain on sale of $309 million on the leasing business and a loss of $47
million in relation to a sale of a portfolio of Aviation loans
2. Goodwill and other impairment include $850 million (2022: $308
million) impairment charge relating to the Group's investment in its associate
China Bohai Bank (Bohai)
3. Underlying performance for relevant periods in 2022 has been
restated for the removal of (i) exit markets and businesses in AME (ii)
Aviation Finance and (iii) DVA. No change to reported performance
Page 53
Group Chief Risk Officer's review
Proactively managing our risks whilst keeping our focus on the execution of
the Group's strategy
Managing Risk
2023 presented challenges across many of our markets, with sustained high
inflation levels from 2022 continuing to put pressure on the central banks to
dampen rising prices through increases to interest rates. Increased levels of
volatility were seen in early 2023 as several bank failures prompted fears of
a global contagion. Despite having no material exposures to the failed banks,
the Group took proactive steps to further strengthen our liquidity position
and monitor for any signs of second order impacts. 2023 also saw a fundamental
shift in global power dynamics, including with the BRICS expansion. Sovereign
risks persisted across emerging markets in the Africa and Middle East region.
In Asia, despite slower than expected economic growth in China, we saw
positive signs of growth in the second half of the year. We continued to keep
our focus on the challenges in the China real estate sector and any contagion
risks. The Group has limited direct exposure in Ukraine and to the countries
in the Middle East which are currently most impacted by conflict. However, we
remained cognisant of the volatility and the potential second order market
impacts, including those from elevated oil and commodity prices or supply
chains disruption, which we continue to actively monitor through stress
testing and portfolio reviews.
As we enter 2024, we stay vigilant and continue to review our exposure and
limits across our portfolios to identify vulnerable industries and clients for
closer monitoring.
Corporate, Commercial and Institutional Banking (CCIB)
Our CCIB credit portfolio remained resilient with overall good asset quality,
as evidenced by our largely investment grade corporate portfolio (31 December
2023: 73 per cent, 31 December 2022: 76 per cent). We actively tracked
geopolitical risks to enable us to act should the need materialise. In
consideration of the macroeconomic challenges, additional reviews were
conducted throughout 2023 across US regional Banks, Non-Bank Financial
Institutions (NBFI), Leveraged Lending books, Global Commercial Real Estate
(CRE) portfolio and select geographies. We closely monitored vulnerable
sectors and identified clients that may face difficulties on account of
increased interest rates, foreign exchange movements, commodity volatility or
increased prices of essential goods. In China, the property market recovery
remained slower than expected amidst government support measures and we
continued to monitor our developers and sponsors portfolios through dedicated
reviews.
Consumer, Private and Business Banking (CPBB)
The CPBB credit portfolio remained alert to the risks of the uncertain
economic outlook but continued to demonstrate resilience. An increase in
delinquency rates (Stage 2 provisions as at 31 December 2023: $139 million, 31
December 2022: $118 million) highlights the emerging pressure on customers'
debt servicing capacity, as our customers continue to adapt to the prolonged
higher interest rate environment. We continued to monitor potential secondary
impacts of local challenges arising from heightened country risks across
Bangladesh, Ghana, Kenya, Nigeria, Pakistan, and Sri Lanka, amongst others.
There was no material impact on the CPBB portfolio due to the war in Ukraine
and the conflict in the Middle East. For both our secured and unsecured
consumer credit portfolios, we continued to monitor customer affordability
across our key markets and dynamically adjusted origination criteria,
portfolio management and collections strategies, as appropriate. We were
mindful of the higher credit risk associated with increased lending to the
mass market segment through our digital partnerships and digital banks and
have tailored our lending criteria and portfolio management approach to the
unique risks and customer behaviours observed in these segments.
Treasury Risk
Our liquidity and capital risks are managed to ensure a strong and resilient
balance sheet that supports sustainable growth. We continued to enhance our
Treasury Risk framework to incorporate the lessons from recent market events
as well as horizon risks. Liquidity remained resilient across the Group and
major legal entities. Group liquidity coverage ratio (LCR) is 145.4 per cent
as at December 2023 (31 December 2022: 147 per cent) with a surplus to both
Risk Appetite and regulatory requirements. Common Equity Tier 1 (CET1) ratio
was 14.1 per cent as at December 2023 (31 December 2022: 14.0 per cent) while
Leverage ratio was 4.7 per cent (31 December 2022: 4.8 per cent). In March
2023, we saw sharp moves in funding markets and customer behaviours triggering
several bank failures in the US and Switzerland.
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Group Chief Risk Officer's review continued
This resulted in a heightened focus on Treasury risks including capital,
liquidity, and interest rate risk on the banking book, with problems most
acute in the US market and reverberating globally. We maintained a resilient
liquidity position throughout the period and continued to focus on managing
risks even as those event risks receded.
The Risk function remains actively engaged in providing independent review and
challenge to internal and regulatory stress tests and recovery and resolution
capabilities.
Further details on Risk Management for our Principal Risk Types can be found
in the full annual report.
Further details on Climate Risk can be found in the full annual report.
Risk Performance Summary
Asset quality is resilient. The percentage of investment-grade corporate net
exposure remained high at 73 per cent (31 December 2022: 76 per cent).
Exposure to our top 20 corporate clients as a percentage of Tier 1 capital
decreased to 62 per cent (31 December 2022: 65 per cent), mainly driven by
reduction in Transaction Banking exposures. However, the Group remained
vigilant of persistent challenging conditions in some markets and sectors. In
2023, we saw a $0.5 billion increase in Early Alerts exposure (31 December
2023: $5.5 billion, 31 December 2022: $5.0 billion), driven by inflows
relating to a select number of clients including sovereign-related exposures,
partially offset by transfers to Purely Precautionary, regularisations,
exposure reductions and outflows to Credit grades 12-14. Credit grade 12
balances increased to $2.2 billion (31 December 2022: $1.6 billion) due to
sovereign and client downgrades, partially offset by outflows to
non-performing loans.
Key indicators
2023 2022
Group total business1 292.1 316.1
Stage 1 loans ($ billion) 273.7 295.2
Stage 2 loans ($ billion) 11.2 13.0
Stage 3 loans, credit-impaired ($ billion) 7.2 7.9
Stage 3 cover ratio 60% 57%
Stage 3 cover ratio (including collateral) 76% 76%
Corporate, Commercial & Institutional Banking
Investment grade corporate net exposures as a percentage of total corporate 73% 76%
net exposures
Loans and advances maturing in one year or less as a percentage of total loans 68% 68%
and advances to customers3
Early Alert portfolio net exposures ($ billion) 5.5 5.0
Credit grade 12 balances ($ billion) 2.2 1.6
Aggregate top 20 corporate net exposures as a percentage of Tier 1 capital2 62% 65%
Collateralisation of sub-investment grade net exposures maturing in more than 41% 53%
one year
Consumer, Private & Business Banking
Loan-to-value ratio of Consumer, Private & Business Banking mortgages 47.2% 44.7%
1 These numbers represent total gross loans and advances to customers
2 Excludes reverse repurchase agreements
3 The 2022 figure has been restated from 65 per cent to 68 per cent
The Group's credit impairment was a net charge of $508 million (31 December
2022: $836 million), a decrease of $328 million. 2022 included overlays for
sovereign downgrades and China commercial real estate, which was partly offset
by a full release of COVID-19 overlays. Stage 3 was a charge of $369 million
(31 December 2022: $430 million), and the reduction was driven by CCIB
releases and lower impairment charges for our China commercial real estate
clients. This reduction was offset by higher bankruptcy related write-offs in
CPBB across Singapore, Hong Kong and Korea, and portfolio growth in digital
partners.
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Group Chief Risk Officer's review continued
Credit impairment
2023 2022(1)
Stage 1 & 2 Stage 3 Total Stage 1 & 2 Stage 3 Total
$million
$million
$million
$million
$million
$million
Ongoing business portfolio
Corporate, Commercial & Institutional Banking 11 112 123 148 277 425
Consumer, Private & Business Banking 129 225 354 151 111 262
Ventures 42 43 85 13 3 16
Central & other items (44) 10 (34) 95 38 133
Credit impairment charge/(release) 138 390 528 407 429 836
Restructuring business portfolio - - - - - -
Others 1 (21) (20) (1) 1 -
Credit impairment charge/(release) 1 (21) (20) (1) 1 -
Total credit impairment charge/(release) 139 369 508 406 430 836
1 Underlying credit impairment has been restated for the removal of (i)
exit markets and businesses in AME and (ii) Aviation Finance. No change in
reported credit impairment
An update on our risk management approach
Our Enterprise Risk Management Framework (ERMF) outlines how we manage risk
across the Group, as well as at branch and subsidiary level(1). It gives us
the structure to manage existing risks effectively in line with our Group Risk
Appetite, as well as allowing for holistic risk identification. The ERMF also
sets out the roles and responsibilities and the minimum governance
requirements for the management of Principal Risks.
In revisions made in the ERMF in 2023, effective 1 January 2024, the concepts
of Integrated Risk Types (IRTs) and IRT Owner roles were discontinued.
Oversight on existing IRTs, i.e. Climate Risk, Digital Asset and Third Party
Risk, is achieved through the Risk Type Frameworks (RTFs) and dedicated
policies. The subject matter experts, as the policy owners for these risks,
provide overall governance and ensure a holistic view of how risks are
monitored and managed across the Principal Risk Types (PRTs).
Principal Risk Types
PRTs are risks inherent in our strategy and business model. These are formally
defined in our ERMF, which provides a structure for monitoring and controlling
these risks through the Risk Appetite Statement. We will not compromise
compliance with our Risk Appetite in order to pursue revenue growth or higher
returns.
The table below provides an overview of the Group's PRTs and their
corresponding risk appetite statements.
Risk Types Risk Appetite Statement
Credit Risk The Group manages its credit exposures following the principle of
diversification across products, geographies, client segments and industry
sectors.
Traded Risk The Group should control its financial markets and activities to ensure that
market and counterparty credit risk losses do not cause material damage to the
Group's franchise.
Treasury Risk The Group should maintain sufficient capital, liquidity and funding to support
its operations, and an interest rate profile ensuring that the reductions in
earnings or value from movements in interest rates impacting banking book
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 The Group aims to control operational and technology risks to ensure that
operational losses (financial or reputational), including any related to
conduct of business matters, do not cause material damage to the Group's
franchise.
Financial Crime Risk The Group has no appetite for breaches in laws and regulations related to
Financial Crime, recognising that whilst incidents are unwanted, they cannot
be entirely avoided.
Compliance Risk The Group has no appetite for breaches in laws and regulations related to
regulatory non-compliance; recognising that whilst incidents are unwanted,
they cannot be entirely avoided.
Information and Cyber Security Risk The Group aims to mitigate and control ICS risks to ensure that incidents do
not cause the Bank material harm, business disruption, financial loss or
reputational damage - recognising that whilst incidents are unwanted, they
cannot be entirely avoided.
Reputational and Sustainability Risk The Group aims to protect the franchise from material damage to its reputation
by ensuring that any business activity is satisfactorily assessed and managed
with the appropriate level of management and governance oversight. This
includes a potential failure to uphold responsible business conduct in
striving to do no significant environmental and social harm.
Model Risk The Group has no appetite for material adverse implications arising from
misuse of models or errors in the development or implementation of models;
whilst accepting some model uncertainty.
1 The Group's Enterprise Risk Management Framework 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.
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Group Chief Risk Officer's review continued
In addition to the PRTs, the Group has defined the following Risk Appetite
statement for Climate Risk: "The Group aims to measure and manage financial
and non-financial risks arising from climate change, and reduce emissions
related to our own activities and those related to the financing of clients in
alignment with the Paris Agreement."
Further details on our Risk Management Approach can be found in the full
annual report.
Topical and Emerging Risks (TERs)
Emerging Risks refer to unpredictable and uncontrollable outcomes from certain
events which may have the potential to adversely impact our business. Topical
Risks refer to themes that may have emerged but are still evolving rapidly.
As part of our continuous risk identification process, we have updated the
Group's TERs from those disclosed in the 2022 Annual Report and 2023 Half-Year
Report; these remain applicable, with nuances in their evolution noted where
pertinent. Below is a summary of the TERs, and the mitigating actions we are
taking based on our current knowledge and assumptions. This reflects the
latest internal assessment as performed by senior management.
The TER list is not exhaustive and there may be additional risks which could
have an adverse effect on the Group. There are some horizon risks that,
although not highly likely at present, could evolve into a threat in the
future and we are therefore monitoring them. These include future pandemics
and the world's preparedness for them, and other potential cross-border
conflicts. Our mitigation approach for these risks may not eliminate them but
demonstrates the Group's awareness and attempt to reduce or manage the risks.
As certain risks develop and materialise over time, management will take
appropriate steps to mitigate them based on their materiality on the Group.
Macroeconomic and geopolitical considerations
There is interconnectedness between risks due to the importance of US Dollar
financing conditions for global markets, the global or concentrated nature of
key supply chains for energy, food, semi-conductors and rare metals, and the
direct influence of geopolitics on geoeconomics.
The Group is exposed to these risks directly through investments,
infrastructure and staff, and also indirectly through its clients. Whilst the
main impacts are financial, other ramifications may exist such as
reputational, compliance or operational considerations.
Expanding array of global tensions and new geopolitical order
Global power dynamics have shifted, with different political and economic
alliances beginning to create a multipolar power system. This has been
accelerated by the war in Ukraine and conflicts in the Middle East. Whilst the
Group has limited direct exposure to Russia, Ukraine or Israel, it may be
impacted by second order effects on its clients and markets for agricultural
commodities, oil or gas.
The positioning of 'middle powers' is complex and evolving, and could tip the
geopolitical scales. The negotiating power of exporters of energy and other
natural resources has expanded and can shape global markets, as they can use
global divisions to raise their own profile. One such example is the envisaged
expansion of BRICS to seek a counterweight to Western power axes.
US-China tensions remain, with protectionist measures imposed by both sides.
Tariffs, embargos, sanctions, new taxes such as that on carbon, and
restrictions on technology exports and investments, are being used to achieve
goals beyond just economic. Further economic or political actions could
escalate distrust and accelerate the decoupling of trade links, leading to
increasingly inefficient production and inflation pressures.
Despite attempts to become more pragmatic, a number of potential flashpoints
remain. A push by China to increase RMB trade and establish RMB as a secondary
global reserve currency presents new business opportunities but also potential
disruption to the balance of power.
With many elections due across the world in the next twelve months, there is
uncertainty over the political direction of domestic and foreign policy. There
is a risk of short-term political expediency taking precedence over long-term
strategic decision making. The malicious use of AI-enabled disinformation
could also cause disruption and undermine trust in the political process.
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Group Chief Risk Officer's review continued
There is an ongoing threat of terrorism, with unpredictability exacerbated by
the wider range of ideologies at play. Cyber warfare by state related actors
could also be used to disrupt infrastructure or institutions in rival
countries.
A more complex and less integrated global political and economic landscape has
the potential to challenge cross border business models, but also provides new
business opportunities.
Persistent high inflation and interest rates
Although rate cuts have been signalled by the Federal Reserve, global rates
could remain elevated for longer. Structurally higher spending and continued
supply disruptions increase the probability of inflation remaining sticky.
During 2023, the International Monetary Fund (IMF) and World Trade
Organisation lowered their initial forecasts for trade growth and increased
that of inflation in 2024, suggesting that several economies will walk a fine
line between recession and stagflation.
Concern for the credit environment spans both commercial and retail lending,
with price inflation and the cliff effects of energy, mortgage and debt
re-pricing ultimately leading to higher defaults. This is visible in bond
markets with yields widening markedly and prone to high volatility.
Drives to de-risk supply chains combined with no obvious resolution to ongoing
conflicts continue to disrupt supply chains. This complicates efforts to
combat inflation as supply constrained markets dent the effectiveness of
monetary policy.
Some sectors are particularly sensitive to high rates, notably commercial real
estate, non-bank financial institutions (NBFI) and leveraged finance due to
their reliance on the availability of cheap financing. Bank failures in Q1
2023 highlighted challenges in managing liquidity, credit, refinancing and
market risks. They also raised questions of competence and confidence in the
finance industry.
Economic slowdown in China
Whilst China's exit from COVID restrictions has had an overall positive
impact, it has failed to deliver a sustained boost to the global economy as
the country contends with strain in several sectors such as real estate. There
has also been a change in the corporate operating environment, with reduced
clarity on the economic outlook.
Given China's importance to global trade a slowdown would have wider
implications across the supply chain, especially for its trading partners, as
well as to countries which rely on it for investment, such as those in Africa.
However, opportunities arise from the diversification of intra-Asia trade and
other global trade routes, and growth acceleration in South Asia, especially
India.
Sovereign risk
Credit fundamentals have been eroding across both emerging and advanced
economies due to persistently high interest rates, food and energy prices.
Emerging markets will also be affected by weakness in local currencies versus
the US Dollar and the resultant cost of refinancing existing debt, or
availability of hard currency liquidity. Issues and challenges have already
been observed across several of the Group's footprint markets, including the
recent default of Ghana, political instability in Pakistan, high inflation in
Turkey, economic turmoil in Sri Lanka, and coups in Africa.
For some countries there is a heightened risk of failure to manage social
demands, which might culminate in increased political vulnerability.
Furthermore, food security exacerbated by the influences of armed conflict and
climate change, and energy security challenges have the potential to drive
social unrest.
Debt moratoria and refinancing initiatives are complicated by larger number of
financiers, with much financing done on a bilateral basis outside of the Paris
Club. Whilst the Global Sovereign Debt Roundtable has made some progress on
coordinating approaches between the Paris Club and other lenders their
interests do not always match. This can lead to delays in negotiations on debt
resolutions for developing nations.
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Group Chief Risk Officer's review continued
Supply chain issues and material shortages
Demand and supply imbalances in global supply chains are increasingly becoming
structural in nature and affect a wide range of commodities including food,
energy, minerals and raw materials, plus targeted restrictions on certain
industry sectors.
There is growing political awareness around the need for key component and
resource security at national level. Countries are enacting rules to "de-risk"
by reducing reliance on rivals or concentrated suppliers (for example
semiconductors) and look to either re-industrialise or make use of
near-shoring and friend-shoring production.
The growing need for minerals and rare earth metals to power green energy
technologies could increase the geopolitical standing of the main refiners,
such as China, Indonesia and some African nations. However, there are also
environmental and social costs to rapidly increasing extraction. A desire to
avoid dependence may slow down the move by some nations towards the
transition.
How these risks are mitigated/next steps
• We remain vigilant in monitoring risk and assessing impacts from
geopolitical and macroeconomic risks to portfolio concentrations.
• We conduct thematic stress tests and portfolio reviews at the Group,
country, and business level, with regular reviews on vulnerable sectors, and
undertake any necessary mitigating actions.
• We maintain a diversified portfolio across products and geographies,
with specific risk appetite metrics to monitor concentrations.
• Increased scrutiny is applied when onboarding clients and in ensuring
compliance with sanctions.
• Collateral and credit insurance are used to manage concentrations.
• We track the participation of our footprint countries in the G20's
Common Framework Agreement and Debt Service Suspension Initiative for Debt
Treatments and the associated exposure.
• Our NBFI exposure is closely monitored in terms of both limits, products
and counterparties.
Regulatory considerations
Changing regulatory environment
Given notable bank failures in 2023 (and the response of resolution
authorities to those failures), the regulatory framework for banks remains
subject to continued change in addition to the implementation of Basel 3.1 in
various jurisdictions. Additionally, the differing pace and scale of
regulatory adoption between jurisdictions, along with increasing
extraterritorial reach and prescriptiveness, can make it challenging for
multinational groups to manage their business. Implementation timelines are a
focus.
The scale of upcoming regulatory change in 2024 and 2025 is significant with
major regime changes in capital and operational resilience due to take effect.
How these risks are mitigated/next steps
• We actively monitor regulatory developments, including those related to
sustainable finance and ESG, and respond to consultations either bilaterally
or through well-established industry bodies.
ESG considerations
ESG stakeholder expectations
Organisations across the corporate and financial sectors are setting ambitious
sustainability goals and net zero targets with many embedding them in their
business models. This has prompted increased attention from various
stakeholders in ensuring that net zero targets are being met with credible
action plans. Stakeholder scrutiny around greenwashing risk relating to ESG
focused financial products, as well as companies' commitments, transpires in
the various regulatory developments and early enforcement actions taken by
several key regulators.
Fragmentation in the pace and scale of adoption of ESG regulations around the
world remains, particularly around taxonomies and disclosure requirements,
which may lead to unintended consequences including misallocation of capital,
increased implementation costs and litigation risks.
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Group Chief Risk Officer's review continued
The Group's net zero aspirations may be impacted by governments or corporates
scaling back their sustainability targets, especially as economic conditions
remain challenging, and budgets are constrained. There have been examples in
developed nations, such as the UK revisiting its electric vehicle transition
timeline. A slower transition from key clients may also weigh reputational
pressure on the Group's roadmap.
Higher frequencies of extreme weather-related events such as wildfires, floods
and famines may lead to physical climate risk and the cost of managing it
becoming a heavier burden on global economies. This will be particularly
impactful to developing markets. Alongside climate change, biodiversity loss,
pollution, and depletion of key resources, such as water, pose incremental
risks to food and health systems, energy security and contribute to the
disruption of supply chains.
Human rights concerns are increasingly in focus, with the scope expanding
beyond direct abuses to cover other areas such as technological advancement
and supply chains.
How these risks are mitigated/next steps
• We update our environmental and social standards for providing financial
services to clients every two years, with a new version scheduled for 2024.
• We focus on embedding our values through our Position Statements for
sensitive sectors and a list of prohibited activities
• We integrate the management of greenwashing risks into our Reputational
and Sustainability Risk Framework and policies
• 'Green', 'sustainable' and 'transition' labels for products and
transactions reflect the criteria set out in the Group's Sustainable Finance
frameworks, which are regularly reviewed. We obtain external verification on
the Group's Sustainable Finance asset pool.
• We assess our clients and suppliers against various international human
rights principles, as well as through our social safeguards and supplier
charter.
• Detailed portfolio reviews and stress tests are conducted to test
resilience to climate-related risks and enhance modelling capabilities to
understand the financial risks and opportunities from climate change.
• Work is underway to embed Climate Risk considerations across all
relevant PRTs. This includes client-level Climate Risk assessments, including
setting adequate mitigants or controls as part of decision making and
portfolio management activities.
Technological considerations
Data and digital
The Group's digital footprint will expand as more services and products are
digitised and made more accessible. Scale in operations and interactions with
digital systems will further reduce the tolerance for errors and outages. The
risk of data breaches is amplified by highly organised actors, with threats
such as 'Ransomware as a Service' and affordable, sophisticated AI systems
helping to facilitate attacks on organisations and individuals.
Data regulation continues to be fluid and fragmented. Geopolitical tensions
have accelerated the implementation of data sovereignty laws, including data
localisation requirements and cross-border access restrictions. These
regulations often have an extraterritorial reach which could increase
operating costs significantly, and also impact cross-border business models.
Stakeholder expectations on data management have also increased, particularly
relating to quality, integrity, record keeping, privacy, sovereignty, the
ethical use of data and application of AI.
The sophistication and adoption of AI solutions are growing exponentially and
will increase exposure to existing risks such as model, fraud, financial
crime, compliance and Information and Cyber Security (ICS) risks. In response,
regulation is accelerating, particularly around the ethical application of AI
in decision-making, necessitating robust governance measures. The Group needs
to ensure that it develops sufficient in-house subject matter expertise.
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Group Chief Risk Officer's review continued
New business structures, channels and competition
Failure to harness new technologies and new business models would place banks
at a competitive disadvantage. The continued exploration of partnerships,
alliances, digital assets, generative AI and nascent technologies, such as
quantum computing, provides both opportunities and unique challenges. This is
increasingly important as digital assets and distributed ledger technology
become progressively prevalent and interconnected with the financial
ecosystem. Supply chains are becoming more complex, interconnected and
digital. Highly extended enterprises expand opportunities available for
malicious actors, with risk cascading further down supply chains beyond just
direct and third party risks.
These innovations require specialist in-house expertise, new operating models
and adapting risk frameworks to perform robust risk assessment and management
of new threats. There is also growing regulatory attention in many of these
areas. Balancing resilience and agility is essential given the global nature
of new technologies alongside the maintenance of existing systems. It is
imperative to establish clear ownership, frameworks, and oversight of the use
of emerging technologies.
How these risks are mitigated/next steps
• We monitor emerging trends, opportunities and developments in technology
as well as emerging business models that may have implications for the banking
sector.
• We invest in our capabilities, to better prepare and protect ourselves
against possible disruption and new risks.
• We track the evolving regulatory landscape affecting key areas such as
data management, digital assets and AI, including country-specific
requirements, and actively collaborate with regulators to support important
initiatives.
• We have established enhanced governance for novel areas through the
Digital Asset Risk Committee and Responsible AI Council, which considers
emerging regulatory guidance.
• We manage data risks through our Compliance Risk Type Framework and
information security risks through our ICS Risk Type Framework.
• We have developed a Group Data Strategy, to strengthen ownership of
related data risks.
• We maintain a dedicated Data Compliance Policy with globally applicable
standards. These standards undergo regular review to ensure alignment with
evolving regulations and industry best practice.
• We maintain programmes to enhance our data risk management capabilities
and controls, including compliance with BCBS239 requirements on effective risk
data aggregation, with progress tracked at executive level risk governance
committees
• The Group has implemented a 'defence-in-depth' ICS control environment
strategy to protect, detect and respond to known and emerging ICS threats.
• New risks arising from partnerships, alliances, digital assets and
generative technologies are identified through the New Initiatives Risk
Assessment and Third Party Risk Management Policy and Standards.
Demographic considerations
Talent pools of the future
The expectations of the workforce, especially skilled workers, continue to
evolve. The COVID pandemic accelerated changes on how people work, connect and
collaborate, with expectations on hybrid working now a given. The focus is
increasingly on 'what' work people do and 'how' they get to deliver it, which
are becoming differentiators in the war for future talents. There is greater
desire to seek meaning and personal fulfilment at work that is aligned to
individual purpose.
These trends are even more distinct among Millennials and Generation Z who
make up an increasing proportion of the global talent pool, and as digital
natives possess the attributes and skills we seek to pursue our strategy.
To sustainably attract, grow and retain talent, we must continue to invest in
and further strengthen our Employee Value Proposition (EVP) and our brand
promise, here for good, through both firm-wide interventions as well as
targeted action.
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Group Chief Risk Officer's review continued
Demographic trends
Divergent demographic trends across developed and emerging markets create
contrasting challenges. Developed markets' state budgets could be strained by
ageing and shrinking populations, whilst political stances reduce the ability
to fill skills gaps through immigration. Conversely emerging markets are
experiencing fast-growing, younger workforces. Whilst it is an opportunity to
develop talent, population growth will put pressure on key resources such as
food, water, education and health, as well as government budgets.
Population displacement, whether as a result of climate events, lack of key
resources, political issues or war, may increase the fragility of societal
structures in vulnerable centres. Large scale movement could cause social
unrest, as well as propagate disease transmission and accelerate the spread of
future pandemics.
How these risks are mitigated/next steps
• Our culture and EVP work aims to address the emerging expectations of
the diverse talent we seek. The Brand and Culture Dashboard monitors our
diversity and inclusion, colleagues' perceptions of our EVP, and whether we
are living our Valued Behaviours. Management teams discuss many of these
metrics (including employee survey responses) to identify actions.
• We are undertaking a multi-year journey of developing future-skills
amongst our colleagues by focusing on continuous learning, to balance
appropriately between 'building' and 'inducting' skills into the Group.
• Our internal Talent Marketplace provides colleagues with opportunities
to learn through experience by signing up for cross-functional (or even
cross-geography) projects.
• Employees in 44 markets are on agreed flexible working arrangements. We
continue to enhance support and resources to People Leaders and colleagues to
help balance productivity, collaboration and wellbeing.
• Our Stands continue to be operationalised through our strategy, and help
address the talent pool's increased expectations of us being purpose-led.
Sadia Ricke
Group Chief Risk Officer
23 February 2024
Page 62
Risk review
Credit quality by client segment
Amortised cost 2023
Banks Customers Undrawn commitments Financial Guarantees
$million
$million
$million
Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items Customer Total
$million
$million
$million
$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 7.8% 64.1% 51.2% 100.0% 6.7% 59.8% 0.0% 16.7%
assets (S3)
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 63
Risk review continued
Amortised cost 2022
Banks Customers Undrawn commitments Financial Guarantees
$million
$million
$million
Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & Customer Total
$million
$million
$million
other items
$million
$million
Stage 1 39,149 126,261 129,134 691 39,133 295,219 162,958 56,683
- Strong 27,941 89,567 124,734 685 39,133 254,119 148,303 39,612
- Satisfactory 11,208 36,694 4,400 6 - 41,100 14,655 17,071
Stage 2 337 11,355 1,670 18 - 13,043 5,582 3,062
- Strong 148 2,068 1,215 10 - 3,293 1,449 522
- Satisfactory 119 7,783 146 4 - 7,933 3,454 2,134
- Higher risk 70 1,504 309 4 - 1,817 679 406
Of which (stage 2):
- Less than 30 days past due 5 109 148 4 - 261 - -
- More than 30 days past due 6 23 310 4 - 337 - -
Stage 3, credit-impaired financial assets 59 6,143 1,453 1 248 7,845 128 665
Gross balance1 39,545 143,759 132,257 710 39,381 316,107 168,668 60,410
Stage 1 (9) (143) (406) (10) - (559) (41) (11)
- Strong (3) (43) (332) (10) - (385) (28) (3)
- Satisfactory (6) (100) (74) - - (174) (13) (8)
Stage 2 (3) (323) (120) (1) - (444) (53) (28)
- Strong - (30) (62) (1) - (93) (6) -
- Satisfactory (2) (159) (17) - - (176) (42) (15)
- Higher risk (1) (134) (41) - - (175) (5) (13)
Of which (stage 2):
- Less than 30 days past due - (2) (17) - - (19) - -
- More than 30 days past due - (1) (41) - - (42) - -
Stage 3, credit-impaired financial assets (14) (3,662) (776) (1) (18) (4,457) - (147)
Total credit impairment (26) (4,128) (1,302) (12) (18) (5,460) (94) (186)
Net carrying value 39,519 139,631 130,955 698 39,363 310,647
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% 1.5% 0.0% 0.2% 0.0% 0.0%
- Satisfactory 0.1% 0.3% 1.7% 0.0% 0.0% 0.4% 0.1% 0.0%
Stage 2 0.9% 2.8% 7.2% 5.6% 0.0% 3.4% 0.9% 0.9%
- Strong 0.0% 1.5% 5.1% 10.0% 0.0% 2.8% 0.4% 0.0%
- Satisfactory 1.7% 2.0% 11.6% 0.0% 0.0% 2.2% 1.2% 0.7%
- Higher risk 1.4% 8.9% 13.3% 0.0% 0.0% 9.6% 0.7% 3.2%
Of which (stage 2):
- Less than 30 days past due 0.0% 1.8% 11.5% 0.0% 0.0% 7.3% 0.0% 0.0%
- More than 30 days past due 0.0% 4.3% 13.2% 0.0% 0.0% 12.5% 0.0% 0.0%
Stage 3, credit-impaired financial 23.7% 59.6% 53.4% 100.0% 7.3% 56.8% 0.0% 22.1%
assets (S3)
Cover ratio 0.1% 2.9% 1.0% 1.7% 0.0% 1.7% 0.1% 0.3%
Fair value through profit or loss
Performing 24,930 44,461 28 - 2,557 47,046 - -
- Strong 21,451 36,454 27 - 2,409 38,890 - -
- Satisfactory 3,479 8,007 1 - 148 8,156 - -
- Higher risk - - - - - - - -
Defaulted (CG13-14) - 37 - - - 37 - -
Gross balance (FVTPL)2 24,930 44,498 28 - 2,557 47,083 - -
Net carrying value (incl FVTPL) 64,449 184,129 130,983 698 41,920 357,730 - -
1. Loans and advances includes reverse repurchase agreements and other
similar secured lending of $24,498 million under Customers and of $978 million
under Banks, held at amortised cost
2. Loans and advances includes reverse repurchase agreements and other
similar secured lending of $40,537 million under Customers and of $23,954
million under Banks, held at fair value through profit or loss
Page 64
Risk review continued
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 2023.
2023 20221
Stage 1 & 2 Stage 3 Total Stage 1 & 2 Stage 3 Total
$million
$million
$million
$million
$million
$million
Ongoing business portfolio
Corporate, Commercial 11 112 123 148 277 425
& Institutional Banking
Consumer, Private & Business Banking 129 225 354 151 111 262
Ventures 42 43 85 13 3 16
Central & other items (44) 10 (34) 95 38 133
Credit impairment charge/(release) 138 390 528 407 429 836
Restructuring business portfolio
Others 1 (21) (20) (1) 1 -
Credit impairment charge/(release) 1 (21) (20) (1) 1 -
Total credit impairment charge/(release) 139 369 508 406 430 836
1 Underlying credit impairment has been restated for the removal of (i)
exit markets and businesses in AME and (ii) Aviation Finance. No change to
reported credit impairment
Vulnerable Sectors
Maximum exposure
2023
Maximum 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
on Balance Sheet Exposure (net of credit impairment)
$million
$million
$million
$million
$million
$million
$million
Industry:
Automotive manufacturers¹ 3,564 65 3,499 3,791 538 4,329 7,828
Aviation1,2 1,775 974 801 1,794 668 2,462 3,263
Of which : High Carbon Sector 1,330 974 356 944 615 1,559 1,915
Commodity Traders2 7,406 303 7,103 2,591 6,281 8,872 15,975
Metals & Mining1.2 4,589 307 4,282 3,373 1,218 4,591 8,873
Of which: Steel1 1,596 193 1,403 601 358 959 2,362
Of which: Coal Mining1 29 9 20 51 99 150 170
Of which: Aluminium1 526 9 517 338 188 526 1,043
Of which: Other Metals & Mining1 2,438 96 2,342 2,383 573 2,956 5,298
Shipping1 5,964 3,557 2,407 2,261 291 2,552 4,959
Construction2 2,853 448 2,405 2,753 5,927 8,680 11,085
Commercial Real Estate2 14,533 6,363 8,170 4,658 311 4,969 13,139
Of which: High Carbon Sector 7,498 3,383 4,115 1,587 112 1,699 5,814
Hotels & Tourism2 1,680 715 965 1,339 227 1,566 2,531
Oil & Gas1,2 6,278 894 5,384 7,845 6,944 14,789 20,173
Power1 5,411 1,231 4,180 3,982 732 4,714 8,894
Total3 54,053 14,857 39,196 34,387 23,137 57,524 96,720
Of which: Vulnerable and cyclical sectors 38,880 9,983 28,897 24,842 21,511 46,353 75,250
Of which: High carbon sectors 34,634 10,411 24,223 23,783 10,450 34,233 58,456
Total Corporate, Commercial & Institutional Banking 130,405 32,744 97,661 104,437 63,183 167,620 265,281
Total Group 331,952 125,760 206,192 182,299 74,278 256,577 462,769
1 High carbon sectors
2 Vulnerable and cyclical sectors
3 Maximum On Balance sheet exposure include FVTPL portion of $955
million, of which Vulnerable sector is $821 million and High Carbon sector is
$443 million
Page 65
Risk review continued
2022
Maximum 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
On Balance Sheet Exposure (net of credit impairment)
$million
$million
$million
$million
$million
$million
$million
Industry:
Automotive manufacturers1 3,167 84 3,083 3,683 560 4,243 7,326
Aviation1,2,3 3,154 1,597 1,557 1,762 632 2,394 3,951
Of which : High Carbon Sector 2,540 1,582 958 695 555 1,250 2,208
Commodity Traders2 8,133 341 7,792 2,578 6,095 8,673 16,465
Metals & Mining1.2 4,990 333 4,657 3,732 930 4,662 9,319
Of which: Steel1 1,227 157 1,070 1,450 327 1,777 2,847
Of which: Coal Mining1 48 15 33 8 7 15 48
Of which: Aluminium1 728 107 621 285 74 359 980
Of which: Other Metals & Mining1 2,987 54 2,933 1,989 522 2,511 5,444
Shipping1 5,322 3,167 2,155 1,870 256 2,126 4,281
Construction2 2,909 552 2,357 2,762 5,969 8,731 11,088
Commercial Real Estate2 16,286 7,205 9,081 6,258 224 6,482 15,563
Of which: High Carbon Sector 6,547 2,344 4,203 3,996 90 4,086 8,289
Hotels & Tourism2 1,741 919 822 1,346 138 1,484 2,306
Oil & Gas1,2 6,668 806 5,862 7,630 7,158 14,788 20,650
Power1 4,771 1,258 3,513 4,169 1,176 5,345 8,858
Total4 57,141 16,262 40,879 35,790 23,138 58,928 99,807
Of which: Vulnerable and cyclical sectors 43,678 11,741 31,937 25,761 21,068 46,829 78,766
Of which: High carbon sectors 34,005 9,574 24,431 25,775 10,725 36,500 60,931
Total Corporate, Commercial & Institutional Banking 139,631 35,229 104,402 95,272 51,662 146,934 251,336
Total Group 350,166 141,715 208,451 168,574 60,224 228,798 437,249
1 High carbon sectors
2 Vulnerable and cyclical sectors
3 In addition to the aviation sector loan exposures, the Group owns
$3.2 billion of aircraft under operating leases in 2022
4 Maximum On Balance sheet exposure include FVTPL portion of $1,251
million, of which Vulnerable sector is $1,072 million and High Carbon sector
is $574 million
Page 66
Risk review continued
Loans and advances by stage
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:
Aviation 1,619 - 1,619 55 (1) 54 74 (15) 59 1,748 (16) 1,732
Commodity Traders 6,912 (2) 6,910 129 (1) 128 555 (504) 51 7,596 (507) 7,089
Metals & Mining 3,934 (1) 3,933 140 (8) 132 154 (88) 66 4,228 (97) 4,131
Construction 2,230 (2) 2,228 502 (8) 494 358 (326) 32 3,090 (336) 2,754
Commercial Real Estate 12,261 (30) 12,231 1,848 (129) 1,719 1,712 (1,191) 521 15,821 (1,350) 14,471
Hotels & Tourism 1,468 (2) 1,466 61 - 61 126 (25) 101 1,655 (27) 1,628
Oil & Gas 5,234 (4) 5,230 615 (15) 600 571 (147) 424 6,420 (166) 6,254
Total 33,658 (41) 33,617 3,350 (162) 3,188 3,550 (2,296) 1,254 40,558 (2,499) 38,059
Total Corporate, Commercial & Institutional Banking 120,886 (101) 120,785 7,902 (257) 7,645 5,508 (3,533) 1,975 134,296 (3,891) 130,405
Total Group 318,076 (438) 317,638 11,765 (430) 11,335 7,305 (4,326) 2,979 337,146 (5,194) 331,952
Amortised Cost 2022
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:
Aviation¹ 2,377 (1) 2,376 573 - 573 155 (32) 123 3,105 (33) 3,072
Commodity Traders 7,187 (6) 7,181 138 (2) 136 689 (435) 254 8,014 (443) 7,571
Metals & Mining 4,184 (1) 4,183 475 (4) 471 257 (157) 100 4,916 (162) 4,754
Construction 2,424 (2) 2,422 407 (5) 402 497 (412) 85 3,328 (419) 2,909
Commercial Real Estate 12,393 (43) 12,350 3,217 (195) 3,022 1,305 (761) 544 16,915 (999) 15,916
Hotels & Tourism 1,448 (2) 1,446 108 (1) 107 206 (18) 188 1,762 (21) 1,741
Oil & Gas 5,468 (4) 5,464 708 (6) 702 919 (442) 477 7,095 (452) 6,643
Total 35,481 (59) 35,422 5,626 (213) 5,413 4,028 (2,257) 1,771 45,135 (2,529) 42,606
Total Corporate, Commercial & Institutional Banking 126,261 (143) 126,118 11,355 (323) 11,032 6,143 (3,662) 2,481 143,759 (4,128) 139,631
Total Group 334,368 (568) 333,800 13,380 (447) 12,933 7,904 (4,471) 3,433 355,652 (5,486) 350,166
1 In addition to the aviation sector loan exposures, the Group owns
$3.2 billion of aircraft under operating leases in 2022
Page 67
Capital review
Capital ratios
31.12.23 30.09.23 Change(4) 30.06.23 Change(4) 31.12.22 Change(4)
CET1 14.1% 13.9% 0.2 14.0% 0.1 14.0% 0.1
Tier 1 capital 16.3% 16.2% 0.1 16.2% 0.1 16.6% (0.3)
Total capital 21.2% 21.2% - 21.1% 0.1 21.7% (0.5)
Capital base(1) (audited)
31.12.23 30.09.23 Change(5) 30.06.23 Change(5) 31.12.22 Change(5)
$million
$million
%
$million
%
$million
%
CET1 capital instruments and reserves
Capital instruments and the related share premium accounts 5,321 5,352 (1) 5,389 (1) 5,436 (2)
Of which: share premium accounts 3,989 3,989 - 3,989 - 3,989 -
Retained earnings(2) 24,930 25,202 (1) 26,549 (6) 25,154 (1)
Accumulated other comprehensive income (and other reserves) 9,171 7,838 17 7,932 16 8,165 12
Non-controlling interests (amount allowed in consolidated CET1) 217 215 1 190 14 189 15
Independently audited year-end profits 3,542 2,586 37 2,386 48 2,988 19
Foreseeable dividends (768) (446) (72) (377) (104) (648) (19)
CET1 capital before regulatory adjustments 42,413 40,747 4 42,069 1 41,284 3
CET1 regulatory adjustments - -
Additional value adjustments (prudential valuation adjustments) (730) (613) (19) (693) (5) (854) 15
Intangible assets (net of related tax liability)(3) (6,128) (5,940) (3) (5,825) (5) (5,802) (6)
Deferred tax assets that rely on future profitability (excludes those arising (41) (31) (32) (86) 52 (76) 46
from temporary differences)
Fair value reserves related to net losses on cash flow hedges (91) 195 (147) 317 (129) 564 (116)
Deduction of amounts resulting from the calculation of excess expected loss (754) (710) (6) (787) 4 (684) (10)
Net gains on liabilities at fair value resulting from changes in own credit (100) 203 (149) 203 (149) 63 (259)
risk
Defined-benefit pension fund assets (95) (113) 16 (134) 29 (116) 18
Fair value gains arising from the institution's own credit risk related to (116) (84) (38) (64) (81) (90) (29)
derivative liabilities
Exposure amounts which could qualify for risk weighting of 1250% (44) (36) (22) (52) 15 (103) 57
Other regulatory adjustments to CET1 capital (3) - (49) 100 (52) 100 (29) 100
Total regulatory adjustments to CET1 (8,099) (7,178) (13) (7,173) (13) (7,127) (14)
CET1 capital 34,314 33,569 2 34,896 (2) 34,157 -
Additional Tier 1 capital (AT1) instruments 5,512 5,512 - 5,512 - 6,504 (15)
AT1 regulatory adjustments (20) (20) - (20) - (20) -
Tier 1 capital 39,806 39,061 2 40,388 (1) 40,641 (2)
- -
Tier 2 capital instruments 11,965 12,081 (1) 12,311 (3) 12,540 (5)
Tier 2 regulatory adjustments (30) (30) - (30) - (30) -
Tier 2 capital 11,935 12,051 (1) 12,281 (3) 12,510 (5)
Total capital 51,741 51,112 1 52,669 (2) 53,151 (3)
Total risk-weighted assets (unaudited) 244,151 241,506 1 249,117 (2) 244,711 -
1 Capital is prepared on the regulatory scope of consolidation
2 Retained earnings includes IFRS9 capital relief (transitional) of
nil (2022: $106 million)
3 Other regulatory adjustments to CET1 capital includes Insufficient
coverage for non-performing exposures of nil (2022: $(29) million)
4 Change is the percentage point difference between two periods,
rather than percentage change
5 Variance is increase/(decrease) comparing current reporting period
to prior reporting periods
Page 68
Capital review continued
Movement in total capital (audited)
Year ended Year ended
31.12.23
31.12.22
$million
$million
CET1 at 1 January 34,157 38,362
Share buy-back (2,000) (1,258)
Profit for the period 3,542 2,988
Foreseeable dividends deducted from CET1 (768) (648)
Difference between dividends paid and foreseeable dividends (372) (301)
Movement in goodwill and other intangible assets (326) (1,410)
Foreign currency translation differences (477) (1,892)
Non-controlling interests 28 (12)
Movement in eligible other comprehensive income 464 (1,224)
Deferred tax assets that rely on future profitability 35 74
Decrease/(increase) in excess expected loss (70) (104)
Additional value adjustments (prudential valuation adjustment) 124 (189)
IFRS 9 transitional impact on regulatory reserves including day one (106) (146)
Exposure amounts which could qualify for risk weighting 59 (67)
Fair value gains arising from the institution's own Credit Risk related to (26) (30)
derivative liabilities
Other 50 14
CET1 at 31 December 34,314 34,157
AT1 at 1 January 6,484 6,791
Issuances net of redemptions (1,000) 241
Foreign currency translation difference 8 9
Excess on AT1 grandfathered limit (ineligible) - (557)
AT1 at 31 December 5,492 6,484
Tier 2 capital at 1 January 12,510 12,491
Regulatory amortisation 1,416 778
Issuances net of redemptions (2,160) (1,098)
Foreign currency translation difference 146 (337)
Tier 2 ineligible minority interest 19 102
Recognition of ineligible AT1 - 557
Other 4 17
Tier 2 capital at 31 December 11,935 12,510
Total capital at 31 December 51,741 53,151
The main movements in capital in the period were:
• CET1 capital increased by $0.2 billion as retained profits of $3.5
billion, movement in FVOCI of $0.6bn were partly offset by share buy-backs of
$2.0 billion, distributions paid and foreseeable of $1.1 billion, foreign
currency translation impact of $0.5 billion and an increase in regulatory
deductions and other movements of $0.3bn.
• AT1 capital decreased by $1.0 billion following the redemption of $1.0
billion of 7.75 per cent securities.
• Tier 2 capital decreased by $0.6 billion due to the redemption of $2.2
billion of Tier 2 during the year partly offset by the reversal of regulatory
amortisation and foreign currency translation impact.
Page 69
Capital review continued
Risk-weighted assets by business
31.12.23
Credit risk Operational risk Market risk Total risk
$million
$million
$million
$million
Corporate, Commercial & Institutional Banking 102,675 18,083 21,221 141,979
Consumer, Private & Business 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
30.09.23
Credit risk Operational risk Market risk Total risk
$million
$million
$million
$million
Corporate, Commercial & Institutional Banking 104,015 18,083 21,288 143,386
Consumer, Private & Business Banking 41,582 8,783 - 50,365
Ventures 1,749 35 2 1,786
Central & other items 40,948 960 4,061 45,969
Total risk-weighted assets 188,294 27,861 25,351 241,506
30.06.23
Credit risk Operational risk Market risk Total risk
$million
$million
$million
$million
Corporate, Commercial & Institutional Banking 109,343 18,083 19,832 147,258
Consumer, Private & Business Banking 41,881 8,783 - 50,664
Ventures 1,888 35 2 1,925
Central & other items 44,039 960 4,271 49,270
Total risk-weighted assets 197,151 27,861 24,105 249,117
31.12.22
Credit risk Operational risk Market risk Total risk
$million
$million
$million
$million
Corporate, Commercial & Institutional Banking 110,103 17,039 16,440 143,582
Consumer, Private & Business Banking 42,091 8,639 - 50,730
Ventures 1,350 6 2 1,358
Central & other items 43,311 1,493 4,237 49,041
Total risk-weighted assets 196,855 27,177 20,679 244,711
Risk-weighted assets by geographic region
31.12.23 30.09.23 Change(1) 30.06.21 Change(1) 31.12.22 Change(1)
$million
$million
%
$million
%
$million
%
ASIA(2) 155,995 150,842 3 155,410 - 150,816 3
Africa & Middle East 38,393 38,529 - 41,068 (7) 40,716 (6)
Europe & Americas 46,106 48,227 (4) 48,787 (5) 50,174 (8)
Central & other items 3,657 3,908 (6) 3,852 (5) 3,005 22
Total risk-weighted assets 244,151 241,506 1 249,117 (2) 244,711 -
1 Variance is increase/(decrease) comparing current reporting period
to prior reporting periods
Page 70
Capital review continued
Movement in risk-weighted assets
Credit risk Operational risk Market risk Total risk
$million
$million
$million
Commercial, Corporate &Institutional Banking Consumer, Private & Business Banking Ventures Central & Total
$million
$million
$million
other items
$million
$million
At 31 December 2021 125,813 42,731 756 50,288 219,588 27,116 24,529 271,233
At 1 January 2022 125,813 42,731 756 50,288 219,588 27,116 24,529 271,233
Assets growth & mix (13,213) (985) 594 (10,033) (23,637) - - (23,637)
Asset quality (4,258) 431 - 7,344 3,517 - - 3,517
Risk-weighted assets efficiencies - - - - - - - -
Model Updates 4,329 1,420 - - 5,749 - (1,000) 4,749
Methodology and policy changes 2,024 85 - 93 2,202 - 1,500 3,702
Acquisitions and disposals - - - - - - - -
Foreign currency translation (4,883) (1,591) - (3,376) (9,850) - - (9,850)
Other, Including non-credit risk movements 291 - - (1,005) (714) 61 (4,350) (5,003)
At 31 December 2022 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
Movements in risk-weighted assets
Movements in risk-weighted assets
RWA decreased by $0.5 billion, or 0.1 per cent from 31 December 2022 to $244.2
billion. This was mainly due to decrease in Credit Risk RWA of $5.4 billion,
an increase in Market Risk RWA of $4.2 billion and Operational Risk RWA of
$0.7 billion.
Corporate, Commercial & Institutional Banking
Credit Risk RWA decreased by $7.4 billion, or 6.7 per cent from 31 December
2022 to $102.7 billion mainly due to:
• $4.4 billion decrease from changes in asset growth & mix of which:
o $10.3 billion decrease from optimisation actions including reduction in
lower returning portfolios
o $5.9 billion increase from asset balance growth
• $1.6 billion decrease from sale of Aviation business
• $0.9 billion decrease from industry-wide regulatory changes to align IRB
model performance
• $0.4 billion decrease from foreign currency translation
• $0.4 billion decrease from asset quality movements reflecting client
upgrades in Asia, Europe & Americas, partially offset by sovereign
downgrades in Africa & Middle East
• $0.3 billion increase from changes in model in Financial Markets and
Lending
Page 71
Capital review continued
Consumer, Private & Business Banking
Credit Risk RWA increased by $0.5 billion, or 1.1 per cent from 31 December
2022 to $42.6 billion mainly due to:
• $0.7 billion increase from changes in asset growth & mix mainly from
Asia
• $0.4 billion increase due to deterioration in asset quality mainly in
Asia
• $0.3 billion decrease from foreign currency translation
• $0.2 billion decrease from methodology change relating to an unsecured
lending portfolio in Africa & Middle East
• $0.1 billion decrease from industry-wide regulatory changes to align IRB
model performance.
Ventures
Ventures is comprised of Mox Bank Limited, Trust Bank and SC Ventures. Credit
Risk RWA increased by $0.5 billion, or 39.7 per cent from 31 December 2022 to
$1.9 billion from asset balance growth, mainly from SC Ventures
Central & Other items
Central & Other items RWA mainly relate to the Treasury Markets liquidity
portfolio, equity investments and current & deferred tax assets.
Credit Risk RWA increased by $1 billion, or 2.3 per cent from 31 December 2022
to $44.3 billion mainly due to:
• $2.7 billion increase due to deterioration in asset quality mainly from
sovereign downgrades in Africa & Middle East
• $1.2 billion increase from changes in asset growth & mix.
• $2.0 billion decrease from foreign currency translation
• $0.7 billion decrease from RWA efficiencies
• $0.2 billion decrease from changes in model in Treasury Markets.
Market Risk
Total Market Risk RWA increased by $4.2 billion, or 20.3 per cent from 31
December 2022 to $24.9 billion due to:
• $2.4 billion increase in Standardised Approach (SA) RWA driven by higher
Specific Interest Rate Risk relating to the traded credit portfolio, offset by
lower net Structural FX positions
• $2.1 billion increase in Internal Models Approach (IMA) RWA due to
increased positions and increased market volatility.
• $0.5 billion increase in IMA RWA due to introduction of a new VaR model
to address the rise in VaR backtesting exceptions in 2022.
• $0.3 billion increase in SA RWA due to other smaller RWA movements in
2023.
• $0.8 billion decrease in IMA RWA due to reduction in the IMA multiplier
with fewer VaR backtesting exceptions in 2023 than in 2022.
Operational Risk
• Operational Risk RWA increased by $0.7 billion, or 2.5 per cent from 31
December 2022 to $27.9 billion, mainly due to a marginal increase in average
income as measured over a rolling three-year time horizon for certain
products.
Page 72
Capital review continued
Leverage ratio
31.12.23 30.09.23 Change(2) 30.06.23 Change(2) 31.12.22 Change(2)
$million
$million
%
$million
%
$million
%
Tier 1 capital 39,806 39,061 2 40,388 (1) 40,641 (2)
Derivative financial instruments 50,434 62,449 (19) 60,388 (16) 63,717 (21)
Derivative cash collateral 10,337 10,035 3 9,304 11 12,515 (17)
Securities financing transactions (SFTs) 97,581 85,481 14 87,118 12 89,967 8
Loans and advances and other assets 664,492 667,868 (1) 681,901 (3) 653,723 2
Total on-balance sheet assets 822,844 825,833 - 838,711 (2) 819,922 -
Regulatory consolidation adjustments(1) (92,709) (105,534) 12 (102,523) 10 (71,728) (29)
Derivatives adjustments - - -
Derivatives netting (39,031) (46,329) 16 (44,747) 13 (47,118) 17
Adjustments to cash collateral (9,833) (8,725) (13) (7,267) (35) (10,640) 8
Net written credit protection 1,359 1,139 19 931 46 548 148
Potential future exposure on derivatives 42,184 40,737 4 39,239 8 35,824 18
Total derivatives adjustments (5,321) (13,178) 60 (11,844) 55 (21,386) 75
Counterparty risk leverage exposure measure for SFTs 6,639 4,586 45 7,591 (13) 15,553 (57)
Off-balance sheet items 123,572 119,136 4 120,355 3 119,049 4
Regulatory deductions from Tier 1 capital (7,883) (7,297) (8) (7,311) (8) (7,099) (11)
Total exposure measure excluding claims on central banks 847,142 823,546 3 844,979 - 854,311 (1)
Leverage ratio excluding claims on central banks (%) 4.7% 4.7% (0.0) 4.8% (0.1) 4.8% (0.1)
Average leverage exposure measure excluding claims on central banks 853,968 838,666 2 842,493 1 864,605 (1)
Average leverage ratio excluding claims on central banks (%) 4.6% 4.7% (0.1) 4.7% (0.1) 4.7% (0.1)
Countercyclical leverage ratio buffer 0.1% 0.1% - 0.1% - 0.1% -
G-SII additional leverage ratio buffer 0.4% 0.4% 0.1 0.4% 5.0 0.4% 0.1
1 Includes adjustment for qualifying central bank claims and unsettled
regular way trades
2 Change is the percentage point difference between two periods, rather
than percentage change
Page 73
Financial statements
Consolidated income statement
For the year ended 31 December 2023
Notes 2023 2022
$million
$million
Interest income 27,227 15,252
Interest expense (19,458) (7,659)
Net interest income 3 7,769 7,593
Fees and commission income 4,067 3,972
Fees and commission expense (815) (859)
Net fee and commission income 4 3,252 3,113
Net trading income 5 6,292 5,310
Other operating income 6 706 302
Operating income 18,019 16,318
Staff costs (8,256) (7,618)
Premises costs (422) (401)
General administrative expenses (1,802) (1,708)
Depreciation and amortisation (1,071) (1,186)
Operating expenses 7 (11,551) (10,913)
Operating profit before impairment losses and taxation 6,468 5,405
Credit impairment 8 (508) (836)
Goodwill, property, plant and equipment and other impairment 9 (1,008) (439)
Profit from associates and joint ventures 32 141 156
Profit before taxation 5,093 4,286
Taxation 10 (1,631) (1,384)
Profit for the year 3,462 2,902
Profit attributable to:
Non-controlling interests 29 (7) (46)
Parent company shareholders 3,469 2,948
Profit for the year 3,462 2,902
cents cents
Earnings per share:
Basic earnings per ordinary share 12 108.6 85.9
Diluted earnings per ordinary share 12 106.2 84.3
The notes form an integral part of these financial statements.
Page 74
Financial statements continued
Consolidated statement of comprehensive income
For the year ended 31 December 2023
Notes 2023 2022
$million
$million
Profit for the year 3,462 2,902
Other comprehensive income:
Items that will not be reclassified to income statement: 239 (75)
Own credit gains/(losses) on financial liabilities designated at fair value 212 (56)
through profit or loss
Equity instruments at fair value through other comprehensive income 181 (75)
Actuarial (losses)/gains on retirement benefit obligations 30 (47) 41
Taxation relating to components of other comprehensive income 10 (107) 15
Items that may be reclassified subsequently to income statement: 562 (3,703)
Exchange differences on translation of foreign operations:
Net loss taken to equity (734) (2,466)
Net gains on net investment hedges 14 215 512
Share of other comprehensive loss from associates and joint ventures 32 (7) (79)
Debt instruments at fair value through other comprehensive income:
Net valuation gain/(loss) taken to equity 383 (1,528)
Reclassified to income statement 6 115 207
Net impact of expected credit losses (48) 118
Cash flow hedges:
Net movements in cash flow hedge reserve 14 767 (619)
Taxation relating to components of other comprehensive income 10 (129) 152
Other comprehensive income/(loss) for the year, net of taxation 801 (3,778)
Total comprehensive income/(loss) for the year 4,263 (876)
Total comprehensive income/(loss) attributable to:
Non-controlling interests 29 (38) (88)
Parent company shareholders 4,301 (788)
Total comprehensive income/(loss) for the year 4,263 (876)
Page 75
Financial statements continued
Consolidated balance sheet
As at 31 December 2023
Notes 2023 2022
$million
$million
Assets
Cash and balances at central banks 13,35 69,905 58,263
Financial assets held at fair value through profit or loss 13 147,222 105,812
Derivative financial instruments 13,14 50,434 63,717
Loans and advances to banks 13,15 44,977 39,519
Loans and advances to customers 13,15 286,975 310,647
Investment securities 13 161,255 172,448
Other assets 20 47,594 50,383
Current tax assets 10 484 503
Prepayments and accrued income 3,033 3,149
Interests in associates and joint ventures 32 966 1,631
Goodwill and intangible assets 17 6,214 5,869
Property, plant and equipment 18 2,274 5,522
Deferred tax assets 10 702 834
Assets classified as held for sale 21 809 1,625
Total assets 822,844 819,922
Liabilities
Deposits by banks 13 28,030 28,789
Customer accounts 13 469,418 461,677
Repurchase agreements and other similar secured borrowing 13,16 12,258 2,108
Financial liabilities held at fair value through profit or loss 13 83,096 79,903
Derivative financial instruments 13,14 56,061 69,862
Debt securities in issue 13,22 62,546 61,242
Other liabilities 23 39,221 43,527
Current tax liabilities 10 811 583
Accruals and deferred income 6,975 5,895
Subordinated liabilities and other borrowed funds 13,27 12,036 13,715
Deferred tax liabilities 10 770 769
Provisions for liabilities and charges 24 299 383
Retirement benefit obligations 30 183 146
Liabilities included in disposal groups held for sale 21 787 1,307
Total liabilities 772,491 769,906
Equity
Share capital and share premium account 28 6,815 6,930
Other reserves 9,171 8,165
Retained earnings 28,459 28,067
Total parent company shareholders' equity 44,445 43,162
Other equity instruments 28 5,512 6,504
Total equity excluding non-controlling interests 49,957 49,666
Non-controlling interests 29 396 350
Total equity 50,353 50,016
Total equity and liabilities 822,844 819,922
The notes form an integral part of these financial statements.
These financial statements were approved by the Board of directors and
authorised for issue on 23 February 2024 and signed on its behalf by:
José Viñals Bill Winters Diego De Giorgi
Group Chairman
Group Chief
Executive
Group Chief Financial Officer
Page 76
Financial statements continued
Consolidated statement of changes in equity
For the year ended 31 December 2023
Ordinary share capital and share premium account Preference share capital and share premium account Capital and merger reserves1 Own credit adjust-ment reserve Fair value through other compre-hensive income reserve - debt Fair value through other compre-hensive income reserve - equity Cash- flow hedge reserve Trans-lation reserve Retained earnings Parent company share-holders' equity Other equity instru-ments Non-controlling interests Total
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
$million
As at 1 January 2022 5,528 1,494 17,246 (15) 103 249 (34) (5,744) 27,184 46,011 6,254 371 52,636
Profit/(loss) for the year - - - - - - - - 2,948 2,948 - (46) 2,902
Other comprehensive (loss)/income¹¹ - - - (48) (1,219) (43) (530) (1,904) 82 (3,736) - (42) (3,778)
Distributions - - - - - - - - - - - (31) (31)
Other equity instruments issued, net of expenses - - - - - - - - - - 1,240 - 1,240
Redemption of other equity instruments - - - - - - - - - - (999) - (999)
Treasury shares net movement - - - - - - - - (203) (203) - - (203)
Share option expenses - - - - - - - - 163 163 - - 163
Dividends on ordinary shares - - - - - - - - (393) (393) - - (393)
Dividends on preference shares and - - - - - - - - (401) (401) - - (401)
AT1 securities
Share buy-back3,4 (92) - 92 - - - - - (1,258) (1,258) - - (1,258)
Other movements - - - - - - - 125 195,6 31 9⁵ 987 138
As at 31 December 2022 5,436 1,494 17,338 (63) (1,116) 206 (564) (7,636) 28,067 43,162 6,504 350 50,016
Profit/(loss) for the year - - - - - - - - 3,469 3,469 - (7) 3,462
Other comprehensive income/(loss)¹¹ - - - 163 426 124 655 (489) (47)2 832 - (31) 801
Distributions - - - - - - - - - - - (26) (26)
Redemption of other equity instruments - - - - - - - - - - (1,000) - (1,000)
Treasury shares net movement - - - - - - - - (189) (189) - - (189)
Share option expenses - - - - - - - - 173 173 - - 173
Dividends on ordinary shares - - - - - - - - (568) (568) - - (568)
Dividends on preference shares and AT1 securities - - - - - - - - (452) (452) - - (452)
Share buyback8,9 (115) - 115 - - - - - (2,000) (2,000) - - (2,000)
Other movements - - - - - - - 125 65 18 8⁵ 11010 136
As at 31 December 2023 5,321 1,494 17,453 100 (690) 330 91 (8,113) 28,459 44,445 5,512 396 50,353
1 Includes capital reserve of $5 million, capital redemption reserve of
$337 million and merger reserve of $17,111 million
2 Comprises actuarial gain on Group defined benefit schemes
3 On 18 February 2022, the Group announced the buy-back programme for a
share buy-back of its ordinary shares of $0.50 each. Nominal value of share
purchases was $56 million, and the total consideration paid was $754 million,
the buy-back completed on 19 May 2022. The total number of shares purchased
was 111,295,408, representing 3.61 per cent of the ordinary shares in issue.
The nominal value of the shares was transferred from the share capital to the
capital redemption reserve account
4 On 1 August 2022, the Group announced the buy-back programme for a share
buy-back of its ordinary shares of $0.50 each. Nominal value of share
purchases was $36 million, and the total consideration paid was $504 million.
The total number of shares purchased was 73,073,837 representing 2.5 per cent
of the ordinary shares in issue. The nominal value of the shares was
transferred from the share capital to the capital redemption reserve account
5 Movement related to Translation adjustment and AT1 Securities charges
6 Movement mainly related to $21million NCI on Power2SME Pte Ltd. and $8
million on CurrencyFair Limited & $(9) million related to AT1 securities
charges
7 Movements primarily from non-controlling interest pertaining to Mox Bank
Limited ($39 million), Trust Bank Singapore Limited ($47 million) , Zodia
Markets Holdings Limited ($3 million) and Power2SME Pte Ltd. ($9 million)
8 On 16 February 2023, the Group announced the buy-back programme for a
share buy-back of its ordinary shares of $0.50 each. Nominal value of share
purchases was $58 million, and the total consideration paid was $1,000 million
and the buy-back completed on 29 September 2023. The total number of shares
purchased was 116,710,492, representing 4.03 per cent of the ordinary shares
in issue as at the commencement of the buy-back. The nominal value of the
shares was transferred from the share capital to the capital redemption
reserve account
9 On 28 July 2023, the Group announced the buy-back programme for a share
buy-back of its ordinary shares of $0.50 each. Nominal value of share
purchases was $57 million, and the total consideration paid was $1,000 million
and the buy-back completed on 6 November 2023. The total number of shares
purchased was 112,982,802, representing 3.90 per cent of the ordinary shares
in issue as at the commencement of the buy-back. The nominal value of the
shares was transferred from the share capital to the capital redemption
reserve account
10 Movements primarily from non-controlling interest pertaining to Mox
Bank Limited ($48 million), Trust Bank Singapore Limited ($34 million) and
Zodia Custody Limited ($28 million)
11 All the amounts are net of tax
Note 28 includes a description of each reserve.
The notes form an integral part of these financial statements.
Page 77
Financial statements continued
Basis of preparation
The consolidated and Company financial statements have been prepared on a
going concern basis and under the historical cost convention, as modified by
the revaluation of cash-settled share-based payments, fair value through other
comprehensive income, and financial assets and liabilities (including
derivatives) at fair value through profit or loss.
The consolidated financial statements are presented in United States dollars
($), being the presentation currency of the Group and functional currency of
the Company, and all values are rounded to the nearest million dollars, except
when otherwise indicated.
Going concern
These financial statements were approved by the Board of directors on 23
February 2024. The directors have made an assessment of the Group's ability to
continue as a going concern. This assessment has been made having considered
the current macroeconomic and geopolitical headwinds, including:
• Review of the Group Strategy and Corporate Plan
• An assessment of the actual performance to date, loan book quality,
credit impairment, legal, regulatory and compliance matters, and the updated
annual budget
• Consideration of stress testing performed, including both the Bank of
England annual stress test and a Group Recovery and Resolution Plan (RRP) as
submitted to the PRA. Both these submissions include the application of
stressed scenarios. Under the tests and through the range of scenarios, the
results of these exercises and the RRP demonstrate that the Group has
sufficient capital and liquidity to continue as a going concern and meet
minimum regulatory capital and liquidity requirements
• Analysis of the capital, funding and liquidity position of the Group,
including the capital and leverage ratios, and ICAAP which summarises the
Group's capital and risk assessment processes, assesses its capital
requirements and the adequacy of resources to meet them. Further, funding and
liquidity was considered in the context of the risk appetite metrics,
including the LCR ratio.
• The Group's Internal Liquidity Adequacy Assessment Process (ILAAP),
which considers the Group's liquidity position, its framework and whether
sufficient liquidity resources are being maintained to meet liabilities as
they fall due, was also reviewed
• The level of debt in issue, including redemptions and issuances during
the year, debt falling due for repayment in the next 12 months and further
planned debt issuances, including the appetite in the market for the Group's
debt
• A detailed review of all principal and emerging risks
Based on the analysis performed, the directors confirm they are satisfied that
the Group has adequate resources to continue in business for a period of at
least 12 months from 23 February 2024. For this reason, the Group continues to
adopt the going concern basis of accounting for preparing the financial
statements.
Page 78
Other supplementary financial information
Five-year summary
2023 2022 2021 2020 2019
$million
$million
$million
$million
$million
Operating profit before impairment losses and taxation 6,468 5,405 3,777 4,374 4,484
Impairment losses on loans and advances and other credit (508) (836) (254) (2,325) (908)
risk provisions
Other impairment1 (1,008) (425) (372) (98) (136)
Profit before taxation 5,093 4,286 3,347 1,613 3,713
Profit attributable to shareholders 3,469 2,948 2,315 724 2,303
Loans and advances to banks2 44,977 39,519 44,383 44,347 53,549
Loans and advances to customers2 286,975 310,647 298,468 281,699 268,523
Total assets 822,844 819,922 827,818 789,050 720,398
Deposits by banks2 28,030 28,789 30,041 30,255 28,562
Customer accounts2 469,418 461,677 474,570 439,339 405,357
Shareholders' equity 44,445 43,162 46,011 45,886 44,835
Total capital resources3 62,389 63,731 69,282 67,383 66,868
Information per ordinary share
Basic earnings per share 108.6c 85.9c 61.3c 10.4c 57.0c
Underlying earnings per share 128.9c 97.9c 85.8c 36.1c 75.7c
Dividends per share4 27.0c 18.0c 12.0c - 22.0c
Net asset value per share 1,629.0c 1,453.3c 1,456.4c 1,409.3c 1,358.3c
Net tangible asset value per share 1,393.0c 1,249.0c 1,277.0c 1,249.0c 1,192.5c
Return on assets5 0.4% 0.4% 0.3% 0.1% 0.3%
Ratios
Reported return on ordinary shareholders' equity 7.2% 6.0% 4.2% 0.8% 4.2%
Reported return on ordinary shareholders' 8.4% 6.8% 4.8% 0.9% 4.8%
tangible equity
Underlying return on ordinary shareholders' equity 8.7% 6.9% 5.9% 2.6% 5.6%
Underlying return on ordinary shareholders' 10.1% 7.7% 6.8% 3.0% 6.4%
tangible equity
Reported cost to income ratio (excluding UK Bank Levy) 63.5% 66.3% 73.6% 68.1% 68.7%
Reported cost to income ratio (including UK Bank Levy) 64.1% 66.9% 74.3% 70.4% 70.9%
Underlying cost to income ratio (excluding UK Bank levy) 63.4% 65.5% 69.8% 66.4% 65.9%
Underlying cost to income ratio (including UK Bank levy) 64.1% 66.2% 70.5% 68.7% 68.2%
Capital ratios:
CET 16 14.1% 14.0% 14.1% 14.4% 13.8%
Total capital6 21.2% 21.7% 21.3% 21.2% 21.2%
1 Other Impairment includes $850 million (2022: $308 million) impairment
charge relating to the Group's investment in its associate China Bohai Bank
(Bohai)
2 Excludes amounts held at fair value through profit or loss
3 Shareholders' funds, non-controlling interests and subordinated
loan capital
4 Dividend paid during the year per share
5 Represents profit attributable to shareholders divided by the total
assets of the Group
6 Unaudited
Page 79
Other supplementary financial information continued
Insured and uninsured deposits
SCB operates and provides services to customers across many countries and
insured deposit is determined on the basis of limits enacted within local
regulations.
2023 2022
Bank deposits Customer accounts Bank deposits Customer accounts
$million
$million
$million
$million
Insured deposits 10 66,753 28 60,008
Current accounts 9 15,767 8 16,373
Savings deposits - 27,376 - 26,973
Time deposits 1 23,517 20 16,599
Other deposits - 93 - 63
Uninsured deposits 35,500 467,868 36,795 460,221
Current accounts 20,969 150,559 22,425 144,931
Savings deposits - 91,425 - 90,937
Time deposits 8,295 176,977 6,870 176,090
Other deposits 6,236 48,907 7,500 48,263
Total 35,510 534,621 36,823 520,229
UK and non-UK deposits
The following table summarises the split of Bank and Customer deposits into UK
and Non-UK deposits for respective account lines based on the domicile or
residence of the clients.
2023 2022
Bank deposits Customer accounts Bank deposits Customer accounts
$million
$million
$million
$million
UK deposits 2,918 29,318 4,163 38,557
Current accounts 925 7,062 903 8,955
Savings deposits - 330 - 420
Time deposits 310 5,412 1,004 6,760
Other deposits 1,683 16,514 2,256 22,422
Non-UK deposits 32,592 505,303 32,660 481,672
Current accounts 20,053 159,264 21,530 152,349
Savings deposits - 118,471 - 117,490
Time deposits 7,986 195,082 5,886 185,929
Other deposits 4,553 32,486 5,244 25,904
Total 35,510 534,621 36,823 520,229
Contractual maturity of Loans, Investment securities and Deposits
2023
Loans and advances Loans and advances Investment securities - Treasury Investment securities - Debt securities Investment securities - Equity shares Bank deposits Customer accounts
to banks
to customers
and other eligible Bills
$million
$million
$million
$million
$million
$million
$million
One year or less 72,717 197,125 38,877 59,023 - 31,333 485,908
Between one and five years 3,975 52,532 4 69,075 - 4,174 46,365
Between five and ten years 837 19,184 1 18,804 - 2 567
Between ten years and fifteen years 35 14,084 - 9,276 - - 1,341
More than fifteen years and undated 226 62,561 - 18,155 3,932 - 441
Total 77,790 345,486 38,882 174,333 3,932 35,509 534,622
Total amortised cost and FVOCI exposures 44,977 286,975
Fixed interest rate exposures 38,505 168,697
Floating interest rate exposures 6,472 118,278
Page 80
Other supplementary financial information continued
2022
Loans and advances Loans and advances Investment securities - Treasury Investment securities - Debt securities Investment securities - Equity shares Bank deposits Customer accounts
to banks
to customers
and other eligible Bills
$million
$million
$million
$million
$million
$million
$million
One year or less 60,132 208,691 42,269 47,193 - 35,240 508,125
Between one and five years 3,630 52,563 482 63,523 - 1,576 10,281
Between five and ten years 411 18,067 - 20,078 - 7 694
Between ten years and fifteen years 92 13,305 - 12,921 - - 598
More than fifteen years and undated 184 65,104 - 15,720 4,037 - 531
Total 64,449 357,730 42,751 159,435 4,037 36,823 520,229
Total amortised cost and FVOCI exposures 39,519 310,647
Fixed interest rate exposures 36,218 170,609
Floating interest rate exposures 3,301 140,038
Maturity and yield of Debt securities, alternative tier one and other eligible
bills held at amortised cost
One year or less Between one and Between five and More than ten years Total
five years
ten years
$million Yield % $million Yield % $million Yield % $million Yield % $million Yield %
Central and Central and other government agencies
- US 1,861 1.39 9,171 1.61 5,799 1.67 4,524 3.89 21,355 2.09
- UK 39 2.75 85 1.06 101 0.67 - - 225 1.18
- Other 5,045 2.72 9,560 2.80 2,289 3.12 81 4.74 16,975 2.84
Other debt securities 2,487 6.45 2,658 5.37 2,262 5.44 10,973 5.13 18,380 5.38
As at 31 December 2023 9,432 3.44 21,474 2.61 10,451 2.79 15,578 4.77 56,935 3.37
One year or less Between one and Between five and More than ten years Total
five years
ten years
$million Yield % $million Yield % $million Yield % $million Yield % $million Yield %
Central and other government agencies
- US 2,208 1.58 5,437 1.41 6,317 1.32 4,498 3.47 18,460 1.90
- UK - - 85 1.98 60 0.50 47 0.90 192 1.26
- Other 3,599 2.71 9,659 1.98 3,541 2.24 44 4.00 16,843 2.19
Other debt securities 4,752 4.53 2,869 5.07 1,454 4.09 15,144 3.55 24,219 3.96
As at 31 December 2022 10,559 3.29 18,050 2.30 11,372 1.96 19,733 3.53 59,714 2.82
Page 81
Other supplementary financial information continued
The maturity distributions are presented in the above table on the basis of
residual contractual maturity dates. The weighted average yield for each range
of maturities is calculated by dividing the annualised interest income for the
year by the book amount of debt securities at that date.
Average balance sheets and yields and volume and price variances
Average balance sheets and yields
The following tables set out the average balances and yields for the Group's
assets and liabilities for the periods ended 31 December 2023 and 31 December
2022 under the revised definition of net interest margin. For the purpose of
these tables, average balances have been determined on the basis of daily
balances, except for certain categories, for which balances have been
determined less frequently. The Group does not believe that the information
presented in these tables would be significantly different had such balances
been determined on a daily basis.
Average assets 2023
Average Average Interest Gross yield Gross yield
non-interest earning
interest
income
%
total balance
balance
earning
$million
%
$million
balance
$million
Cash and balances at central banks 10,466 67,634 2,833 4.19 3.63
Gross loans and advances to banks 34,743 44,161 2,095 4.74 2.66
Gross loans and advances to customers 55,235 301,570 15,698 5.20 4.40
Impairment provisions against loans and advances to banks - (5,894) - - -
and customers
Investment securities - Treasury and Other Eligible Bills 7,955 32,026 1,596 4.98 3.99
Investment securities - Debt Securities 29,912 133,023 5,005 3.76 3.07
Investment securities - Equity Shares 3,190 - - - -
Property, plant and equipment and intangible assets 8,861 - - - -
Prepayments, accrued income and other assets 126,539 - - - -
Investment associates and joint ventures 1,628 - - - -
Total average assets 278,529 572,520 27,227 4.76 3.20
Average assets 2022
Average Average Interest Gross yield Gross yield
non-interest
interest
income
%
total balance
earning
earning
$million
%
balance
balance
$million
$million
Cash and balances at central banks 19,700 54,503 765 1.40 1.03
Gross loans and advances to banks 29,576 42,953 853 1.99 1.18
Gross loans and advances to customers 61,480 306,880 10,168 3.31 2.76
Impairment provisions against loans and advances to banks and customers - (5,867) - - -
Investment securities - Treasury and Other Eligible Bills 5,564 25,924 630 2.43 2.00
Investment securities - Debt Securities 23,618 140,977 2,836 2.01 1.72
Investment securities - Equity Shares 4,152 - - - -
Property, plant and equipment and intangible assets 8,821 - - - -
Prepayments, accrued income and other assets 142,599 - - - -
Investment associates and joint ventures 2,152 - - - -
Total average assets 297,662 565,370 15,252 2.70 1.77
Page 82
Other supplementary financial information continued
Average liabilities
Average liabilities 2023
Average Average Interest Rate paid Rate paid
non-interest bearing
interest
expense
%
total balance
balance
bearing
$million
%
$million
balance
$million
Deposits by banks 14,238 24,066 796 3.31 2.08
Customer accounts:
Current accounts 41,911 132,537 3,619 2.73 2.07
Savings deposits - 112,046 1,981 1.77 1.77
Time deposits 15,345 186,287 8,204 4.40 4.07
Other deposits 44,211 6,527 488 7.48 0.96
Debt securities in issue 12,259 65,579 3,367 5.13 4.33
Accruals, deferred income and other liabilities 132,442 1,009 52 5.15 0.04
Subordinated liabilities and other borrowed funds - 12,299 951 7.73 7.73
Non-controlling interests 373 - - - -
Shareholders' funds 49,920 - - - -
310,699 540,350 19,458 3.60 2.29
Adjustment for Financial Markets funding costs and financial guarantee fees on (1,778)
interest earning assets
Total average liabilities and shareholders' funds 310,699 540,350 17,680 3.27 2.08
Average liabilities 2022
Average Average Interest Rate paid Rate paid
non-interest
interest
expense
%
total balance
bearing
bearing
$million
%
balance
balance
$million
$million
Deposits by banks 17,039 27,241 433 1.59 0.98
Customer accounts:
Current accounts 51,375 132,709 1,480 1.12 0.80
Savings deposits - 131,571 832 0.63 0.63
Time deposits 11,586 152,118 3,021 1.99 1.85
Other deposits 52,962 5,094 110 2.16 0.19
Debt securities in issue 6,720 60,559 1,169 1.93 1.74
Accruals, deferred income and other liabilities 147,814 1,065 44 4.13 0.03
Subordinated liabilities and other borrowed funds - 14,994 570 3.80 3.80
Non-controlling interests 312 - - - -
Shareholders' funds 49,873 - - - -
337,681 525,351 7,659 1.46 0.89
Adjustment for Financial Markets funding costs and financial guarantee fees on (383)
interest earning assets
Total average liabilities and shareholders' funds 337,681 525,351 7,276 1.38 0.84
Page 83
Other supplementary financial information continued
Net interest margin
2023 2022
$million
$million
Interest income (Reported) 27,227 15,252
Average interest earning assets 572,520 565,370
Gross yield (%) 4.76 2.70
Interest expense (Reported) 19,458 7,659
Adjustment for Financial Markets funding costs and financial guarantee fees on (1,778) (383)
interest earning assets
Interest expense adjusted for Financial Markets trading book funding costs and 17,680 7,276
financial guarantee fees on interest-earning assets
Average interest-bearing liabilities 540,350 525,351
Rate paid (%) 3.27 1.38
Net yield (%) 1.49 1.32
Net interest income adjusted for Financial Markets funding costs and Financial 9,547 7,976
guarantee fees on interest earing assets
Net interest margin (%) 1.67 1.41
Volume and price variances
The following table analyses the estimated change in the Group's net interest
income attributable to changes in the average volume of interest-earning
assets and interest-bearing liabilities, and changes in their respective
interest rates for the years presented. Volume and rate variances have been
determined based on movements in average balances and average exchange rates
over the year and changes in interest rates on average interest-earning assets
and average interest-bearing liabilities.
2023 versus 2022
N
e
t
i
n
c
r
e
a
s
e
/
(
d
e
c
r
e
a
s
e
)
i
n
i
n
t
e
r
e
s
t
$
m
i
l
l
i
o
n
Volume Rate
$million
$million
Cash and unrestricted balances at central banks 550 1,518 2,068
Loans and advances to banks 57 1,185 1,242
Loans and advances to customers (284) 5,814 5,530
Investment securities (74) 3,209 3,135
Total interest earning assets 249 11,726 11,975
Interest bearing liabilities
Subordinated liabilities and other borrowed funds (208) 589 381
Deposits by banks (105) 468 363
Customer accounts:
Current accounts and savings deposits (458) 3,769 3,311
Time and other deposits 1,601 3,945 5,546
Debt securities in issue 258 1,940 2,198
Total interest bearing liabilities 1,088 10,711 11,799
Page 84
Other supplementary financial information continued
2022 versus 2021
(Decrease)/increase in
interest due to: N
e
t
i
n
c
r
e
a
s
e
/
(
d
e
c
r
e
a
s
e
)
i
n
i
n
t
e
r
e
s
t
$
m
i
l
l
i
o
n
Volume Rate
$million
$million
Interest earning assets
Cash and unrestricted balances at central banks (21) 694 673
Loans and advances to banks (60) 423 363
Loans and advances to customers (17) 2,611 2,594
Investment securities 228 1,148 1,376
Total interest earning assets 130 4,876 5,006
Interest bearing liabilities
Subordinated liabilities and other borrowed funds (58) 131 73
Deposits by banks (3) 300 297
Customer accounts:
Current accounts and savings deposits 18 1,428 1,446
Time and other deposits 157 1,635 1,792
Debt securities in issue 27 576 603
Total interest bearing liabilities 141 4,070 4,211
Page 85
Shareholder information
Dividend and interest payment dates
Ordinary shares Final dividend
Results and dividend announced 23 February 2024
Ex-dividend date 7 (UK) 6 (HK) March 2024
Record date for dividend 8 March 2024
Last date to amend currency election instructions for cash dividend* 23 April 2024
Dividend payment date 17 May 2024
* 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 each 1 April 2024 1 October 2024
81∕4 per cent non-cumulative irredeemable preference shares of £1 each 1 April 2024 1 October 2024
6.409 per cent non-cumulative redeemable preference shares of $5 each 30 January and 30 April 2024 30 July and 30 October 2024
7.014 per cent non-cumulative redeemable preference shares of $5 each 30 January 2024 30 July 2024
Annual General Meeting
The Annual General Meeting (AGM) will be held on Friday 10 May 2024 at 11:00
UK time (18:00 Hong Kong time). Further details regarding the format, location
and business to be transacted at the meeting will be disclosed within the 2024
Notice of AGM.
Details of voting at the Company's AGM and of proxy votes cast can be found on
the Company's website at sc.com/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 2023, on or before 31 December 2024. We have also published our
approach to tax and tax policy.
This information will be available on the Group's website at sc.com
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
2023, on or before 23 February 2024.
This information will be available on the Group's website at sc.com
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.
If you would like to receive more information, please visit our website at
https://www.sc.com/sharecare or contact the shareholder helpline on 0370 702
0138
Page 86
Shareholder information continued
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.
Further information can be obtained from the Company's registrars or from
ShareGift on 020 7930 3737 or from sharegift.org
Bankers' Automated Clearing System (BACS)
Dividends can be paid straight into your bank or building society account.
Please register online at investorcentre.co.uk or contact our registrar for a
dividend mandate form
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 and click on the 'ASK A QUESTION' link at the bottom of
the page. 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.
You can check your shareholding at computershare.com/hk/investors
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.
Page 87
Shareholder information continued
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.
Previous dividend payments (unadjusted for the impact of the 2015/2010/2008 rights issues)
Dividend and financial year Payment date Dividend per ordinary share Cost of one new ordinary share under share dividend scheme
Final 2008 15 May 2009 42.32c/28.4693p/HK$3.279597 £8.342/$11.7405
Interim 2009 8 October 2009 21.23c/13.25177p/HK$1.645304 £13.876/$22.799
Final 2009 13 May 2010 44.80c/29.54233p/HK$3.478306 £17.351/$26.252
Interim 2010 5 October 2010 23.35c/14.71618p/HK$1.811274/INR0.9841241 £17.394/$27.190
Final 2010 11 May 2011 46.65c/28.272513p/HK$3.623404/INR1.99751701 £15.994/$25.649
Interim 2011 7 October 2011 24.75c/15.81958125p/HK$1.928909813/INR1.137971251 £14.127/$23.140
Final 2011 15 May 2012 51.25c/31.63032125p/HK$3.9776083375/INR2.66670151 £15.723/$24.634
Interim 2012 11 October 2012 27.23c/16.799630190p/HK$2.111362463/INR1.3498039501 £13.417/$21.041
Final 2012 14 May 2013 56.77c/36.5649893p/HK$4.4048756997/INR2.9762835751 £17.40/$26.28792
Interim 2013 17 October 2013 28.80c/17.8880256p/HK$2.233204992/INR1.68131 £15.362/$24.07379
Final 2013 14 May 2014 57.20c/33.9211444p/HK$4.43464736/INR3.3546261 £11.949/$19.815
Interim 2014 20 October 2014 28.80c/17.891107200p/HK$2.2340016000/INR1.6718425601 £12.151/$20.207
Final 2014 14 May 2015 57.20c/37.16485p/HK$4.43329/INR3.5140591 £9.797/$14.374
Interim 2015 19 October 2015 14.40c/9.3979152p/HK$1.115985456/INR0.861393721 £8.5226/$13.34383
Final 2015 No dividend declared N/A N/A
Interim 2016 No dividend declared N/A N/A
Final 2016 No dividend declared N/A N/A
Interim 2017 No dividend declared N/A N/A
Final 2017 17 May 2018 11.00c/7.88046p/HK$0.86293/INR0.6536433401 £7.7600/$10.83451
Interim 2018 22 October 2018 6.00c/4.59747p/HK$0.46978/INR0.36961751 £6.7104/$8.51952
Final 2018 16 May 2019 15.00c/11.569905p/HK$1.176260/INR0.9576916501 N/A
Interim 2019 21 October 2019 7.00c/5.676776p/HK$0.548723/INR0.4250286001 N/A
Final 2019 Dividend withdrawn N/A N/A
Interim 2020 No dividend declared N/A N/A
Final 2020 20 May 2021 9.00c/6.472413p/HK$0.698501 N/A
Interim 2021 22 October 2021 3.00c/2.204877p/HK$0.233592 N/A
Final 2021 12 May 2022 9.00c/6.894144p/HK$0.705772 N/A
Interim 2022 14 October 2022 4.00c/3.675912p/HK$0.313887 N/A
Final 2022 11 May 2023 14.00c/11.249168p/HK$1.098083 N/A
Interim 2023 13 October 2023 6.00c/4.910412p/HK$0.469085 N/A
1 The INR dividend is per Indian Depository Receipt. In March 2020, the
Group announced the termination of the IDR programme. The IDR programme was
formally delisted from the BSE Limited (formerly the Bombay Stock Exchange)
and National Stock Exchange of India Limited with effect from 22 July 2020
Page 88
Shareholder information continued
Chinese translation
If you would like a Chinese language version of the 2023 Annual Report, please
contact Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell
Centre, 183 Queen's Road East, Wan Chai, Hong Kong.
二〇二三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 89
Shareholder information continued
Important notices
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. certain information in this document is unaudited;
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 prepared 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;
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;
Page 90
Shareholder information continued
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. All rights reserved.
Page 91
Shareholder information continued
CONTACT INFORMATION
Global headquarters
Standard Chartered Group
1 Basinghall Avenue
London, EC2V 5DD
United Kingdom
telephone: +44 (0)20 7885 8888
facsimile: +44 (0)20 7885 9999
Digital Annual Report
sc.com/annualreport
Shareholder enquiries
ShareCare information
website: sc.com/shareholders
helpline: +44 (0)370 702 0138
ShareGift information
website: ShareGift.org
helpline: +44 (0)20 7930 3737
Registrar information
UK
Computershare Investor
Services PLC
The Pavilions
Bridgwater Road
Bristol, BS99 6ZZ
helpline: +44 (0)370 702 0138
Hong Kong
Computershare Hong Kong
Investor Services Limited
17M Floor, Hopewell Centre
183 Queen's Road East
Wan Chai
Hong Kong
website: computershare.com/hk/investors
Chinese translation
Computershare Hong Kong
Investor Services Limited
17M Floor, Hopewell Centre
183 Queen's Road East
Wan Chai
Hong Kong
Register for electronic communications
website: investorcentre.co.uk
Page 92
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