Standard Chartered PLC - Half Year
Results 2024 - Part 1
Table of content
|
Performance highlights
|
2
|
|
Statement of results
|
5
|
|
Group Chief Executive's
review
|
6
|
|
Group Chief Financial Officer's
review
|
9
|
|
Supplementary financial
information
|
18
|
|
Underlying versus reported results
reconciliations
|
26
|
|
Alternative performance
measures
|
28
|
|
Group Chief Risk Officer's
review
|
30
|
Unless another currency is
specified, the word 'dollar' or symbol '$' in this document means
US dollar and the word 'cent' or symbol 'c' means one-hundredth of
one US dollar.
The information within this report
is unaudited.
Unless the context requires, within
this document, 'China' refers to the People's Republic of China
and, for the purposes of this document only, excludes Hong Kong
Special Administrative Region (Hong Kong), Macau Special
Administrative Region (Macau) and Taiwan. 'Korea' or 'South Korea'
refers to the Republic of Korea.
Within the tables in this report,
blank spaces indicate that the number is not disclosed, dashes
indicate that the number is zero and nm stands for not meaningful.
Standard Chartered PLC is incorporated in England and Wales with
limited liability. Standard Chartered PLC is headquartered in
London.
The Group's head office provides
guidance on governance and regulatory standards. Standard Chartered
PLC stock codes are: HKSE 02888 and LSE STAN.LN.
Page
1
Standard Chartered PLC - Results for the first
half and second quarter ended 30 June 2024
All figures are presented on an underlying basis
and comparisons are made to 2023 on a reported currency basis,
unless otherwise stated. A reconciliation of restructuring and
other items excluded from underlying results is set out
below.
Bill Winters, Group Chief Executive, said:
"We produced a strong set of results for the
first half of the year, demonstrating the value of our franchise as
a cross-border corporate and investment bank and a leading wealth
manager for affluent clients. We generated double-digit income
growth, with positive momentum continuing into the second quarter,
and with continued discipline in managing our expenses. This led to
a 20% growth in underlying profit before tax. Reflecting confidence
in our performance and robust capital position, we are upgrading
our guidance for income growth, which we now expect to be above 7%
in 2024, and we are announcing our largest ever share buyback of
$1.5bn. This brings our total shareholder distributions announced
since full-year 2023 results to $2.7bn."
Selected information on Q2'24 financial performance with
comparisons to Q2'23 unless otherwise stated
• Operating income up
6% to $4.8bn, up 7% at constant currency (ccy)
- Net interest income (NII) up 6% at ccy
to $2.6bn, primarily due to the short-term hedge roll-off and
benefit from treasury optimisation activities; Non NII up 9% at ccy
to $2.2bn
- Wealth Solutions up 27% at ccy, with
broad-based growth across products and supported by robust leading
indicators in net new sales and Affluent new to bank
clients
- Global Banking up 11% at ccy, driven by
pipeline execution and higher origination and distribution
volumes
- Global Markets down 7% at ccy with
non-repeat of strong prior year episodic income in Macro
Trading
• Operating expenses up
2% to $2.9bn, up 4% at ccy driven by inflation and business
growth
• Credit impairment
charge of $73m includes $146m from Wealth & Retail Banking
(WRB) in line with recent run rate and $66m release from impact of
sovereign upgrades booked across CIB and Central &
Other
- High risk assets of $8.5bn broadly flat
quarter-on-quarter
- Loan-loss rate (LLR) of 12bps, down
4bps on prior year and down 11bps on prior quarter
• Underlying profit
before tax of $1.8bn, up 15% at ccy; reported profit before tax of
$1.6bn, up 5% at ccy
• Restructuring and
other items of $250m of which $174m primarily relates to recycling
of FX translation losses from reserves into the P&L on the sale
of Zimbabwe (no impact on tangible net asset value and capital
ratios)
• Balance sheet remains
strong, liquid and well diversified
- Loans and advances to customers of
$276bn, down $8bn or 3% since 31.3.24 from run-off of Treasury
balances and FX translation; up $1bn on an underlying basis
with continued growth in CIB offsetting mortgage headwinds in
WRB
- Customer deposits of $468bn, up $9bn or
2% since 31.3.24; growth in WRB term deposits and CIB
CASA
• Risk-weighted assets
(RWA) of $242bn, down $10bn or 4% since 31.3.24
- Credit risk RWA down $8bn; from
improved asset quality including sovereign upgrades, optimisation
initiatives and FX translation
- Market risk RWA down $2bn reflecting
lower risk as Markets activity reduced
• The Group remains
strongly capitalised:
- Common equity tier 1 (CET1) ratio 14.6%
(31.3.24: 13.6%), above 13-14% target range
- $1.5bn share buyback starting
imminently is expected to reduce CET1 ratio by approximately
60bps
- Interim ordinary dividend increased 50%
to 9 cents per share ($230m)
• Tangible net asset
value per share of $14.44, up 54 cents since 31.3.24
• Return on Tangible
Equity (RoTE) of 12.9%, up 1%pts
Page
2
Selected information on H1'24 financial performance with
comparisons to H1'23 unless otherwise stated
• Operating income up
11% to $10.0bn, up 13% at ccy; up 10% at ccy excluding notable
items
- NII up 5% at ccy to $5.0bn; Non NII up
22% at ccy to $5.0bn, up 16% at ccy excluding two notable
items
- Wealth Solutions up 25% at ccy, record
performance, net new sales more than doubled to $13bn and Wealth
AUM increased by 12% since 31.12.23 to $135bn
- Global Banking up 14% at ccy driven by
higher origination and distribution volumes, executing on a strong
pipeline
- Global Markets up 5% at ccy with flow
income up 7%. Strong double-digit growth in Credit Trading and
Commodities offset lower episodic income in FX and Rates
- Two notable items of $258m from
revaluation of FX positions in Egypt and hyperinflation in
Ghana
• Operating expenses up
3% to $5.7bn, up 5% at ccy
- Positive 8% income-to-cost jaws at ccy,
with the cost-to-income ratio improving 4%pts to 57%
• Credit impairment
charge of $249m, up $77m as WRB charges normalise following the
release of management overlays
in the first half last year
• Other impairment
charge of $143m mostly relates to write-off of software assets with
no impact on capital ratios
• Underlying profit
before tax of $4.0bn, up 21% at ccy; reported profit before tax of
$3.5bn, up 6% at ccy
• Restructuring charges
of $150m; Other items of $289m primarily the recycling of FX
translation losses and a provision
in respect of the Korea equity linked securities
portfolio
• Tax charge of $1.1bn;
underlying effective tax rate of 30.1%
• Balance sheet remains
strong, liquid and well diversified
- Loans and advances to customers of
$276bn, down $11bn or 4% since 31.12.23; up $5bn or 2% on an
underlying basis
- Customer deposits of $468bn, broadly
flat since 31.12.23
- Liquidity coverage ratio of 148%
(31.12.23: 145%)
• Underlying earnings
per share (EPS) increased 23.5 cents or 31% to 98.5 cents; Reported
EPS increased 7.7 cents or 10% to 83.3 cents
• RoTE of 14.0%, up
2%pts
Update on 2024-2026 strategic actions for H1'24 unless
otherwise stated
• Drive growth in high
returning businesses in CIB: Cross-border (network) income up 12%
year-on-year (YoY), excluding interest rate impact
• Build on strengths in
Affluent client business in WRB: $23bn of net new money for the
first six months of the year (H1'23: $13bn)
• Deliver profitability
and drive returns accretion in Ventures: ~600k customers in Mox and
~800k customers in Trust
• Improve operational
leverage through Fit for Growth programme: >200 projects scoped,
execution in progress
• Deliver substantial
shareholder distributions: $2.7bn of total distributions announced
since FY'23
Other updates
• Sustainability:
Sustainable Finance income up 18% YoY; mobilised over $105bn in
Sustainable Finance since 1.1.21
Page
3
Guidance
We are upgrading our 2024 income guidance while
all other key points of guidance remain unchanged:
• Operating income to
increase above 7% in 2024 at ccy, excluding the two notable
items
• Net interest income
for 2024 of $10bn to $10.25bn, at ccy
• Positive
income-to-cost jaws, excluding UK bank levy, at ccy in
2024
• Low single-digit
percentage growth in underlying loans and advances to customers and
RWA in 2024
• Continue to expect
LLR to normalise towards the historical through the cycle 30 to
35bps range
• Continue to operate
dynamically within the full 13-14% CET1 ratio target
range
• Continue to increase
full-year dividend per share over time
• RoTE increasing
steadily from 10%, targeting 12% in 2026 and to progress
thereafter
Page
4
Statement of results
|
|
6 months ended 30.06.24
$million
|
6 months ended 30.06.23
$million
|
Change¹
%
|
|
Underlying performance
|
|
|
|
|
Operating income
|
9,958
|
8,951
|
11
|
|
Operating expenses
|
(5,673)
|
(5,504)
|
(3)
|
|
Credit impairment
|
(249)
|
(172)
|
(45)
|
|
Other impairment
|
(143)
|
(63)
|
(127)
|
|
Profit from associates and joint
ventures
|
64
|
94
|
(32)
|
|
Profit before taxation
|
3,957
|
3,306
|
20
|
|
Profit attributable to ordinary
shareholders²
|
2,567
|
2,128
|
21
|
|
Return on ordinary shareholders' tangible equity
(%)
|
14.0
|
12.0
|
200bps
|
|
Cost-to-income ratio (%)
|
57.0
|
61.5
|
453bps
|
|
Reported performance⁷
|
|
|
|
|
Operating income
|
9,791
|
9,127
|
7
|
|
Operating expenses
|
(6,056)
|
(5,668)
|
(7)
|
|
Credit impairment
|
(240)
|
(161)
|
(49)
|
|
Goodwill and other impairment
|
(147)
|
(77)
|
(91)
|
|
Profit from associates and joint
ventures
|
144
|
102
|
41
|
|
Profit before taxation
|
3,492
|
3,323
|
5
|
|
Taxation
|
(1,123)
|
(938)
|
(20)
|
|
Profit for the period
|
2,369
|
2,385
|
(1)
|
|
Profit attributable to parent company
shareholders
|
2,378
|
2,388
|
0
|
|
Profit attributable to ordinary
shareholders2
|
2,169
|
2,145
|
1
|
|
Return on ordinary shareholders' tangible equity
(%)
|
11.9
|
11.9
|
-
|
|
Cost-to-income ratio (%)
|
61.9
|
62.1
|
20bps
|
|
Net interest margin (%) (adjusted)6
|
1.85
|
1.67
|
18bps
|
|
|
30.06.24
$million
|
31.12.23
$million
|
Change¹
%
|
|
Balance sheet and capital
|
|
|
|
|
Total assets
|
835,427
|
822,844
|
2
|
|
Total equity
|
51,327
|
50,353
|
2
|
|
Average tangible equity attributable to ordinary
shareholders2
|
36,529
|
36,098
|
1
|
|
Loans and advances to customers
|
275,896
|
286,975
|
(4)
|
|
Customer accounts
|
468,157
|
469,418
|
-
|
|
Risk-weighted assets
|
241,926
|
244,151
|
(1)
|
|
Total capital
|
53,569
|
51,741
|
4
|
|
Total capital ratio (%)
|
22.1
|
21.2
|
90bps
|
|
Common Equity Tier 1
|
35,418
|
34,314
|
3
|
|
Common Equity Tier 1 ratio (%)
|
14.6
|
14.1
|
50bps
|
|
Advances-to-deposits ratio (%)3
|
52.6
|
53.3
|
(70)bps
|
|
Liquidity coverage ratio (%)
|
148
|
145
|
300bps
|
|
UK leverage ratio (%)
|
4.8
|
4.7
|
10bps
|
|
|
30.06.24
|
30.06.23
|
Change¹
|
|
|
Cents
|
Cents
|
Cents
|
|
Information per ordinary share
|
|
|
|
|
Earnings per share -
underlying4
|
98.5
|
75.0
|
23.5
|
|
- reported⁴
|
83.3
|
75.6
|
7.7
|
|
Net asset value per share5
|
1,683
|
1,513
|
170
|
|
Tangible net asset value per share5
|
1,444
|
1,302
|
142
|
|
Number of ordinary shares at period end
(millions)
|
2,550
|
2,797
|
(9)
|
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 Net interest margin is calculated
as adjusted net interest income divided by average interest-earning
assets, annualised
7 Reported performance/results
within this interim financial report means amounts reported under
UK-adopted IAS and EU IFRS. In prior periods Reported
performance/results were described as Statutory
performance/results
Page
5
Group Chief Executive's review
Delivering a strong performance in the first six months
of the year
We posted a strong set of results for the first
six months of 2024, generating a 14 per cent return on tangible
equity (RoTE). Income of $10.0 billion was up 13 per cent on a
constant currency basis, supported by continued positive momentum
in the second quarter. We delivered an encouraging performance
across our engines of non net interest income, including a record
performance in Wealth Solutions, with income up 25 per
cent.
Good cost discipline has enabled us to generate
significantly positive income-to-cost jaws of 8 per cent, even with
continued underlying investments. Credit impairment rose
year-on-year, though lower charges in the first half of 2023 in
Wealth & Retail Banking (WRB) benefitted from provision
releases. The broader portfolios have proved resilient, and we
remain vigilant in the face of volatile global environment. All
this has helped to increase underlying profit before tax by 21 per
cent year-on-year to $4.0 billion.
We remain highly liquid with a diverse and
stable deposit base and an advances-to-deposits ratio of 52.6 per
cent. We are well capitalised, with equity generation and continued
discipline on risk weighted assets (RWA) delivering a Common Equity
Tier 1 (CET1) ratio of 14.6 per cent in the second
quarter.
Driving sustainably higher returns
In February, we set out a series of further
actions in each of our three client businesses to drive income
growth of 5 to
7 per cent over the next three years, well above the anticipated
rate of growth for the global economy. I am extremely pleased with
the progress we have made since we made these
commitments.
• In Corporate &
Investment Banking (CIB), we said we are going to
drive growth in high-returning businesses
targeting an 8 to 10 per cent underlying income growth
over the next three years in cross-border (network) business and
from Financial Institutions clients, as well as Financing income.
Leveraging the significant opportunities of supply chain shifts,
with China, ASEAN, South Asia and the Middle East as epicentres,
the team delivered 6 per cent growth (12 per cent excluding
interest rate impact) in our cross-border (network) income. Almost
one third of our cross border income is intra-Asia, with
particularly strong growth in the China-to-ASEAN corridor, up 11
per cent. Financing and underlying Financial Institutions income
grew 12 per cent and 6 per cent respectively during the first half
of the year
• In WRB, we said we
will build on our strengths in the Affluent
client business, and in the first six months of the
year, the team has attracted $23 billion of Affluent net new money,
which is great progress against our $80 billion three-year target.
We are also focusing on accelerating growth in international
clients in our wealth hubs, with 296,000 at the end of the first
half, making good progress towards our target of more than 375,000
by 2026. We are also growing the Affluent client business through
up-tiering our clients across the wealth continuum, with 155,000
clients up-tiered in the first six months of the year
• For Ventures, we said
we will deliver profitability and drive
returns accretion targeting for the overall segment to
be RoTE accretive by 2026. In Mox, our digital bank in Hong Kong,
we now have around 600,000 customers, with income for the first six
months of the year up almost 20 per cent. While in Trust, our
digital bank in Singapore, we have increased the number of
customers to around 800,000 and we are aiming for Trust to become
the fourth largest retail bank, by customer numbers, in Singapore
by the end of 2024. In SC Ventures, we have raised $55 million of
external funds in the first six months of the year. We also
recently established an office in the UAE, to engage the fintech
and business innovation ecosystem in Abu Dhabi and the broader
region
Improving operational leverage through the Fit for Growth
programme
We are taking actions to transform the way we
operate, addressing structural inefficiencies and complexity
through our three-year enterprise-wide Fit for Growth programme,
that aims to simplify, standardise and digitise key elements of our
business, setting the stage for accelerated growth.
This programme is targeting to save around $1.5
billion of expenses over the next three years, and we expect to
incur a similar amount in terms of the cost to achieve these
sustainable organisational and financial benefits, creating lasting
capacity to reinvest in our growth.
Page
6
Since its launch in February this year, we are
progressing the programme at pace, having identified more than 200
individual projects as in-scope or being scoped. Around 50 per cent
of these projects are in execution or ready to commence execution,
with the plan to have all of them in execution by the end of this
year.
These projects are well diversified, which will
help to minimise concentration and execution risk, with around 80
per cent of the projects expected to deliver savings of less than
$10 million individually.
Delivering substantial shareholder
distributions
We remain committed to sharing our success with
our shareholders and will continue to actively manage our capital
position with this objective in mind. We are today announcing a
further share buyback programme of $1.5 billion, to commence
imminently. This new share buyback, and the interim dividend of 9
cents per share, up 50 per cent year-on-year, brings our total
shareholder returns announced since the full year 2023 results to
$2.7 billion, well on our way to our 2024 to 2026 target of at
least $5 billion.
Strong progress to our sustainability goals
We continue to see strong momentum in our
Sustainable Finance franchise, which is up 18 per cent year-on-year
in the first six months of the year, and we remain on-track to
deliver over a billion dollars in income by 2025, as planned. We
have mobilised over $105 billion of sustainable finance since the
beginning of 2021, making good progress as we advance towards our
$300 billion target by 2030.
On the broader sustainability agenda, building
on the good progress we made in 2023, and in line with our position
statements, we have updated our approach to greenhouse gas
emissions reduction by adding methane emissions resulting from
client activities. We announced in May the commitment that by 2025
we will set a methane emission baseline and interim 2030
target.
We facilitate the movement of capital to where
it is needed most, and where it can have the biggest societal
impact.
For instance, this year we launched an innovative Adaptation Trade
Finance Facility to protect businesses against extreme weather
events. We have also released the "Guide for Adaptation and
Resilience Finance" in partnership with the United Nations Office
for Disaster Risk Reduction (UNDRR) and KPMG, with input from over
30 other organisations.
Optimistic outlook for the markets in our
footprint
Looking forward, we expect global growth of 3.1
per cent this year, with Asia set to remain the primary engine of
global growth, expanding by 5.1 per cent in 2024 and 4.9 per cent
in 2025. We expect Africa and the Middle East to grow faster in
2024 than in 2023, accelerating again in 2025.
We are uniquely positioned 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. Global trade and investment
will continue to grow and is expected to be anchored in Asia,
Africa and the Middle East (AME), and in Asia wealth creation is
also expected to outpace that in the rest of world.
We have an unparalleled presence in 21 Asia
markets, including all 10 ASEAN markets, as well as being one of
the largest international banks in South Asia. We have a
deep-rooted heritage in AME, where we are one of the largest
international banks on the continent of Africa and have a
significant presence across seven markets in the Middle
East.
We will continue to invest in our core
capabilities serving our clients' cross-border needs and with a
particular focus on Affluent clients. These segments are
fast-growing and high returning and returns on incremental
investment are high.
Page
7
Concluding remarks
We've delivered a strong financial performance
in the first half of the year demonstrating the value of our
franchise as a cross-border corporate and investment bank and a
leading wealth manager for Affluent clients. We have also made very
encouraging early progress against the key actions we laid out in
February to drive sustainably higher returns.
Reflecting confidence in our performance and
robust capital position, we are announcing our largest ever share
buyback of $1.5 billion, bringing our total shareholder
distributions announced since full-year 2023 results to $2.7
billion. We are also upgrading our guidance for income growth,
which we now expect to be above 7 per cent in 2024.
Delivering strong income growth, combined with
improving operational leverage through our Fit for Growth
programme
and maintaining our responsible approach to risk and capital, we
continue to expect RoTE to increase steadily from
10 per cent in 2023, targeting 12 per cent in 2026 and to progress
thereafter.
I believe we have the right strategy, business
model and ambition to deliver our 2026 targets. My management team
and I remain focused on delivering these targets while we
create exceptional long-term value for the Group.
Finally, I would like to acknowledge the
remarkable efforts of our colleagues for a strong start to the
year. Their impressive dedication to our customers and the
communities that we serve help to manifest our brand promise of
here for good.
Bill Winters
Group Chief Executive
30 July 2024
Page
8
Group Chief Financial Officer's
review
The Group delivered a strong performance in the
first six months of 2024
Summary of financial performance
|
|
H1'24
$million
|
H1'23
$million
|
Change
%
|
Constant currency change1
%
|
Q2'24
$million
|
Q2'23
$million
|
Change
%
|
Constant currency change1
%
|
Q1'24
$million
|
Change
%
|
Constant currency change1
%
|
|
Underlying net interest income
|
4,979
|
4,777
|
4
|
5
|
2,560
|
2,436
|
5
|
6
|
2,419
|
6
|
6
|
|
Underlying non NII
|
4,979
|
4,174
|
19
|
22
|
2,246
|
2,119
|
6
|
9
|
2,733
|
(18)
|
(16)
|
|
Underlying operating income
|
9,958
|
8,951
|
11
|
13
|
4,806
|
4,555
|
6
|
7
|
5,152
|
(7)
|
(6)
|
|
Other operating expenses
|
(5,673)
|
(5,501)
|
(3)
|
(5)
|
(2,887)
|
(2,826)
|
(2)
|
(4)
|
(2,786)
|
(4)
|
(5)
|
|
UK bank levy
|
-
|
(3)
|
100
|
100
|
-
|
(3)
|
100
|
100
|
-
|
nm³
|
nm³
|
|
Underlying operating expenses
|
(5,673)
|
(5,504)
|
(3)
|
(5)
|
(2,887)
|
(2,829)
|
(2)
|
(4)
|
(2,786)
|
(4)
|
(5)
|
|
Underlying operating profit before impairment
and taxation
|
4,285
|
3,447
|
24
|
26
|
1,919
|
1,726
|
11
|
13
|
2,366
|
(19)
|
(17)
|
|
Credit impairment
|
(249)
|
(172)
|
(45)
|
(52)
|
(73)
|
(146)
|
50
|
43
|
(176)
|
59
|
59
|
|
Other impairment
|
(143)
|
(63)
|
(127)
|
(118)
|
(83)
|
(63)
|
(32)
|
(27)
|
(60)
|
(38)
|
(40)
|
|
Profit from associates and
joint ventures
|
64
|
94
|
(32)
|
(32)
|
65
|
83
|
(22)
|
(23)
|
(1)
|
nm³
|
nm³
|
|
Underlying profit before taxation
|
3,957
|
3,306
|
20
|
21
|
1,828
|
1,600
|
14
|
15
|
2,129
|
(14)
|
(12)
|
|
Restructuring
|
(150)
|
56
|
nm³
|
nm³
|
(95)
|
8
|
nm³
|
nm³
|
(55)
|
(73)
|
(76)
|
|
DVA
|
(26)
|
(39)
|
33
|
32
|
22
|
(93)
|
124
|
124
|
(48)
|
146
|
146
|
|
Other items
|
(289)
|
-
|
nm³
|
nm³
|
(177)
|
-
|
nm³
|
nm³
|
(112)
|
(58)
|
(59)
|
|
Reported profit before taxation
|
3,492
|
3,323
|
5
|
6
|
1,578
|
1,515
|
4
|
5
|
1,914
|
(18)
|
(16)
|
|
Taxation
|
(1,123)
|
(938)
|
(20)
|
(24)
|
(604)
|
(474)
|
(27)
|
(37)
|
(519)
|
(16)
|
(20)
|
|
Profit for the year
|
2,369
|
2,385
|
(1)
|
-
|
974
|
1,041
|
(6)
|
(8)
|
1,395
|
(30)
|
(29)
|
|
Net interest margin (%)2
|
1.85
|
1.67
|
18
|
|
1.93
|
1.71
|
22
|
|
1.76
|
17
|
|
|
Underlying return on tangible
equity (%)2
|
14.0
|
12.0
|
200
|
|
12.9
|
12.1
|
79
|
|
15.2
|
(231)
|
|
|
Underlying earnings per share (cents)
|
98.5
|
75.0
|
31
|
|
45.5
|
37.3
|
22
|
|
52.9
|
(14)
|
|
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
Reported financial performance summary
|
|
H1'24
$million
|
H1'23
$million
|
Change
%
|
Constant currency change1
%
|
Q2'24
$million
|
Q2'23
$million
|
Change
%
|
Constant currency change1
%
|
Q1'24
$million
|
Change
%
|
Constant currency change1
%
|
|
Net interest income
|
3,175
|
3,984
|
(20)
|
(19)
|
1,603
|
1,978
|
(19)
|
(18)
|
1,572
|
2
|
3
|
|
Non NII
|
6,616
|
5,143
|
29
|
32
|
3,058
|
2,589
|
18
|
21
|
3,558
|
(14)
|
(13)
|
|
Reported operating income
|
9,791
|
9,127
|
7
|
9
|
4,661
|
4,567
|
2
|
4
|
5,130
|
(9)
|
(8)
|
|
Reported operating expenses
|
(6,056)
|
(5,668)
|
(7)
|
(9)
|
(3,059)
|
(2,918)
|
(5)
|
(7)
|
(2,997)
|
(2)
|
(3)
|
|
Reported operating profit before impairment and
taxation
|
3,735
|
3,459
|
8
|
10
|
1,602
|
1,649
|
(3)
|
(1)
|
2,133
|
(25)
|
(23)
|
|
Credit impairment
|
(240)
|
(161)
|
(49)
|
(61)
|
(75)
|
(141)
|
47
|
40
|
(165)
|
55
|
55
|
|
Goodwill and Other impairment
|
(147)
|
(77)
|
(91)
|
(91)
|
(87)
|
(77)
|
(13)
|
(14)
|
(60)
|
(45)
|
(47)
|
|
Profit from associates and
joint ventures
|
144
|
102
|
41
|
41
|
138
|
84
|
64
|
64
|
6
|
nm³
|
nm³
|
|
Reported profit before taxation
|
3,492
|
3,323
|
5
|
6
|
1,578
|
1,515
|
4
|
5
|
1,914
|
(18)
|
(16)
|
|
Taxation
|
(1,123)
|
(938)
|
(20)
|
(24)
|
(604)
|
(474)
|
(27)
|
(37)
|
(519)
|
(16)
|
(20)
|
|
Profit for the year
|
2,369
|
2,385
|
(1)
|
-
|
974
|
1,041
|
(6)
|
(8)
|
1,395
|
(30)
|
(29)
|
|
Reported return on tangible
equity (%)2
|
11.9
|
11.9
|
-
|
|
10.4
|
10.8
|
(40)
|
|
13.5
|
(310)
|
|
|
Reported earnings per share (cents)
|
83.3
|
75.6
|
10
|
|
36.7
|
34.8
|
5
|
|
46.5
|
(21)
|
|
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
Page
9
The Group delivered a strong performance in the
first half of 2024. Underlying operating income grew 13 per cent at
constant currency to $10.0 billion and was up 10 per cent at
constant currency excluding two notable items relating to gains on
revaluation of FX positions in Egypt and hyperinflationary
accounting adjustments in Ghana. Underlying net interest income
(NII) was up 5 per cent at constant currency as the Group
benefitted from the roll-off of short-term hedges and improved mix
from Treasury activities. Underlying non net interest income (Non
NII) increased 22 per cent or up 16 per cent at constant currency
excluding the impact of the two notable items. The Group generated
8 per cent positive income-to-cost jaws at constant currency as
expenses grew 5 per cent driven by inflation and continued
investment into business growth initiatives. Credit impairment
charges of $249 million were equivalent to an annualised loan-loss
rate of 18 basis points and benefitted from sovereign upgrades.
This resulted in an underlying profit before tax of $4.0 billion,
up 21 per cent at constant currency.
The Group remains well capitalised and highly
liquid with a diverse and stable deposit base. The liquidity
coverage ratio of 148 per cent was 2 percentage points higher on
the prior quarter, reflecting disciplined asset and liability
management. The common equity tier 1 (CET1) ratio of 14.6 per cent
is above the Group's target range, reflecting profit accretion and
actions to lower risk-weighted assets (RWA). This capital strength
has enabled the Board to announce an interim ordinary dividend of 9
cents per share, up 3 cents or 50 per cent, and announce a further
$1.5 billion share buyback programme to commence imminently.
This follows the recently completed $1 billion share buyback in the
first half.
All commentary that follows is on an underlying
basis and comparisons are made to the equivalent period in 2023 on
a reported currency basis, unless otherwise stated.
• Underlying operating
income of $10 billion was up 13 per cent or 10 per cent at constant
currency excluding the benefit of two notable items. The
double-digit growth was driven by a record performance in Wealth
Solutions, strong pipeline execution in Global Banking, and the
roll-off of short-term hedges within Treasury
• Underlying NII
increased 4 per cent, or 5 per cent at constant currency, with a
$207 million benefit from the roll-off the short-term hedges and
Treasury optimisation actions partly offset by an accounting
asymmetry resulting from Treasury management of FX positions and
elevated deposit passthrough rates in Corporate & Investment
Banking (CIB)
• Underlying non NII
increased 19 per cent or 22 per cent at constant currency.
Excluding two notable items booked respectively within Treasury and
Other income, underlying non NII was up 16 per cent at constant
currency driven by strong double-digit growth in both Wealth
Solutions and Global Banking
• Underlying operating
expenses excluding the UK bank levy increased 3 per cent or 5 per
cent at constant currency largely driven by inflation and continued
investment into business growth initiatives, including strategic
hiring of Relationship Managers in Wealth & Retail Banking
(WRB) and coverage bankers in CIB. Expenses in the second quarter
benefitted from lower investment spend, and are expected to
increase slightly in the second half of 2024. The Group generated 8
per cent positive income-to-cost jaws while the cost-to-income
ratio improved 4 percentage points to 57 per cent
• Credit impairment was
a charge of $249 million with $282 million in WRB, where charges
have normalised following overlay releases in the first half of the
prior year. Sovereign upgrades contributed to net releases in CIB
and Central & Other items. There was a $20 million increase in
the Ventures charge, albeit it continued to decline for the second
successive quarter. The annualised loan-loss rate for the first
half of the year was 18 basis points
• Other impairment
charge of $143 million reflects the write-off of software assets
with no impact on capital ratios
• Profit from
associates and joint ventures decreased 32 per cent to $64 million
for the first six months of the year, reflecting lower profits at
China Bohai Bank
• Restructuring, DVA
and Other items charges totalled $465 million. Restructuring of
$150 million reflect the impact of actions to transform the
organisation to improve productivity, partly offset by gains on the
remaining Principal Finance portfolio. Other items of $289 million
include $174 million related to the loss from the sale of Zimbabwe
primarily from the recycling of FX translation losses from
reserves into the income statement, with no impact on tangible
equity or capital. There was also a $100 million charge booked for
participation in a compensation scheme recommended by the Korean
Financial Supervisory Service in respect of the Korea equity linked
securities (ELS) portfolio. Movements in Debit Valuation Adjustment
(DVA) were a negative $26 million
Page
10
• Taxation was $1.1
billion on a reported basis with an underlying year-to-date
effective tax rate of 30.1 per cent, up 1.7 per cent from
28.4 per cent in the first half of 2023, driven by increased
deferred tax not recognised for UK losses,
US tax adjustments and a change in the geographic mix of profits.
This underlying effective tax rate is expected to continue into the
second half of 2024
• Underlying return on
tangible equity (RoTE) increased by 200 basis points to 14.0 per
cent reflecting the increase in profits
Operating income by product
|
|
H1'24
$million
|
H1'23
$million
|
Change
%
|
Constant currency change¹
%
|
Q2'24
$million
|
Q2'23
$million
|
Change
%
|
Constant currency change¹
%
|
Q1'24
$million
|
Change
%
|
Constant currency change¹
%
|
|
Transaction Services
|
3,220
|
3,192
|
1
|
2
|
1,605
|
1,620
|
(1)
|
-
|
1,615
|
(1)
|
-
|
|
Payments and Liquidity
|
2,300
|
2,242
|
3
|
3
|
1,139
|
1,148
|
(1)
|
(1)
|
1,161
|
(2)
|
(2)
|
|
Securities & Prime Services
|
294
|
272
|
8
|
10
|
153
|
131
|
17
|
19
|
141
|
9
|
9
|
|
Trade & Working Capital
|
626
|
678
|
(8)
|
(4)
|
313
|
341
|
(8)
|
(6)
|
313
|
-
|
2
|
|
Global Banking²
|
960
|
858
|
12
|
14
|
488
|
447
|
9
|
11
|
472
|
3
|
4
|
|
Lending & Financial Solutions
|
836
|
749
|
12
|
14
|
422
|
396
|
7
|
9
|
414
|
2
|
2
|
|
Capital Markets & Advisory
|
124
|
109
|
14
|
14
|
66
|
51
|
29
|
27
|
58
|
14
|
14
|
|
Global Markets²
|
1,837
|
1,799
|
2
|
5
|
796
|
877
|
(9)
|
(7)
|
1,041
|
(24)
|
(23)
|
|
Macro Trading
|
1,515
|
1,562
|
(3)
|
-
|
631
|
776
|
(19)
|
(17)
|
884
|
(29)
|
(28)
|
|
Credit Trading
|
332
|
237
|
40
|
46
|
165
|
116
|
42
|
46
|
167
|
(1)
|
(1)
|
|
Valuation & Other Adj
|
(10)
|
-
|
nm³
|
nm³
|
-
|
(15)
|
100
|
100
|
(10)
|
100
|
100
|
|
Wealth Solutions
|
1,234
|
1,006
|
23
|
25
|
618
|
495
|
25
|
27
|
616
|
-
|
1
|
|
Investment Products
|
868
|
695
|
25
|
27
|
444
|
343
|
29
|
32
|
424
|
5
|
5
|
|
Bancassurance
|
366
|
311
|
18
|
19
|
174
|
152
|
14
|
15
|
192
|
(9)
|
(9)
|
|
CCPL & Other Unsecured Lending
|
585
|
576
|
2
|
4
|
298
|
286
|
4
|
6
|
287
|
4
|
4
|
|
Deposits
|
1,816
|
1,684
|
8
|
9
|
908
|
881
|
3
|
4
|
908
|
-
|
-
|
|
Mortgages & Other Secured Lending
|
227
|
274
|
(17)
|
(14)
|
124
|
113
|
10
|
13
|
103
|
20
|
23
|
|
Treasury
|
13
|
(393)
|
103
|
104
|
(30)
|
(160)
|
81
|
95
|
43
|
(170)
|
(135)
|
|
Other
|
66
|
(45)
|
nm³
|
nm³
|
(1)
|
(4)
|
75
|
(100)
|
67
|
(101)
|
(100)
|
|
Total underlying operating income
|
9,958
|
8,951
|
11
|
13
|
4,806
|
4,555
|
6
|
7
|
5,152
|
(7)
|
(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 Banking and Markets products have been
renamed to Global Banking and Global Markets
respectively
3 Not meaningful
The operating income by product commentary that
follows is on an underlying basis and comparisons are made to the
equivalent period in 2023 on a constant currency basis, unless
otherwise stated.
Transaction Services
income increased 2 per cent. Payments and Liquidity was up by
3 per cent driven by higher volumes. This was partly offset by
lower Trade & Working Capital income which decreased 4 per cent
reflecting margin compression and lower volumes.
Global Banking income
increased 14 per cent as Lending & Financial Solutions grew 14
per cent from strong pipeline execution which led to higher
origination and distribution volumes. Capital Market & Advisory
income was up 14 per cent.
Global Markets
income increased 5 per cent with strong
double-digit growth in Credit Trading and Commodities supporting a
7 per cent increase in flow income. This was partly offset by lower
episodic income, primarily in FX and Rates, due to a non-repeat of
the pockets of volatility which led to elevated client activity in
the prior year.
Wealth Solutions income
was up 25 per cent with broad-based growth across all products
supported by new and innovative product launches, increased
investment in Affluent Relationship Managers and continued strong
new client onboarding levels. Net new sales more than doubled to
$13 billion and Wealth AUM of $135 billion increased by 12 per cent
since 31 December 2023.
CCPL & Other Unsecured
Lending income was up 4 per cent with volume growth in
both Personal Loans and Credit Cards.
Deposits income
increased 9 per cent from higher volumes, and active passthrough
rate management leading to increasing margins in a rising interest
rate environment.
Page
11
Mortgages & Other Secured
Lending income was down 14 per cent on the back of
lower mortgage volumes, particularly in Korea and Hong Kong, and
margin compression, which in part reflects 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.
Treasury income
increased by $406 million benefitting from $151 million gain on
revaluation of FX positions in Egypt and $207 million benefit
from the roll-off of short-term hedges.
Other income of $66
million includes $107 million related to hyperinflationary
accounting adjustments in Ghana partly offset by increased funding
costs on non-financial assets from a rise in interest
rates.
Profit before tax by client segment
|
|
H1'24
$million
|
H1'23
$million
|
Change
%
|
Constant currency change¹
%
|
Q2'24
$million
|
Q2'23
$million
|
Change
%
|
Constant currency change¹
%
|
Q1'24
$million
|
Change
%
|
Constant currency change¹
%
|
|
Corporate & Investment Banking
|
3,001
|
2,915
|
3
|
5
|
1,362
|
1,430
|
(5)
|
(4)
|
1,639
|
(17)
|
(16)
|
|
Wealth & Retail Banking
|
1,407
|
1,373
|
2
|
3
|
678
|
696
|
(3)
|
(2)
|
729
|
(7)
|
(7)
|
|
Ventures
|
(199)
|
(158)
|
(26)
|
(27)
|
(87)
|
(55)
|
(58)
|
(54)
|
(112)
|
22
|
24
|
|
Central & other items
|
(252)
|
(824)
|
69
|
68
|
(125)
|
(471)
|
73
|
76
|
(127)
|
2
|
23
|
|
Underlying profit before taxation
|
3,957
|
3,306
|
20
|
21
|
1,828
|
1,600
|
14
|
15
|
2,129
|
(14)
|
(12)
|
1 Comparisons presented on the
basis of the current period's transactional currency rate, ensuring
like-for-like currency rates between the two periods
Corporate & Investment Banking
(CIB) profit before taxation increased 5 per cent.
Income grew 5 per cent with broad-based growth across Transaction
Services, Global Markets, and in particular, double-digit growth in
Global Banking. Expenses were 5 per cent higher, while credit
impairment was a net release of $35 million. Other impairment of
$104 million primarily related to the write-off of software
assets.
Wealth & Retail Banking
(WRB) profit before taxation increased 3 per cent.
Income increased 10 per cent, with record income in Wealth
Solutions, up 25 per cent, partly offset by lower Mortgage income.
Expenses increased 6 per cent, and the credit impairment charge of
$282 million was broadly in line with recent run rates and
following a non-repeat of prior year overlay releases.
Ventures loss increased
by $41 million to $199 million reflecting the Group's continued
investment in transformational digital initiatives. Income was down
by $9 million to $80 million from lower gains in SC Ventures
compared to the prior period gains. Digital Banks income of $62
million increased 77 per cent. Expenses increased by $19 million
whilst there was an impairment charge of $43 million, primarily
from Mox albeit delinquency rates have improved.
Central & other items
(C&O) recorded a loss of $252 million
approximately one third of the prior period loss. Treasury income
of $10 million increased by $415 million mostly from translation
gains on the revaluation of FX positions in Egypt and the roll-off
of the short-term hedges. Other products income of $5 million
increased by $117 million primarily from hyperinflationary
accounting adjustments relating to Ghana. Expenses decreased by $34
million and there was a credit impairment release of $41 million
from sovereign-related exposures. Associates income reduced by $37
million, reflecting lower profits at China Bohai Bank.
Adjusted net interest income and margin
|
|
H1'24
$million
|
H1'23
$million
|
Change1
%
|
Q2'24
$million
|
Q2'23
$million
|
Change1
%
|
Q1'24
$million
|
Change¹
%
|
|
Adjusted net interest income2
|
4,991
|
4,770
|
5
|
2,562
|
2,430
|
5
|
2,429
|
5
|
|
Average interest-earning assets
|
543,788
|
576,149
|
(6)
|
533,869
|
569,811
|
(6)
|
553,710
|
(4)
|
|
Average interest-bearing liabilities
|
537,608
|
537,549
|
-
|
538,054
|
536,142
|
-
|
537,161
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Gross yield (%)3
|
5.25
|
4.49
|
76
|
5.32
|
4.61
|
71
|
5.18
|
14
|
|
Rate paid (%)3
|
3.44
|
3.02
|
42
|
3.36
|
3.08
|
28
|
3.52
|
(16)
|
|
Net yield (%)3
|
1.81
|
1.47
|
34
|
1.96
|
1.53
|
43
|
1.66
|
30
|
|
Net interest margin (%)3,4
|
1.85
|
1.67
|
18
|
1.93
|
1.71
|
22
|
1.76
|
17
|
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
5 Not meaningful
Adjusted net interest income was up 5 per cent
driven by an increase in the net interest margin, which averaged
185 basis points in the first half, increasing 18 basis points both
year-on-year and compared to the prior half. The benefit from
roll-off of the short-term hedges and Treasury optimisation was
partly offset by an accounting asymmetry resulting from Treasury
management of FX positions and elevated deposit passthrough rates
in CIB.
Adjusted net interest income increased 5 per
cent quarter-on-quarter with an $84 million uplift from an
incremental two-month benefit from the short-term hedge roll-off,
Treasury optimisation and a reduction in the accounting asymmetry
resulting from Treasury management of FX positions. This was partly
offset by the impact of elevated deposit passthrough rates in
CIB
• Average
interest-earning assets decreased 4 per cent on the prior quarter
primarily due to a reduction in Treasury assets following on from
an increase in demand for funding of trading book assets. The run
down in both Treasury assets and low margin mortgages led to an
improvement in the mix of assets. This, alongside roll-off of the
short-term hedge contributed to gross yields increasing 14 basis
points compared to the prior quarter to 532 basis points
• Average
interest-bearing liabilities were broadly stable on the prior
quarter as growth in WRB customer accounts was offset by lower
Treasury and CIB balances. The rate paid on liabilities decreased
16 basis points compared with the average in the prior quarter,
reflecting a reduction in Treasury accounting asymmetry and
increase in the trading book funding cost adjustment
Credit risk summary
Income Statement (Underlying view)
|
|
H1'24
$million
|
H1'23
$million
|
Change1
%
|
Q2'24
$million
|
Q2'23
$million
|
Change1
%
|
Q1'24
$million
|
Change1
%
|
|
Total credit impairment
charge/(release)2
|
249
|
172
|
45
|
73
|
146
|
(50)
|
176
|
(59)
|
|
Of which stage 1 and 22
|
73
|
33
|
121
|
12
|
27
|
(56)
|
61
|
(80)
|
|
Of which stage 32
|
176
|
139
|
27
|
61
|
119
|
(49)
|
115
|
(47)
|
1 Variance is increase/(decrease)
comparing current reporting period to prior reporting
period
2 Refer to Group Chief Risk Officer's
section
Balance sheet
|
|
30.06.24
$million
|
31.03.24
$million
|
Change1
%
|
31.12.23
$million
|
Change1
%
|
30.06.23
$million
|
Change1
%
|
|
Gross loans and advances to
customers2
|
280,893
|
288,643
|
(3)
|
292,145
|
(4)
|
295,508
|
(5)
|
|
Of which stage 1
|
264,249
|
272,133
|
(3)
|
273,692
|
(3)
|
277,711
|
(5)
|
|
Of which stage 2
|
10,005
|
9,520
|
5
|
11,225
|
(11)
|
10,110
|
(1)
|
|
Of which stage 3
|
6,639
|
6,990
|
(5)
|
7,228
|
(8)
|
7,687
|
(14)
|
|
|
|
|
|
|
|
|
|
|
Expected credit loss provisions
|
(4,997)
|
(5,240)
|
(5)
|
(5,170)
|
(3)
|
(5,371)
|
(7)
|
|
Of which stage 1
|
(480)
|
(478)
|
-
|
(430)
|
12
|
(451)
|
6
|
|
Of which stage 2
|
(362)
|
(359)
|
1
|
(420)
|
(14)
|
(400)
|
(10)
|
|
Of which stage 3
|
(4,155)
|
(4,403)
|
(6)
|
(4,320)
|
(4)
|
(4,520)
|
(8)
|
|
|
|
|
|
|
|
|
|
|
Net loans and advances to customers
|
275,896
|
283,403
|
(3)
|
286,975
|
(4)
|
290,137
|
(5)
|
|
Of which stage 1
|
263,769
|
271,655
|
(3)
|
273,262
|
(3)
|
277,260
|
(5)
|
|
Of which stage 2
|
9,643
|
9,161
|
5
|
10,805
|
(11)
|
9,710
|
(1)
|
|
Of which stage 3
|
2,484
|
2,587
|
(4)
|
2,908
|
(15)
|
3,167
|
(22)
|
|
|
|
|
|
|
|
|
|
|
Cover ratio of stage 3 before/after collateral
(%)3
|
63/82
|
63/81
|
0/1
|
60/76
|
3/6
|
59/78
|
4/4
|
|
Credit grade 12 accounts ($million)
|
964
|
1,009
|
(4)
|
2,155
|
(55)
|
1,316
|
(27)
|
|
Early alerts ($million)
|
5,044
|
4,933
|
2
|
5,512
|
(8)
|
4,443
|
14
|
|
Investment grade corporate exposures
(%)3
|
74
|
72
|
2
|
73
|
1
|
74
|
-
|
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 $7,788
million at 30 June 2024, $11,290 million at 31 March 2024, $13,996
million at 31 December 2023 and $10,950 million at 30 June
2023
3 Change is the percentage points
difference between the two points rather than the percentage
change
Asset quality remained resilient in the first
half of 2024, with an improvement in a number of underlying credit
metrics.
The Group continues to actively manage the
credit portfolio while remaining alert to a volatile and
challenging external environment, including increased geopolitical
tensions, which has led to idiosyncratic stress in a select number
of geographies and industry sectors.
Page
13
Credit impairment was a charge of $249 million
in the half, up $77 million year-on-year and representing an
annualised loan-loss rate of 18 basis points. WRB charges
have broadly normalised following the release of management
overlays in the first half of the prior year and totalled $282
million, an increase of $174 million. There was a $43 million
charge in Ventures, an increase of $20 million, primarily from Mox,
albeit impairment charges have fallen for two successive quarters
as credit criteria were adjusted after delinquency rates increased
in the second half of last year. Sovereign upgrades were a net
release of $54 million across CIB and C&O and were the
primary contributor to the $41 million net release in C&O. CIB
was a net release of $35 million as a low level of new impairment
was more than offset by releases relating to historical provisions
and sovereign upgrades. Included in CIB is a China commercial
real estate sector charge of $8 million as additional stage 3
provisions were offset by $55 million in management overlay
releases primarily as a result of repayments. The management
overlay now totals $86 million and the Group has provided $1.2
billion in total in relation to the China commercial real estate
sector.
Gross stage 3 loans and advances to customers of
$6.6 billion were 8 per cent lower compared with 31 December 2023
as repayments, client upgrades, reduction in exposures and
write-offs more than offset new inflows. Credit-impaired loans
represent 2.4 per cent of gross loans and advances, a reduction of
11 basis points compared with 31 December 2023.
The stage 3 cover ratio of 63 per cent increased
3 percentage points compared with the position at 31 December 2023,
and the cover ratio post collateral of 82 per cent increased by 6
percentage points, both increasing due to the decrease in gross
stage 3 loans.
Credit grade 12 balances of $1.0 billion have
decreased by $1.2 billion since 31 December 2023 and are broadly
stable since 31 March 2024, reflecting both improvements into
stronger credit grades and downgrades to stage 3, as well as the
reversal of an existing $1 billion sovereign related exposure from
reverse repurchase agreements to investment securities. Early alert
accounts of $5.0 billion decreased by $0.6 billion due to net
upgrades and exposure reductions relating to a select number of
clients.
The proportion of investment grade corporate
exposures has increased by 1 percentage point since 31 December
2023 to 74 per cent.
Restructuring, goodwill impairment and other
items
|
|
H1'24
|
H1'23
|
|
Restructuring
$million
|
DVA
$million
|
Other items
$million
|
Restructuring
$million
|
DVA
$million
|
Other items
$million
|
|
Operating income
|
48
|
(26)
|
(189)
|
215
|
(39)
|
-
|
|
Operating expenses
|
(283)
|
-
|
(100)
|
(164)
|
-
|
-
|
|
Credit impairment
|
9
|
-
|
-
|
11
|
-
|
-
|
|
Other impairment
|
(4)
|
-
|
-
|
(14)
|
-
|
-
|
|
Profit from associates and joint
ventures
|
80
|
-
|
-
|
8
|
-
|
-
|
|
Profit/(loss) before taxation
|
(150)
|
(26)
|
(289)
|
56
|
(39)
|
-
|
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.
Restructuring charges of $150 million reflect
the impact of actions to transform the organisation to improve
productivity, primarily additional redundancy charges and
technology related costs partly offset by profits on the remaining
Principal Finance portfolio.
Other items charges of $289 million include $174
million from the sale of Zimbabwe primarily related to the
recycling of FX translation losses from reserves into the income
statement, which has no impact on tangible net asset value and
capital; and a $100 million charge was booked in the first quarter
related to the SCB Korea approved compensation scheme based on the
Financial Supervisory Service guidelines . We have engaged with
impacted customers and have already reached settlement with some
customers under this scheme.
Movements in DVA were negative $26 million,
driven by tightening of the Group's asset swap spreads on
derivative liability exposures. The size of the portfolio subject
to DVA did not change materially.
Page
14
Balance sheet and liquidity
|
|
30.06.24
$million
|
31.03.24
$million
|
Change1
%
|
31.12.23
$million
|
Change1
%
|
30.06.23
$million
|
Change1
%
|
|
Assets
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
45,231
|
39,698
|
14
|
44,977
|
1
|
44,602
|
1
|
|
Loans and advances to customers
|
275,896
|
283,403
|
(3)
|
286,975
|
(4)
|
290,137
|
(5)
|
|
Other assets
|
514,300
|
489,424
|
5
|
490,892
|
5
|
503,972
|
2
|
|
Total assets
|
835,427
|
812,525
|
3
|
822,844
|
2
|
838,711
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deposits by banks
|
28,087
|
29,691
|
(5)
|
28,030
|
-
|
28,560
|
(2)
|
|
Customer accounts
|
468,157
|
459,386
|
2
|
469,418
|
-
|
469,567
|
-
|
|
Other liabilities
|
287,856
|
272,609
|
6
|
275,043
|
5
|
290,903
|
(1)
|
|
Total liabilities
|
784,100
|
761,686
|
3
|
772,491
|
2
|
789,030
|
(1)
|
|
Equity
|
51,327
|
50,839
|
1
|
50,353
|
2
|
49,681
|
3
|
|
Total equity and liabilities
|
835,427
|
812,525
|
3
|
822,844
|
2
|
838,711
|
-
|
|
|
|
|
|
|
|
|
|
|
Advances-to-deposits ratio (%)2
|
52.6%
|
54.3%
|
|
53.3%
|
|
53.6%
|
|
|
Liquidity coverage ratio (%)
|
148%
|
146%
|
|
145%
|
|
164%
|
|
1 Variance is
increase/(decrease)comparing current reporting period to prior
reporting periods
2 The Group excludes $18,419 million
held with central banks (31.03.24: $21,258 million, 31.12.23:
$20,710 million, 30.06.23: $24,749 million) that has been confirmed
as repayable at the point of stress. Advances exclude repurchase
agreement and other similar secured lending of $7,788 million
(31.03.24: $11,290 million and 31.12.23: $13,996 million) and
include loans and advances to customers held at fair value through
profit or loss of $6,877 million (31.03.24: $7,950 million and
31.12.23: $7,212 million). Deposits include customer accounts held
at fair value through profit or loss of $19,850 million (31.03.24:
$17,595 million and 31.12.23: $17,248 million)
The Group's balance sheet remains strong,
liquid and well diversified.
• Loans and advances to
customers decreased 4 per cent since 31 December 2023 to $276
billion and were up $5 billion or 2 per cent on an underlying
basis with growth in CIB mostly from higher origination volumes in
Global Banking, and short-term structured loans in Global Markets.
WRB balances reduced as an increase in Wealth Lending was more than
offset by lower Mortgage balances as the Group reduced the number
of new mortgages written in markets experiencing an uneconomic
pricing environment. The underlying increase excludes the impact of
a $10 billion reduction from Treasury and securities based loans
held to collect and a $6 billion reduction from currency
translation
• Customer accounts of
$468 billion were broadly flat since 31 December 2023 but increased
an underlying 1 per cent excluding the impact of currency
translation. An increase in WRB Time Deposits and Ventures was
partly offset by a reduction in Transaction Services
CASA
• Other assets
increased 5 per cent or $23 billion from 31 December 2023, with a
$35 billion increase in financial assets held at fair value through
profit or loss, primarily in relation to the trading book. This was
partly offset by a $9 billion reduction in investment securities
fair valued through other comprehensive income and $6 billion
decrease in cash and balances held at central banks
• Other liabilities
increased 5 per cent or $13 billion from 31 December 2023, with a
$14 billion increase in financial liabilities held at fair value
through profit or loss primarily in repurchase agreements and short
positions as well as a $5 billion increase in unsettled trades and
other financial liabilities. This was partly offset by a $5 billion
reduction in derivative balances and a $5 billion reduction in
repurchase agreements and other similar secured borrowing booked at
amortised cost
The advances-to-deposits ratio decreased to 52.6
per cent from 53.3 per cent at 31 December 2023 reflecting the
reduction in loans and advances to customers. The point-in-time
liquidity coverage ratio increased to 148 per cent and remains well
above the minimum regulatory requirement.
Risk-weighted assets
|
|
30.06.24
$million
|
31.03.24
$million
|
Change1
%
|
31.12.23
$million
|
Change1
%
|
30.06.23
$million
|
Change1
%
|
|
By risk type
|
|
|
|
|
|
|
|
|
Credit risk
|
185,004
|
193,009
|
(4)
|
191,423
|
(3)
|
197,151
|
(6)
|
|
Operational risk
|
29,479
|
29,805
|
(1)
|
27,861
|
6
|
27,861
|
6
|
|
Market risk
|
27,443
|
29,302
|
(6)
|
24,867
|
10
|
24,105
|
14
|
|
Total RWAs
|
241,926
|
252,116
|
(4)
|
244,151
|
(1)
|
249,117
|
(3)
|
1 Variance is increase/(decrease)
comparing current reporting period to prior reporting
periods
Page
15
Total risk-weighted assets (RWA) decreased 1 per
cent or $2.2 billion since 31 December 2023 to $241.9
billion.
• Credit risk RWA
decreased $6.4 billion to $185.0 billion, from improved asset
quality including sovereign upgrades, optimisation initiatives and
FX translation
• Operational risk RWA
increased by $1.6 billion reflecting an increase in average income
as measured over a rolling three-year time horizon, with higher
2023 income replacing lower 2020 income, partly offset by a
reduction in the second quarter from a regulatory waiver granted to
exclude the impact of the disposed Aviation business
• Market risk RWA
increased by $2.6 billion to $27.4 billion since 31 December 2023
as RWA was deployed to help clients capture opportunities in
Markets, partly offset by reductions from methodology changes
related to our Internal Model Approach
Capital base and ratios
|
|
30.06.24
$million
|
31.03.24
$million
|
Change1
%
|
31.12.23
$million
|
Change1
%
|
30.06.23
$million
|
Change¹
%
|
|
CET1 capital
|
35,418
|
34,279
|
3
|
34,314
|
3
|
34,896
|
1
|
|
Additional Tier 1 capital (AT1)
|
6,484
|
6,486
|
-
|
5,492
|
18
|
5,492
|
18
|
|
Tier 1 capital
|
41,902
|
40,765
|
3
|
39,806
|
5
|
40,388
|
4
|
|
Tier 2 capital
|
11,667
|
11,773
|
(1)
|
11,935
|
(2)
|
12,281
|
(5)
|
|
Total capital
|
53,569
|
52,538
|
2
|
51,741
|
4
|
52,669
|
2
|
|
CET1 capital ratio (%)2
|
14.6
|
13.6
|
1.0
|
14.1
|
0.5
|
14.0
|
0.6
|
|
Total capital ratio (%)2
|
22.1
|
20.8
|
1.3
|
21.2
|
0.9
|
21.1
|
1.0
|
|
Leverage ratio (%)2
|
4.8
|
4.8
|
-
|
4.7
|
0.1
|
4.8
|
-
|
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 14.6 per cent
increased 59 basis points since 31 December 2023 and remains 4.1
percentage points above the Group's latest regulatory minimum of
10.6 per cent. Underlying profit accretion was partly offset by
shareholder distributions.
As well as the 99 basis points of CET1 accretion
from underlying profits, there was a further 26 basis points uplift
primarily from fair value gains on other comprehensive income and
regulatory capital adjustments.
The Group spent $1 billion purchasing
113.3 million ordinary shares of $0.50 each during the first
half, representing a volume-weighted average price per share of
£6.97. These shares were subsequently cancelled, reducing the total
issued share capital by 4 per cent and the CET1 ratio by
approximately 40 basis points. The Group is accruing a provisional
interim 2024 ordinary share dividend over the first half of 2024,
which is calculated formulaically at one-third of the ordinary
dividend paid in 2023 or 9 cents a share. This, combined with
payments due to AT1 and preference shareholders reduced the CET1
ratio by 19 basis points.
The Board has decided to carry out a share
buyback commencing imminently for up to a maximum consideration of
$1.5 billion to further reduce the number of ordinary shares
in issue by cancelling the repurchased shares. The terms of the
buyback will be announced and it is expected to reduce the Group's
CET1 ratio in the third quarter of 2024 by approximately 60 basis
points.
The Group's UK leverage ratio of 4.8 per cent
increased 7 basis points compared with the ratio at 31 December
2023 and remains significantly above its minimum requirement of 3.8
per cent.
Page
16
Outlook
We are upgrading our 2024 income guidance while
all other key points of guidance remain unchanged:
• Operating income to
increase above 7 per cent in 2024 at constant currency, excluding
the two notable items
• Net interest income
for 2024 of $10 billion to $10.25 billion, at constant
currency
• Positive
income-to-cost jaws, excluding UK bank levy, at constant currency
in 2024
• Low single-digit
percentage growth in underlying loans and advances to customers and
RWA in 2024
• Continue to expect
loan-loss ratio to normalise towards the historical through the
cycle 30 to 35 basis points range
• Continue to operate
dynamically within the full 13-14 per cent CET1 ratio target
range
• Continue to increase
full-year dividend per share over time
• RoTE increasing
steadily from 10 per cent, targeting 12 per cent in 2026 and to
progress thereafter
Diego De Giorgi
Group Chief Financial Officer
30 July 2024
Page
17
Supplementary financial information
Underlying performance by client segment
|
|
H1'24
|
|
Corporate & Investment Banking
$million
|
Wealth &
Retail Banking
$million
|
Ventures
$million
|
Central &
other items
$million
|
Total
$million
|
|
Operating income
|
5,991
|
3,872
|
80
|
15
|
9,958
|
|
External
|
5,018
|
1,749
|
80
|
3,111
|
9,958
|
|
Inter-segment
|
973
|
2,123
|
-
|
(3,096)
|
-
|
|
Operating expenses
|
(2,921)
|
(2,156)
|
(230)
|
(366)
|
(5,673)
|
|
Operating profit/(loss) before impairment
losses
and taxation
|
3,070
|
1,716
|
(150)
|
(351)
|
4,285
|
|
Credit impairment
|
35
|
(282)
|
(43)
|
41
|
(249)
|
|
Other impairment
|
(104)
|
(27)
|
-
|
(12)
|
(143)
|
|
Profit from associates and joint
ventures
|
-
|
-
|
(6)
|
70
|
64
|
|
Underlying profit/(loss) before
taxation
|
3,001
|
1,407
|
(199)
|
(252)
|
3,957
|
|
Restructuring
|
(59)
|
(51)
|
(1)
|
(39)
|
(150)
|
|
DVA
|
(26)
|
-
|
-
|
-
|
(26)
|
|
Other items
|
-
|
(100)
|
-
|
(189)
|
(289)
|
|
Reported profit/(loss) before
taxation
|
2,916
|
1,256
|
(200)
|
(480)
|
3,492
|
|
Total assets
|
443,442
|
122,846
|
5,280
|
263,859
|
835,427
|
|
Of which: loans and advances to
customers
|
190,298
|
120,277
|
1,110
|
24,022
|
335,707
|
|
loans and advances to customers
|
130,496
|
120,268
|
1,110
|
24,022
|
275,896
|
|
loans held at fair value through profit or loss
(FVTPL)1
|
59,802
|
9
|
-
|
-
|
59,811
|
|
Total liabilities
|
467,875
|
208,565
|
4,347
|
103,313
|
784,100
|
|
Of which: customer accounts1
|
315,767
|
204,154
|
4,046
|
8,295
|
532,262
|
|
Risk-weighted assets
|
149,133
|
52,459
|
2,129
|
38,205
|
241,926
|
|
Income return on risk-weighted assets
(%)
|
8.1
|
14.8
|
8.3
|
0.1
|
8.1
|
|
Underlying return on tangible equity
(%)
|
21.0
|
27.8
|
nm²
|
(16.9)
|
14.0
|
|
Cost-to-income ratio (%)
|
48.8
|
55.7
|
nm²
|
nm²
|
57.0
|
|
|
H1'23
|
|
Corporate & Investment Banking
$million
|
Wealth &
Retail Banking
$million
|
Ventures
$million
|
Central &
other items
$million
|
Total
$million
|
|
Operating Income
|
5,823
|
3,556
|
89
|
(517)
|
8,951
|
|
External
|
4,569
|
2,154
|
89
|
2,139
|
8,951
|
|
Inter-segment
|
1,254
|
1,402
|
-
|
(2,656)
|
-
|
|
Operating Expenses
|
(2,818)
|
(2,075)
|
(211)
|
(400)
|
(5,504)
|
|
Operating profit/(loss) before impairment
losses
and taxation
|
3,005
|
1,481
|
(122)
|
(917)
|
3,447
|
|
Credit impairment
|
(69)
|
(108)
|
(23)
|
28
|
(172)
|
|
Other impairment
|
(21)
|
-
|
-
|
(42)
|
(63)
|
|
Profit from associates and joint
ventures
|
-
|
-
|
(13)
|
107
|
94
|
|
Underlying profit/(loss) before
taxation
|
2,915
|
1,373
|
(158)
|
(824)
|
3,306
|
|
Restructuring
|
73
|
(16)
|
(1)
|
-
|
56
|
|
DVA
|
(39)
|
-
|
-
|
-
|
(39)
|
|
Reported profit/(loss) before
taxation
|
2,949
|
1,357
|
(159)
|
(824)
|
3,323
|
|
Total assets
|
401,001
|
129,660
|
3,076
|
304,974
|
838,711
|
|
Of which: loans and advances to
customers
|
174,214
|
127,039
|
947
|
33,623
|
335,823
|
|
loans and advances to customers
|
128,548
|
127,020
|
947
|
33,622
|
290,137
|
|
loans held at fair value through profit or loss
(FVTPL)1
|
45,666
|
19
|
-
|
1
|
45,686
|
|
Total liabilities
|
490,697
|
190,690
|
2,317
|
105,326
|
789,030
|
|
Of which: customer accounts1
|
333,584
|
185,741
|
2,072
|
8,394
|
529,791
|
|
Risk-weighted assets
|
147,258
|
50,664
|
1,925
|
49,270
|
249,117
|
|
Income return on risk-weighted assets
(%)
|
8.0
|
14.1
|
13.0
|
(2.1)
|
7.3
|
|
Underlying return on tangible equity
(%)
|
20.8
|
28.2
|
nm²
|
(25.6)
|
12.0
|
|
Cost-to-income ratio (%)
|
48.4
|
58.4
|
nm²
|
nm²
|
61.5
|
1 Loans and advances to customers
includes FVTPL and customer accounts includes FVTPL and repurchase
agreements
2 Not meaningful
Page
18
Corporate & Investment Banking
|
|
H1'24
$million
|
H1'23
$million
|
Change2
%
|
Constant currency change1,2
%
|
Q2'24
$million
|
Q2'23
$million
|
Change2
%
|
Constant currency change1,2
%
|
Q1'24
$million
|
Change2
%
|
Constant currency change1,2
%
|
|
Operating income
|
5,991
|
5,823
|
3
|
5
|
2,876
|
2,931
|
(2)
|
(1)
|
3,115
|
(8)
|
(7)
|
|
Transaction Services
|
3,196
|
3,169
|
1
|
2
|
1,593
|
1,608
|
(1)
|
-
|
1,603
|
(1)
|
-
|
|
Payments and Liquidity
|
2,300
|
2,242
|
3
|
3
|
1,139
|
1,148
|
(1)
|
(1)
|
1,161
|
(2)
|
(2)
|
|
Securities & Prime Services
|
294
|
272
|
8
|
10
|
153
|
131
|
17
|
19
|
141
|
9
|
9
|
|
Trade & Working Capital
|
602
|
655
|
(8)
|
(4)
|
301
|
329
|
(9)
|
(6)
|
301
|
-
|
2
|
|
Global Banking3
|
960
|
858
|
12
|
14
|
488
|
447
|
9
|
11
|
472
|
3
|
4
|
|
Lending & Financial Solutions
|
836
|
749
|
12
|
14
|
422
|
396
|
7
|
9
|
414
|
2
|
2
|
|
Capital Markets & Advisory
|
124
|
109
|
14
|
14
|
66
|
51
|
29
|
27
|
58
|
14
|
14
|
|
Global Markets3
|
1,837
|
1,799
|
2
|
5
|
796
|
877
|
(9)
|
(7)
|
1,041
|
(24)
|
(23)
|
|
Macro Trading
|
1,515
|
1,562
|
(3)
|
-
|
631
|
776
|
(19)
|
(17)
|
884
|
(29)
|
(28)
|
|
Credit Trading
|
332
|
237
|
40
|
46
|
165
|
116
|
42
|
46
|
167
|
(1)
|
(1)
|
|
Valuation & Other Adj
|
(10)
|
-
|
nm⁷
|
nm⁷
|
-
|
(15)
|
100
|
100
|
(10)
|
100
|
100
|
|
Deposits
|
-
|
1
|
(100)
|
(100)
|
-
|
1
|
(100)
|
nm⁷
|
-
|
nm⁷
|
nm⁷
|
|
Other
|
(2)
|
(4)
|
50
|
50
|
(1)
|
(2)
|
50
|
50
|
(1)
|
-
|
-
|
|
Operating expenses
|
(2,921)
|
(2,818)
|
(4)
|
(5)
|
(1,498)
|
(1,403)
|
(7)
|
(8)
|
(1,423)
|
(5)
|
(6)
|
|
Operating profit before impairment losses
and taxation
|
3,070
|
3,005
|
2
|
4
|
1,378
|
1,528
|
(10)
|
(9)
|
1,692
|
(19)
|
(18)
|
|
Credit impairment
|
35
|
(69)
|
151
|
149
|
35
|
(77)
|
145
|
156
|
-
|
nm⁷
|
nm⁷
|
|
Other impairment
|
(104)
|
(21)
|
nm⁷
|
nm⁷
|
(51)
|
(21)
|
(143)
|
(122)
|
(53)
|
4
|
4
|
|
Underlying profit
before taxation
|
3,001
|
2,915
|
3
|
5
|
1,362
|
1,430
|
(5)
|
(4)
|
1,639
|
(17)
|
(16)
|
|
Restructuring
|
(59)
|
73
|
(181)
|
(198)
|
(48)
|
34
|
nm⁷
|
nm⁷
|
(11)
|
nm⁷
|
nm⁷
|
|
DVA
|
(26)
|
(39)
|
33
|
32
|
22
|
(93)
|
124
|
124
|
(48)
|
146
|
146
|
|
Reported profit
before taxation
|
2,916
|
2,949
|
(1)
|
1
|
1,336
|
1,371
|
(3)
|
(1)
|
1,580
|
(15)
|
(15)
|
|
Total assets
|
443,442
|
401,001
|
11
|
12
|
443,442
|
401,001
|
11
|
12
|
415,090
|
7
|
7
|
|
Of which: loans and advances to
customers4
|
190,298
|
174,214
|
9
|
11
|
190,298
|
174,214
|
9
|
11
|
190,083
|
-
|
1
|
|
Total liabilities
|
467,875
|
490,697
|
(5)
|
(4)
|
467,875
|
490,697
|
(5)
|
(4)
|
450,072
|
4
|
4
|
|
Of which: customer accounts4
|
315,767
|
333,584
|
(5)
|
(5)
|
315,767
|
333,584
|
(5)
|
(5)
|
310,079
|
2
|
2
|
|
Risk-weighted assets
|
149,133
|
147,258
|
1
|
nm⁷
|
149,133
|
147,258
|
1
|
nm⁷
|
150,600
|
(1)
|
nm⁷
|
|
Income return on risk-weighted assets
(%)5
|
8.1
|
8.0
|
10bps
|
nm⁷
|
7.7
|
8.1
|
(40)bps
|
nm⁷
|
8.5
|
(80)bps
|
nm⁷
|
|
Underlying return on
tangible equity (%)5
|
21.0
|
20.8
|
20bps
|
nm⁷
|
18.9
|
20.4
|
(150)bps
|
nm⁷
|
23.0
|
(410)bps
|
nm⁷
|
|
Cost-to-income ratio (%)6
|
48.8
|
48.4
|
-
|
-
|
52.1
|
47.9
|
(4.2)
|
(4.3)
|
45.7
|
(6.4)
|
(2.2)
|
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 Banking and Markets products have been
renamed to Global Banking and Global Markets
respectively
4 Loans and advances to customers
and customer accounts includes FVTPL and 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
Performance highlights
• Underlying profit
before tax of $3,001 million was up 5 per cent at constant currency
(ccy) driven by higher income and, lower credit impairment, partly
offset by higher operating expenses and other impairment
• Underlying operating
income of $5,991 million increased 5 per cent at ccy, driven by
strong double-digit growth of 14 per cent growth in Global Banking
from higher origination and distribution volumes. Global Markets
was up 5 per cent, despite a strong comparator in Q2'24, driven by
robust client flow incomes. Transaction services income increased 2
per cent, within which Payments and Liquidity income was up 3 per
cent benefiting from elevated rates and volumes and Securities
& Prime Services income increased 10 per cent, mainly
driven by higher custody, funds and prime brokerage fees. This was
partly offset by lower Trade & Working Capital income which
decreased by 4 percent reflecting margin compression
• Underlying operating
expenses increased 5 per cent at ccy largely due to inflation and
investment in business growth initiatives including strategic
hiring of coverage bankers
Page
19
• Credit impairment was
a net release of $35 million, as a low level of new impairment was
more than offset by releases relating to historical provisions and
sovereign upgrades. Other impairment was primarily related to the
write-off of software assets
• Loans and Advances to
customers increased by 2 per cent at ccy since 31 December 2023,
mainly driven by Global Banking due to higher origination and
distribution volumes
• Risk-weighted assets
(RWA) of $149 billion were up $7 billion since 31 December 2023,
mainly from asset growth and mix, increased market risk RWA and
mechanically higher operational risk RWA
• Underlying RoTE of 21
per cent was broadly flat to H1'23
Wealth & Retail Banking
|
|
H1'24
$million
|
H1'23
$million
|
Change2
%
|
Constant currency change1,2
%
|
Q2'24
$million
|
Q2'23
$million
|
Change2
%
|
Constant currency change1,2
%
|
Q1'24
$million
|
Change2
%
|
Constant currency change1,2
%
|
|
Operating income
|
3,872
|
3,556
|
9
|
10
|
1,955
|
1,784
|
10
|
11
|
1,917
|
2
|
2
|
|
Transaction Services
|
24
|
23
|
4
|
4
|
12
|
12
|
-
|
-
|
12
|
-
|
-
|
|
Trade & Working Capital
|
24
|
23
|
4
|
4
|
12
|
12
|
-
|
-
|
12
|
-
|
-
|
|
Wealth Solutions
|
1,234
|
1,006
|
23
|
25
|
618
|
495
|
25
|
27
|
616
|
-
|
1
|
|
Investment Products
|
868
|
695
|
25
|
27
|
444
|
343
|
29
|
32
|
424
|
5
|
5
|
|
Bancassurance
|
366
|
311
|
18
|
19
|
174
|
152
|
14
|
15
|
192
|
(9)
|
(9)
|
|
CCPL & Other Unsecured Lending
|
530
|
539
|
(2)
|
1
|
270
|
264
|
2
|
5
|
260
|
4
|
4
|
|
Deposits
|
1,834
|
1,703
|
8
|
8
|
917
|
890
|
3
|
4
|
917
|
-
|
-
|
|
Mortgages & Other
Secured Lending
|
227
|
274
|
(17)
|
(14)
|
124
|
113
|
10
|
13
|
103
|
20
|
23
|
|
Other
|
23
|
11
|
109
|
100
|
14
|
10
|
40
|
40
|
9
|
56
|
75
|
|
Operating expenses
|
(2,156)
|
(2,075)
|
(4)
|
(6)
|
(1,109)
|
(1,042)
|
(6)
|
(8)
|
(1,047)
|
(6)
|
(7)
|
|
Operating profit before impairment losses and
taxation
|
1,716
|
1,481
|
16
|
16
|
846
|
742
|
14
|
15
|
870
|
(3)
|
(3)
|
|
Credit impairment
|
(282)
|
(108)
|
(161)
|
(169)
|
(146)
|
(46)
|
nm⁷
|
nm⁷
|
(136)
|
(7)
|
(7)
|
|
Other impairment
|
(27)
|
-
|
nm⁷
|
nm⁷
|
(22)
|
-
|
nm⁷
|
nm⁷
|
(5)
|
nm⁷
|
nm⁷
|
|
Underlying profit/(loss) before
taxation
|
1,407
|
1,373
|
2
|
3
|
678
|
696
|
(3)
|
(2)
|
729
|
(7)
|
(7)
|
|
Restructuring
|
(51)
|
(16)
|
nm⁷
|
(174)
|
(32)
|
(14)
|
(129)
|
(129)
|
(19)
|
(68)
|
(60)
|
|
Other items3
|
(100)
|
-
|
nm⁷
|
nm⁷
|
-
|
-
|
nm⁷
|
nm⁷
|
(100)
|
100
|
100
|
|
Reported profit/(loss)
before taxation
|
1,256
|
1,357
|
(7)
|
(7)
|
646
|
682
|
(5)
|
(5)
|
610
|
6
|
6
|
|
Total assets
|
122,846
|
129,660
|
(5)
|
(4)
|
122,846
|
129,660
|
(5)
|
(4)
|
124,456
|
(1)
|
(1)
|
|
Of which: loans and advances
to customers4
|
120,277
|
127,039
|
(5)
|
(4)
|
120,277
|
127,039
|
(5)
|
(4)
|
122,089
|
(1)
|
(1)
|
|
Total liabilities
|
208,565
|
190,690
|
9
|
10
|
208,565
|
190,690
|
9
|
10
|
201,870
|
3
|
4
|
|
Of which: customer accounts4
|
204,154
|
185,741
|
10
|
11
|
204,154
|
185,741
|
10
|
11
|
197,121
|
4
|
4
|
|
Risk-weighted assets
|
52,459
|
50,664
|
4
|
nm⁷
|
52,459
|
50,664
|
4
|
nm⁷
|
52,706
|
-
|
nm⁷
|
|
Income return on risk-weighted assets
(%)5
|
14.8
|
14.1
|
70bps
|
nm⁷
|
14.9
|
14.1
|
80bps
|
nm⁷
|
14.7
|
20bps
|
nm⁷
|
|
Underlying return on tangible equity
(%)5
|
27.8
|
28.2
|
(40)bps
|
nm⁷
|
26.8
|
28.3
|
(150)bps
|
nm⁷
|
28.8
|
(200)bps
|
nm⁷
|
|
Cost-to-income ratio (%)6
|
55.7
|
58.4
|
2.7
|
2.2
|
56.7
|
58.4
|
1.7
|
1.4
|
54.6
|
(2.1)
|
(2.3)
|
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 Other items include $100m charge
relating to Korea ELS
4 Loans and advances to customers
and customer accounts includes FVTPL and 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
Page
20
Performance highlights
• Underlying profit
before tax of $1,407 million was up 3 per cent at constant currency
(ccy) mainly driven by higher income partly offset by higher
operating expenses and credit impairment
• Underlying operating
income of $3,872 million was up 10 per cent at ccy, driven by
Wealth Solutions, up 25 per cent from increased investment in
Affluent Relationship Managers, continued momentum in Affluent new
to bank client onboarding and positive net new sales of $13
billion. Deposits income increased 8 per cent from higher volumes
and active passthrough rate management leading to increasing
margins in a rising interest rate environment. This was partly
offset by lower Mortgage income which was down 14 per cent largely
due to lower mortgage volumes particularly in Korea and Hong Kong
and margin compression
• Underlying operating
expenses increased 6 per cent at ccy, mainly from inflation and
investment in business growth initiatives including strategic
hiring of Affluent relationship managers
• Credit impairment
charge of $282 million up $174 million, has broadly normalised
following the release of management overlays in the first half of
the prior year
• Loans and advances to
customers decreased by 2 per cent at ccy since 31 December 2023,
mainly driven by lower Mortgages particularly in Hong Kong and
Korea
• Customer accounts
increased 6 per cent at ccy since 31 December 2023
• Underlying RoTE of
27.8 per cent was down 40 basis points
Ventures
|
|
H1'24
$million
|
H1'23
$million
|
Change2
%
|
Constant currency change1,2
%
|
Q2'24
$million
|
Q2'23
$million
|
Change2
%
|
Constant currency change1,2
%
|
Q1'24
$million
|
Change2
%
|
Constant currency change1,2
%
|
|
Operating income
|
80
|
89
|
(10)
|
(10)
|
48
|
72
|
(33)
|
(32)
|
32
|
50
|
58
|
|
Of which: SCV
|
18
|
54
|
(67)
|
(67)
|
15
|
51
|
(71)
|
(69)
|
3
|
nm⁷
|
nm⁷
|
|
Of which: Digital Banks6
|
62
|
35
|
77
|
77
|
33
|
21
|
57
|
57
|
29
|
14
|
14
|
|
CCPL & Other Unsecured Lending
|
55
|
37
|
49
|
49
|
28
|
22
|
27
|
27
|
27
|
4
|
4
|
|
Deposits
|
(18)
|
(20)
|
10
|
10
|
(9)
|
(10)
|
10
|
10
|
(9)
|
-
|
-
|
|
Treasury
|
3
|
12
|
(75)
|
(67)
|
2
|
7
|
(71)
|
(57)
|
1
|
100
|
nm⁷
|
|
Other
|
40
|
60
|
(33)
|
(35)
|
27
|
53
|
(49)
|
(49)
|
13
|
108
|
125
|
|
Operating expenses
|
(230)
|
(211)
|
(9)
|
(10)
|
(117)
|
(109)
|
(7)
|
(7)
|
(113)
|
(4)
|
(4)
|
|
Operating profit/(loss) before impairment
losses and taxation
|
(150)
|
(122)
|
(23)
|
(24)
|
(69)
|
(37)
|
(86)
|
(84)
|
(81)
|
15
|
17
|
|
Credit impairment
|
(43)
|
(23)
|
(87)
|
(87)
|
(15)
|
(13)
|
(15)
|
(7)
|
(28)
|
46
|
46
|
|
Profit from associates and joint
ventures
|
(6)
|
(13)
|
54
|
54
|
(3)
|
(5)
|
40
|
40
|
(3)
|
-
|
-
|
|
Underlying profit/(loss) before
taxation
|
(199)
|
(158)
|
(26)
|
(27)
|
(87)
|
(55)
|
(58)
|
(54)
|
(112)
|
22
|
24
|
|
Restructuring
|
(1)
|
(1)
|
-
|
-
|
(1)
|
(1)
|
-
|
nm⁷
|
-
|
nm⁷
|
nm⁷
|
|
Reported profit/(loss) before
taxation
|
(200)
|
(159)
|
(26)
|
(27)
|
(88)
|
(56)
|
(57)
|
(55)
|
(112)
|
21
|
23
|
|
Total assets
|
5,280
|
3,076
|
72
|
79
|
5,280
|
3,076
|
72
|
79
|
4,916
|
7
|
11
|
|
Of which: loans and advances to
customers3
|
1,110
|
947
|
17
|
17
|
1,110
|
947
|
17
|
17
|
1,024
|
8
|
8
|
|
Total liabilities
|
4,347
|
2,317
|
88
|
87
|
4,347
|
2,317
|
88
|
87
|
3,967
|
10
|
10
|
|
Of which: customer accounts3
|
4,046
|
2,072
|
95
|
95
|
4,046
|
2,072
|
95
|
95
|
3,694
|
10
|
10
|
|
Risk-weighted assets
|
2,129
|
1,925
|
11
|
nm⁷
|
2,129
|
1,925
|
11
|
nm⁷
|
2,084
|
2
|
nm⁷
|
|
Income return on risk-weighted assets
(%)4
|
8.3
|
13.0
|
(470)bps
|
nm⁷
|
9.1
|
18.9
|
(980)bps
|
nm⁷
|
7.2
|
190bps
|
nm⁷
|
|
Underlying return on tangible
equity (%)4
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
|
Cost-to-income ratio (%)5
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
nm⁷
|
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 repurchase
agreements
4 Change is the basis points (bps)
difference between the two periods rather than the percentage
change
5 Change is the percentage points
difference between the two periods rather than the percentage
change
6 Digital Banks income includes Mox and
Trust bank
7 Not meaningful
Page
21
Performance highlights
• Underlying loss
before tax increased $41 million to $199 million reflecting Group's
continued investment in transformational digital initiatives.
Income declined by 10 per cent to $80 million from $89 million,
from lower gains in SC ventures compared to the prior period gains.
Digital Banks (Mox & Trust) income increased by 77 per
cent
• Operating expenses
increased by 10 per cent due to inflation and investment in
business growth initiatives
• Credit impairment
increased from $23 million to $43 million primarily from charges in
Mox, albeit delinquency rates
have improved
• Loans and advances to
customers of $1.1 billion increased 8 per cent since 31 December
2023 and consumer accounts of $4 billion increased 45 per
cent, with strong growth in the two digital banks, Mox and
Trust
Central & other items
|
|
H1'24
$million
|
H1'23
$million
|
Change2
%
|
Constant currency change1,2
%
|
Q2'24
$million
|
Q2'23
$million
|
Change2
%
|
Constant currency change1,2
%
|
Q1'24
$million
|
Change2
%
|
Constant currency change1,2
%
|
|
Operating income
|
15
|
(517)
|
103
|
104
|
(73)
|
(232)
|
69
|
77
|
88
|
(183)
|
(174)
|
|
Treasury
|
10
|
(405)
|
102
|
103
|
(32)
|
(167)
|
81
|
94
|
42
|
(176)
|
(150)
|
|
Other
|
5
|
(112)
|
104
|
107
|
(41)
|
(65)
|
37
|
27
|
46
|
(189)
|
(185)
|
|
Operating expenses
|
(366)
|
(400)
|
9
|
3
|
(163)
|
(275)
|
41
|
36
|
(203)
|
20
|
16
|
|
Operating loss before impairment losses and
taxation
|
(351)
|
(917)
|
62
|
60
|
(236)
|
(507)
|
53
|
57
|
(115)
|
(105)
|
(67)
|
|
Credit impairment
|
41
|
28
|
46
|
37
|
53
|
(10)
|
nm⁶
|
nm⁶
|
(12)
|
nm⁶
|
nm⁶
|
|
Other impairment
|
(12)
|
(42)
|
71
|
71
|
(10)
|
(42)
|
76
|
76
|
(2)
|
nm⁶
|
nm⁶
|
|
Profit from associates and
joint ventures
|
70
|
107
|
(35)
|
(35)
|
68
|
88
|
(23)
|
(24)
|
2
|
nm⁶
|
nm⁶
|
|
Underlying loss before taxation
|
(252)
|
(824)
|
69
|
68
|
(125)
|
(471)
|
73
|
76
|
(127)
|
2
|
23
|
|
Restructuring
|
(39)
|
-
|
nm⁶
|
nm⁶
|
(14)
|
(11)
|
(27)
|
(29)
|
(25)
|
44
|
22
|
|
Other items
|
(189)
|
-
|
nm⁶
|
nm⁶
|
(177)
|
-
|
nm⁶
|
nm⁶
|
(12)
|
nm⁶
|
nm⁶
|
|
Reported loss before taxation
|
(480)
|
(824)
|
42
|
39
|
(316)
|
(482)
|
34
|
34
|
(164)
|
(93)
|
(71)
|
|
Total assets
|
263,859
|
304,974
|
(13)
|
(13)
|
263,859
|
304,974
|
(13)
|
(13)
|
268,063
|
(2)
|
(1)
|
|
Of which: loans and advances
to customers3
|
24,022
|
33,623
|
(29)
|
(28)
|
24,022
|
33,623
|
(29)
|
(28)
|
25,725
|
(7)
|
(6)
|
|
Total liabilities
|
103,313
|
105,326
|
(2)
|
(2)
|
103,313
|
105,326
|
(2)
|
(2)
|
105,777
|
(2)
|
(2)
|
|
Of which: customer accounts3
|
8,295
|
8,394
|
(1)
|
(1)
|
8,295
|
8,394
|
(1)
|
(1)
|
10,610
|
(22)
|
(22)
|
|
Risk-weighted assets
|
38,205
|
49,270
|
(22)
|
nm⁶
|
38,205
|
49,270
|
(22)
|
nm⁶
|
46,726
|
(18)
|
nm⁶
|
|
Income return on risk-weighted assets
(%)4
|
0.1
|
(2.1)
|
220bps
|
nm⁶
|
(0.7)
|
(1.9)
|
120bps
|
nm⁶
|
0.7
|
(140)bps
|
nm⁶
|
|
Underlying return on tangible
equity (%)4
|
(16.9)
|
(25.6)
|
870bps
|
nm⁶
|
(17.1)
|
(25.4)
|
830bps
|
nm⁶
|
(16.7)
|
(40)bps
|
nm⁶
|
|
Cost-to-income ratio (%) (excluding UK bank
levy)5
|
nm⁶
|
nm⁶
|
nm⁶
|
nm⁶
|
nm⁶
|
nm⁶
|
nm⁶
|
nm⁶
|
nm⁶
|
nm⁶
|
nm⁶
|
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 repurchase
agreements
4 Change is the basis points (bps)
difference between the two periods rather than the percentage
change
5 Change is the percentage points
difference between the two periods rather than the percentage
change
6 Not meaningful
Performance highlights
• Underlying loss
before tax of $252 million was just under third of the prior period
loss from higher income coupled with lower operating expenses and
impairments, being partially offset by Associate income, which
reduced 35 per cent reflecting lower profits at China Bohai
Bank
• Underlying operating
income of $15 million was $532 million better year-on-year.
Treasury income of $10 million increased by $415 million mostly
from translation gains on the revaluation of FX positions in Egypt
and the roll-off of short-term hedges. Other income of $5 million
increased by $117 million, primarily from hyperinflation accounting
adjustments relating to Ghana
• Other items include
$174m related to the loss on the sale of Zimbabwe primarily from
the recycling of FX translation losses from reserves into the
income statement with no impact to on tangible equity or
capital
Page
22
Underlying performance by key geography
|
|
H1'24
|
|
Hong Kong
$million
|
Korea
$million
|
China
$million
|
Taiwan
$million
|
Singapore
$million
|
India
$million
|
UAE
$million
|
UK
$million
|
US
$million
|
Other2
$million
|
Group
$million
|
|
Operating income
|
2,303
|
556
|
664
|
298
|
1,302
|
657
|
447
|
136
|
596
|
2,999
|
9,958
|
|
Operating expenses
|
(992)
|
(348)
|
(441)
|
(167)
|
(627)
|
(440)
|
(217)
|
(480)
|
(346)
|
(1,615)
|
(5,673)
|
|
Operating profit/(loss) before impairment
losses and taxation
|
1,311
|
208
|
223
|
131
|
675
|
217
|
230
|
(344)
|
250
|
1,384
|
4,285
|
|
Credit impairment
|
(93)
|
(19)
|
(87)
|
(19)
|
(20)
|
(7)
|
(1)
|
(5)
|
(1)
|
3
|
(249)
|
|
Other impairment
|
(12)
|
(1)
|
(4)
|
(1)
|
(8)
|
(6)
|
(3)
|
5
|
-
|
(113)
|
(143)
|
|
Profit from associates and
joint ventures
|
-
|
-
|
72
|
-
|
-
|
-
|
-
|
(5)
|
-
|
(3)
|
64
|
|
Underlying profit/(loss) before
taxation
|
1,206
|
188
|
204
|
111
|
647
|
204
|
226
|
(349)
|
249
|
1,271
|
3,957
|
|
Total assets employed
|
202,878
|
51,017
|
45,451
|
21,180
|
105,312
|
36,752
|
27,218
|
155,831
|
75,001
|
114,787
|
835,427
|
|
Of which: loans and advances
to customers1
|
84,272
|
26,970
|
16,798
|
11,002
|
60,791
|
15,479
|
8,934
|
32,609
|
25,405
|
53,447
|
335,707
|
|
Total liabilities employed
|
191,631
|
42,224
|
36,588
|
19,000
|
110,318
|
28,004
|
20,411
|
106,861
|
66,564
|
162,499
|
784,100
|
|
Of which: customer accounts1
|
160,948
|
32,323
|
27,081
|
16,983
|
86,049
|
20,661
|
14,935
|
79,545
|
33,920
|
59,817
|
532,262
|
|
|
H1'23
|
|
Hong Kong
$million
|
Korea
$million
|
China
$million
|
Taiwan
$million
|
Singapore
$million
|
India
$million
|
UAE
$million
|
UK
$million
|
US
$million
|
Other
$million
|
Group
$million
|
|
Operating income
|
2,091
|
582
|
593
|
288
|
1,263
|
627
|
421
|
185
|
452
|
2,449
|
8,951
|
|
Operating expenses
|
(962)
|
(359)
|
(439)
|
(165)
|
(606)
|
(420)
|
(200)
|
(425)
|
(324)
|
(1,604)
|
(5,504)
|
|
Operating profit/(loss) before impairment
losses and taxation
|
1,129
|
223
|
154
|
123
|
657
|
207
|
221
|
(240)
|
128
|
845
|
3,447
|
|
Credit impairment
|
(110)
|
(23)
|
(35)
|
(31)
|
2
|
(3)
|
9
|
(7)
|
8
|
18
|
(172)
|
|
Other impairment
|
-
|
-
|
-
|
-
|
(1)
|
-
|
(1)
|
5
|
(3)
|
(63)
|
(63)
|
|
Profit from associates and
joint ventures
|
-
|
-
|
105
|
-
|
-
|
-
|
-
|
-
|
-
|
(11)
|
94
|
|
Underlying profit/(loss)
before taxation
|
1,019
|
200
|
224
|
92
|
658
|
204
|
229
|
(242)
|
133
|
789
|
3,306
|
|
Total assets employed
|
182,512
|
62,885
|
41,808
|
21,536
|
99,103
|
35,830
|
19,105
|
171,028
|
91,860
|
113,044
|
838,711
|
|
Of which: loans and advances
to customers1
|
85,004
|
37,764
|
14,554
|
10,838
|
64,268
|
14,980
|
7,519
|
34,338
|
19,284
|
47,274
|
335,823
|
|
Total liabilities employed
|
170,945
|
53,204
|
34,064
|
20,448
|
103,381
|
27,937
|
16,742
|
132,756
|
84,648
|
144,905
|
789,030
|
|
Of which: customer accounts1
|
142,766
|
41,075
|
24,127
|
18,656
|
77,591
|
20,788
|
12,856
|
85,767
|
49,749
|
56,416
|
529,791
|
1 Loans and advances to customers and
customer accounts includes FVTPL and repurchase
agreements
2 Other includes notable items of Egypt
revaluation and Ghana hyperinflation
Page
23
Quarterly underlying operating income by
product
|
|
Q2'24
$million
|
Q1'24
$million
|
Q4'23
$million
|
Q3'23
$million
|
Q2'23 $million
|
Q1'23
$million
|
Q4'22
$million
|
Q3'22
$million
|
|
Transaction Services
|
1,605
|
1,615
|
1,659
|
1,667
|
1,620
|
1,572
|
1,416
|
1,221
|
|
Payments and Liquidity
|
1,139
|
1,161
|
1,207
|
1,196
|
1,148
|
1,094
|
962
|
758
|
|
Securities & Prime Services
|
153
|
141
|
140
|
138
|
131
|
141
|
126
|
120
|
|
Trade & Working Capital
|
313
|
313
|
312
|
333
|
341
|
337
|
328
|
343
|
|
Global Banking¹
|
488
|
472
|
400
|
447
|
447
|
411
|
400
|
459
|
|
Lending & Financial Solutions
|
422
|
414
|
358
|
393
|
396
|
353
|
366
|
410
|
|
Capital Market & Advisory
|
66
|
58
|
42
|
54
|
51
|
58
|
34
|
49
|
|
Global Markets¹
|
796
|
1,041
|
534
|
716
|
877
|
922
|
662
|
907
|
|
Macro Trading
|
631
|
884
|
463
|
595
|
776
|
786
|
536
|
725
|
|
Credit Trading
|
165
|
167
|
92
|
122
|
116
|
121
|
123
|
163
|
|
Valuation & Other Adj
|
-
|
(10)
|
(21)
|
(1)
|
(15)
|
15
|
3
|
19
|
|
Wealth Solutions
|
618
|
616
|
412
|
526
|
495
|
511
|
358
|
454
|
|
Investment Products
|
444
|
424
|
298
|
364
|
343
|
352
|
266
|
330
|
|
Bancassurance
|
174
|
192
|
114
|
162
|
152
|
159
|
92
|
124
|
|
CCPL & Other Unsecured Lending
|
298
|
287
|
288
|
297
|
286
|
290
|
294
|
298
|
|
Deposits
|
908
|
908
|
933
|
953
|
881
|
803
|
833
|
640
|
|
Mortgages & Other Secured Lending
|
124
|
103
|
57
|
69
|
113
|
161
|
55
|
191
|
|
Treasury
|
(30)
|
43
|
(235)
|
(274)
|
(160)
|
(233)
|
(173)
|
(5)
|
|
Other
|
(1)
|
67
|
(24)
|
2
|
(4)
|
(41)
|
(80)
|
(27)
|
|
Total underlying operating income
|
4,806
|
5,152
|
4,024
|
4,403
|
4,555
|
4,396
|
3,765
|
4,138
|
1 Banking and Markets products have been
renamed to Global Banking and Global Markets
respectively
Earnings per ordinary share
|
|
H1'24
$million
|
H1'23
$million
|
Change
%
|
Q2'24
$million
|
Q2'23
$million
|
Change
%
|
Q1'24
$million
|
Change
%
|
|
Profit for the period attributable to
equity holders
|
2,369
|
2,385
|
(1)
|
974
|
1,041
|
(6)
|
1,395
|
(30)
|
|
Non-controlling interest
|
9
|
3
|
200
|
1
|
6
|
(83)
|
8
|
(88)
|
|
Dividend payable on preference shares and AT1
classified as equity
|
(209)
|
(243)
|
14
|
(29)
|
(65)
|
55
|
(180)
|
84
|
|
Profit for the period attributable to
ordinary shareholders
|
2,169
|
2,145
|
1
|
946
|
982
|
(4)
|
1,223
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
Items normalised:
|
|
|
|
|
|
|
|
|
|
Restructuring
|
150
|
(56)
|
nm³
|
95
|
(8)
|
nm³
|
55
|
73
|
|
Other items2
|
100
|
-
|
nm³
|
-
|
-
|
nm³
|
100
|
nm³
|
|
DVA
|
26
|
39
|
(33)
|
(22)
|
93
|
nm³
|
48
|
nm³
|
|
Net loss on sale of Businesses
|
189
|
-
|
nm³
|
177
|
-
|
nm³
|
12
|
nm³
|
|
Tax on normalised items
|
(67)
|
-
|
nm³
|
(22)
|
(15)
|
(47)
|
(45)
|
51
|
|
Underlying profit/(loss)
|
2,567
|
2,128
|
21
|
1,174
|
1,052
|
12
|
1,393
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
Basic - Weighted average number of
shares (millions)
|
2,605
|
2,839
|
(8)
|
2,578
|
2,818
|
(9)
|
2,632
|
(2)
|
|
Diluted - Weighted average number of
shares (millions)
|
2,669
|
2,902
|
(8)
|
2,645
|
2,884
|
(8)
|
2,692
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share
(cents)¹
|
83.3
|
75.6
|
7.7
|
36.7
|
34.8
|
1.9
|
46.5
|
(9.8)
|
|
Diluted earnings per ordinary share
(cents)¹
|
81.3
|
73.9
|
7.4
|
35.8
|
34.0
|
1.8
|
45.4
|
(9.6)
|
|
Underlying basic earnings per ordinary
share (cents)¹
|
98.5
|
75.0
|
23.5
|
45.5
|
37.3
|
8.2
|
52.9
|
(7.4)
|
|
Underlying diluted earnings per ordinary share
(cents)¹
|
96.2
|
73.3
|
22.9
|
44.4
|
36.5
|
7.9
|
51.7
|
(7.3)
|
1 Change is the percentage points
difference between the two periods rather than the percentage
change
2 Charge relating to Korea
ELS
3 Not meaningful
Page
24
Return on Tangible Equity
|
|
H1'24
$million
|
H1'23
$million
|
Change
%
|
Q2'24
$million
|
Q2'23
$million
|
Change
%
|
Q1'24
$million
|
Change
%
|
|
Average parent company Shareholders'
Equity
|
44,180
|
43,803
|
1
|
44,171
|
43,964
|
-
|
44,188
|
-
|
|
Less Preference share premium
|
(1,494)
|
(1,494)
|
-
|
(1,494)
|
(1,494)
|
-
|
(1,494)
|
-
|
|
Less Average intangible assets
|
(6,157)
|
(5,887)
|
(5)
|
(6,128)
|
(5,895)
|
4
|
(6,184)
|
1
|
|
Average Ordinary Shareholders'
Tangible Equity
|
36,529
|
36,422
|
-
|
36,549
|
36,575
|
-
|
36,510
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period attributable
to
equity holders
|
2,369
|
2,385
|
(1)
|
974
|
1,041
|
7
|
1,395
|
(30)
|
|
Non-controlling interests
|
9
|
3
|
200
|
1
|
6
|
nm²
|
8
|
(88)
|
|
Dividend payable on preference shares and AT1
classified as equity
|
(209)
|
(243)
|
14
|
(28)
|
(65)
|
(132)
|
(180)
|
84
|
|
Profit/(loss) for the period attributable to
ordinary shareholders
|
2,169
|
2,145
|
1
|
947
|
982
|
4
|
1,223
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
Items normalised:
|
|
|
|
|
|
|
|
|
|
Restructuring
|
150
|
(56)
|
nm²
|
95
|
(8)
|
nm²
|
55
|
73
|
|
Other items1
|
100
|
-
|
nm²
|
-
|
-
|
nm²
|
100
|
nm²
|
|
Net loss on sale of businesses
|
189
|
-
|
nm²
|
177
|
-
|
nm²
|
12
|
nm²
|
|
Ventures FVOCI unrealised gains/(losses)
net of tax
|
(15)
|
43
|
nm²
|
(3)
|
52
|
nm²
|
(13)
|
77
|
|
DVA
|
26
|
39
|
(33)
|
(22)
|
93
|
nm²
|
48
|
nm²
|
|
Tax on normalised items
|
(67)
|
-
|
nm²
|
(22)
|
(15)
|
32
|
(45)
|
51
|
|
Underlying profit for the period attributable
to ordinary shareholders
|
2,552
|
2,171
|
18
|
1,172
|
1,104
|
(6)
|
1,380
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
Underlying Return on Tangible Equity
|
14.0%
|
12.0%
|
200bps
|
12.9%
|
12.1%
|
80bps
|
15.2%
|
(230)bps
|
|
Reported Return on Tangible Equity
|
11.9%
|
11.9%
|
0bps
|
10.4%
|
10.8%
|
(40)bps
|
13.5%
|
(310)bps
|
1 Charge relating to Korea
ELS
2 Not meaningful
Net Tangible Asset Value per Share
|
|
30.06.24
$million
|
30.06.23
$million
|
Change
%
|
31.12.23
$million
|
Change
%
|
31.03.24
$million
|
Change
%
|
|
Parent company shareholders' equity
|
44,413
|
43,803
|
1
|
44,445
|
-
|
43,929
|
1
|
|
Less Preference share premium
|
(1,494)
|
(1,494)
|
-
|
(1,494)
|
-
|
(1,494)
|
-
|
|
Less Intangible assets
|
(6,103)
|
(5,898)
|
(3)
|
(6,214)
|
2
|
(6,153)
|
1
|
|
Net shareholders tangible equity
|
36,816
|
36,411
|
1
|
36,737
|
-
|
36,282
|
1
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares in issue, excluding own shares
(millions)
|
2,550
|
2,797
|
(9)
|
2,637
|
(3)
|
2,610
|
(2)
|
|
Net Tangible Asset Value per share
(cents)1
|
1,444
|
1,302
|
142
|
1,393
|
51
|
1,390
|
54
|
1 Change is cents difference between the
two periods rather than percentage change
Page
25
Underlying versus reported results
reconciliations
Reconciliations between underlying and reported
results are set out in the tables below:
Operating income by client segment
Reconciliation of underlying versus reported
operating income by client segment set out in note 2 Segmental
information.
Net interest income and Non NII
|
|
H1'24
|
H1'23
|
|
Underlying
$million
|
Restructuring
$million
|
Adjustment for Trading book funding cost and
Others
$million
|
Reported
$million
|
Underlying
$million
|
Restructuring
$million
|
Adjustment for Trading book funding cost and
Others
$million
|
Reported
$million
|
|
Net interest income1
|
4,979
|
12
|
(1,816)
|
3,175
|
4,777
|
(7)
|
(786)
|
3,984
|
|
Non NII1
|
4,979
|
(179)
|
1,816
|
6,616
|
4,174
|
183
|
786
|
5,143
|
|
Total income
|
9,958
|
(167)
|
-
|
9,791
|
8,951
|
176
|
-
|
9,127
|
1 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 rather than Underlying NII. There is no impact on total
income
Profit before taxation (PBT)
Reconciliation of underlying versus reported PBT
set out in note 2 Segmental information.
Profit before taxation (PBT) by client
segment
Reconciliation of underlying versus reported PBT
by client segment set out in note 2 Segmental
information.
Return on tangible equity (RoTE)
|
|
H1'24
$million
|
H1'23
$million
|
|
Average parent company Shareholders'
Equity
|
44,180
|
43,803
|
|
Less Preference share premium
|
(1,494)
|
(1,494)
|
|
Less Average intangible assets
|
(6,157)
|
(5,887)
|
|
Average Ordinary Shareholders' Tangible
Equity
|
36,529
|
36,422
|
|
Profit for the period attributable to equity
holders
|
2,369
|
2,385
|
|
Non-controlling interests
|
9
|
3
|
|
Dividend payable on preference shares and AT1
classified as equity
|
(209)
|
(243)
|
|
Profit for the period attributable to ordinary
shareholders
|
2,169
|
2,145
|
|
Items normalised:
|
|
|
|
Restructuring
|
150
|
(56)
|
|
Net loss on sale of businesses
|
189
|
-
|
|
Ventures FVOCI unrealised gains/(losses) net of
tax
|
(15)
|
43
|
|
DVA
|
26
|
39
|
|
Other Items¹
|
100
|
-
|
|
Tax on normalised items
|
(67)
|
-
|
|
Underlying profit for the period attributable
to ordinary shareholders
|
2,552
|
2,171
|
|
Underlying Return on Tangible Equity
|
14.0%
|
12.0%
|
|
Reported Return on Tangible Equity
|
11.9%
|
11.9%
|
1 Charge relating to Korea
ELS
Page
26
Net charge-off ratio
|
|
30.06.24
|
30.06.23
|
|
Credit impairment (charge)/ release for the
year/ period
$million
|
Net average exposure
$million
|
Net
Charge-off Ratio
%
|
Credit impairment (charge)/ release for the
year/ period
$million
|
Net average exposure
$million
|
Net
Charge-off Ratio
%
|
|
Stage 1
|
46
|
312,091
|
(0.01)%
|
34
|
325,639
|
(0.01)%
|
|
Stage 2
|
(129)
|
10,015
|
1.29%
|
(115)
|
11,803
|
0.97%
|
|
Stage 3
|
(173)
|
2,715
|
6.37%
|
(144)
|
3,205
|
4.49%
|
|
Total exposure
|
(256)
|
324,821
|
0.08%
|
(225)
|
340,647
|
0.07%
|
Earnings per ordinary share (EPS)
|
|
H1'24
|
|
Underlying
$ million
|
Restructuring
$ million
|
Net loss
on sale of businesses
$ million
|
Other
Items¹
$ million
|
DVA
$ million
|
Tax on normalised items
$ million
|
Reported
$ million
|
|
Profit for the year attributable to ordinary
shareholders
|
2,567
|
(150)
|
(189)
|
(100)
|
(26)
|
67
|
2,169
|
|
Basic - Weighted average number of shares
(millions)
|
2,605
|
|
|
|
|
|
2,605
|
|
Basic earnings per ordinary share
(cents)
|
98.5
|
|
|
|
|
|
83.3
|
|
|
H1'23
|
|
Underlying
$ million
|
Restructuring
$ million
|
Net gain
on sale of businesses
$ million
|
Other
Items
$ million
|
DVA
$ million
|
Tax on normalised items
$ million
|
Reported
$ million
|
|
Profit for the year attributable to ordinary
shareholders
|
2,128
|
56
|
-
|
-
|
(39)
|
-
|
2,145
|
|
Basic - Weighted average number of shares
(millions)
|
2,839
|
|
|
|
|
|
2,839
|
|
Basic earnings per ordinary share
(cents)
|
75.0
|
|
|
|
|
|
75.6
|
1 Charge relating to Korea ELS
Page
27
Alternative performance measures
An alternative performance measure is a
financial measure of historical or future financial performance,
financial position, or cash flows, other than a financial measure
defined or specified in the applicable financial reporting
framework. The following are key alternative performance measures
used by the Group to assess financial performance and financial
position.
|
Measure
|
Definition
|
|
Advances-to-deposits/customer
advances-to-deposits (ADR) ratio
|
The ratio of total loans and advances to
customers relative to total customer accounts, excluding approved
balances held with central banks, confirmed as repayable at the
point of stress. A low advances-to-deposits ratio demonstrates that
customer accounts exceed customer loans resulting from emphasis
placed on generating a high level of stable funding from
customers.
|
|
Average interest earning balance
|
Daily average of the interest earning assets and
interest bearing liabilities balances excluding the daily average
cash collateral balances in other assets and other liabilities that
are related to the Global Markets trading book.
|
|
Constant currency basis
|
A performance measure on a constant currency
basis is presented such that comparative periods are adjusted for
the current year's functional currency rate. The following balances
are presented on a constant currency basis when described as
such:
• Operating
income
• Operating
expenses
• Profit before
tax
• RWAs or
Risk-weighted assets
|
|
Cost-to-income ratio
|
The proportion of total operating expenses to
total operating income.
|
|
Cover ratio
|
The ratio of impairment provisions for each
stage to the gross loan exposure for each stage.
|
|
Cover ratio after collateral/cover ratio
including collateral
|
The ratio of impairment provisions for stage 3
loans and realisable value of collateral held against these
non-performing loan exposures to the gross loan exposure of stage 3
loans.
|
|
Gross yield
|
Reported interest income divided by average
interest earning assets.
|
|
Income return on risk weighted assets
(IRoRWA)
|
Annualised Income excluding Debit Valuation
Adjustment as a percentage of Average RWA
|
|
Jaws
|
The difference between the rates of change in
revenue and operating expenses. Positive jaws occurs when the
percentage change in revenue is higher than, or less negative than,
the corresponding rate for operating expenses.
|
|
Loan loss rate
|
Credit Impairment Profit & Loss on Loans
& Advances to Banks & Customers over Average Loans and
Advances to Banks and Customers.
|
|
Net charge-off ratio
|
The ratio of net credit impairment charge or
release to average outstanding net loans and advances.
|
|
Net tangible asset value per share
|
Ratio of net tangible assets (total tangible
assets less total liabilities) to the number of ordinary shares
outstanding at the end of a reporting period.
|
|
Net yield
|
Gross yield on average assets less rate paid on
average liabilities.
|
|
NIM or Net interest margin
|
Reported net interest income adjusted for
trading book funding cost, cash collateral and prime services on
interest earning assets, divided by average interest-earning assets
excluding financial assets measured at fair value through profit or
loss.
|
|
Non NII
|
Reported Non NII is a sum of net fees and
commission, net trading income and other operating
income
|
|
RAR per FTE or Risk adjusted revenue per
full-time equivalent
|
Risk adjusted revenue (RAR) is defined as
underlying operating income less underlying impairment revenue per
full-time equivalent over the past 12 months. RAR is then divided
by the 12 month rolling average full-time equivalent (FTE) to
determine RAR per FTE.
|
|
Rate paid
|
Reported interest expense adjusted for interest
expense incurred on amortised cost liabilities used to fund
financial instruments held at fair value through profit or loss,
divided by average interest bearing liabilities.
|
|
RoE or Return on equity
|
The ratio of the current year's profit available
for distribution to ordinary shareholders plus fair value movements
through other comprehensive income relating to the Ventures segment
to the weighted average ordinary shareholders' equity for the
reporting period.
|
|
RoTE or Return on ordinary shareholders'
tangible equity
|
The ratio of the current year's profit available
for distribution to ordinary shareholders to the average tangible
equity, being ordinary shareholders' equity less the average
intangible assets for the reporting period. Where a target RoTE is
stated, this is based on profit and equity expectations for future
periods.
|
|
TSR or Total shareholder return
|
The total return of the Group's equity (share
price growth and dividends) to investors.
|
|
Underlying net interest income
|
Reported net interest income normalised to an
underlying basis adjusted for trading book funding cost and
financial guarantee Fees on interest earning assets.
|
Page
28
|
Underlying/Normalised
|
A performance measure is described as
underlying/normalised if the statutory result has been adjusted for
restructuring and other items representing profits or losses of a
capital nature; DVA; amounts consequent to investment transactions
driven by strategic intent, excluding amounts consequent to
Ventures transactions, as these are considered part of the Group's
ordinary course of business; and 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 performance period-by-period.
Restructuring includes impacts to profit or loss from businesses
that have been disclosed as no longer part of the Group's ongoing
business, redundancy costs, costs of closure or relocation of
business locations, impairments of assets and other costs which are
not related to the Group's ongoing business. Restructuring in this
context is not the same as a restructuring provision as defined in
IAS 37.
A reconciliation between underlying/normalised
and statutory performance is contained in Note 2 to the financial
statements. The following balances and measures are presented on an
underlying basis when described as such:
• Operating
income
• Operating
expense
• Profit before
tax
• Earnings per
share (basic and diluted)
• Cost-to-income
ratio
• Jaws
• RoTE or Return
on tangible equity
|
|
Underlying Non NII
|
Reported Non NII normalised to an underlying
basis adjusted for trading book funding cost and financial
guarantee Fees on interest earning assets. In prior periods
Underlying Non NII was described as underlying other
income
|
|
Underlying RoTE
|
The ratio of the current year's underlying
profit attributable to ordinary shareholders plus fair value on OCI
equity movement relating to Ventures segment to the weighted
average tangible equity, being ordinary shareholders' equity less
the intangible assets for the reporting period.
|
Page
29
Group Chief Risk Officer's review
"Proactively managing our risks whilst keeping
our focus on the Group's strategy"
Managing Risks
The first half of 2024 continues to see a world
in flux presenting several challenges across many of our markets.
The market expectation of interest rate cuts in 2024 has reduced,
as the Federal Reserve cited that inflation levels are still above
target levels, and in several Asian countries interest rates have
increased to respond to challenges accompanied by higher US rates
and weaker local currencies. Inflation has yet to decline
significantly in many countries, and central banks are wary that
maintaining high rates for too long may risk damaging economic
activity. Given the challenging geopolitical and macroeconomic
environment, we continue to monitor sovereign risks across emerging
markets in Asia, Africa and the Middle East.
Political risks in 2024 have increased with over
70 elections taking place, potentially impacting both foreign and
domestic policy. The US presidential election will be particularly
consequential for the balance of power in the international system
and could create uncertainty over the future of US involvement in
multilateral initiatives. For the regions in conflict, the Group
has limited direct exposure across Corporate and Investment Banking
and Wealth and Retail Banking to Ukraine and to the countries in
the Middle East which are most impacted by conflict.
We have been vigilant in managing these risks
through proactive reviews of our exposure and limits across our
portfolios to identify vulnerable industries and clients for closer
monitoring. We also continue to monitor the impact of continued
high interest rates and the effects of inflation across our risks,
and we take proactive steps to further strengthen our risk
management. In China in particular, 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. We remain vigilant on the challenges in
the real estate sector globally and any contagion risks.
Further details on other risks and
uncertainties which we are monitoring can be found in the 'Topical
and Emerging Risks' section.
Corporate and Investment Banking
(CIB)
Our CIB credit portfolio remained resilient with
overall good asset quality, as evidenced by our largely investment
grade corporate portfolio (30 June 2024: 74 per cent; 31 December
2023: 73 per cent). In consideration of the above challenges,
additional stress tests and portfolio reviews have been conducted
in the first half of 2024, including examining the impact
of oil price fluctuations and sustained high interest rate levels.
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.
Wealth and Retail Banking (WRB)
The uncertainties around the prolonged higher
interest rate environment in our major markets remain a key focus,
but the credit portfolios have continued to demonstrate resilience.
Sluggish consumer confidence in China and underperforming
residential property markets in Hong Kong and Korea also present
challenges. For our consumer credit portfolios, we have continued
to monitor customer affordability and have 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 the 2023 market events.
Liquidity remained resilient across the Group and major legal
entities. Group liquidity coverage ratio (LCR) was 148 per cent as
at June 2024 (31 December 2023: 145 per cent) with a surplus to
both Risk Appetite and regulatory requirements. CET1 ratio was
14.6 per cent as at June 2024 (31 December 2023: 14.1 per
cent) whilst the Leverage ratio was 4.8 per cent (31 December 2023:
4.7 per cent). Market conditions have been stable during 2024
across our markets.
Further details on managing Liquidity
and Funding Risk and Interest Rate Risk in the Banking Book can be
found in the respective sections.
Page
30
Risk Performance Summary
Asset quality is resilient. The percentage of
investment-grade corporate net exposure remained high at 74 per
cent (31 December 2023: 73 per cent). In H1 2024, we saw a
$0.5 billion reduction in Early Alerts exposure to $5 billion
(31 December 2023: $5.5 billion), reflecting outflows due to
improved credit outlook and exposure reductions. Credit grade 12
balances reduced by $1.2 billion to $1 billion (31 December 2023:
$2.2 billion), reflecting both improvements into stronger
credit grades and downgrades to stage 3, as well as due to the
maturity of short-term loan exposures being replaced with debt
securities in the Middle East .
Key indicators
|
|
30.06.24
|
31.12.23
|
|
Group total business1
|
280.9
|
292.1
|
|
Stage 1 loans ($ billion)
|
264.2
|
273.7
|
|
Stage 2 loans ($ billion)
|
10.0
|
11.2
|
|
Stage 3 loans, credit-impaired ($
billion)
|
6.6
|
7.2
|
|
Stage 3 cover ratio
|
63%
|
62%
|
|
Stage 3 cover ratio (including
collateral)
|
82%
|
76%
|
|
Corporate & Investment Banking
|
|
|
|
Investment grade corporate exposures as a
percentage of total corporate exposures
|
74%
|
73%
|
|
Early Alert portfolio exposures ($
billion)
|
5
|
5.5
|
|
Credit grade 12 balances ($ billion)
|
1.0
|
2.2
|
|
Aggregate top 20 corporate exposures as a
percentage of Tier 1 capital2
|
58%
|
62%
|
|
Collateralisation of sub-investment grade net
exposures maturing in more than one year
|
40%
|
41%
|
|
Wealth & Retail Banking
|
|
|
|
Loan-to-value ratio of Wealth & Retail
Banking mortgages
|
47.9%
|
47.1%
|
1 These numbers represent total gross
loans and advances to customers
2 Excludes reverse repurchase
agreements
The Group's credit impairment was a net charge
of $240 million (30 June 2023: $161 million), an increase of $79
million. The charge of $240 million was driven by WRB, with stage 1
and 2 charges of $135 million mainly due to the release of COVID-19
overlays and other one-off releases present in 2023 and $147
million in stage 3 from gross charge-offs in credit cards and
personal loans. The Ventures charge of $43 million was driven by
Mox Bank, with releases offsetting the total from CIB and Central
and other items.
Further details can be found in the
Risk Review section.
Credit impairment
|
|
30.06.24
|
30.06.23
|
|
Stage 1 & 2
$million
|
Stage 3
$million
|
Total
$million
|
Stage 1 & 2
$million
|
Stage 3
$million
|
Total
$million
|
|
Ongoing business portfolio
|
|
|
|
|
|
|
|
Corporate & Investment Banking
|
(38)
|
3
|
(35)
|
33
|
36
|
69
|
|
Wealth & Retail Banking
|
135
|
147
|
282
|
15
|
93
|
108
|
|
Ventures
|
7
|
36
|
43
|
12
|
11
|
23
|
|
Central & other items
|
(31)
|
(10)
|
(41)
|
(27)
|
(1)
|
(28)
|
|
Credit impairment charge/(release)
|
73
|
176
|
249
|
33
|
139
|
172
|
|
Restructuring business portfolio
|
|
|
|
|
|
|
|
Others
|
2
|
(11)
|
(9)
|
(2)
|
(9)
|
(11)
|
|
Credit impairment charge/(release)
|
2
|
(11)
|
(9)
|
(2)
|
(9)
|
(11)
|
|
Total credit impairment
charge/(release)
|
75
|
165
|
240
|
31
|
130
|
161
|
Our Risk Management Approach
Standard Chartered PLC Group's Enterprise Risk
Management Framework (ERMF) outlines how we manage risk across the
Group, as well as at branch and subsidiary levels1. 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.
Page
31
Principal Risk Types
Principal Risk Types (PRT) 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 Risk
Appetite Statements for the PRTs.
|
Risk Types
|
Risk Appetite Statements
|
|
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
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 do 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 (ICS)
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.
|
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."
1 The Group's ERMF and system of
internal control applies only to wholly controlled subsidiaries of
the Group, and not to Associates, Joint Ventures or Structured
Entities of the Group.
Topical and Emerging Risks (TERs)
Topical risks refer to themes that may have
emerged but are still evolving rapidly and unpredictably. Emerging
risks refer to unpredictable and uncontrollable outcomes from
certain events which may have the potential to adversely impact our
business.
As part of our ongoing risk identification
process, we have updated the Group's TERs from those disclosed in
the 2023 Annual Report. These remain relevant with nuances in their
evolution noted where pertinent. Below is a summary of the TERs,
and the actions we are taking to mitigate them based on our current
knowledge and assumptions. This reflects the latest internal
assessment by senior management.
The TERs 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 become threats in the future, and thus we are
monitoring them. These include future pandemics and the world's
preparedness for them, and 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
their impact. As certain risks develop and materialise over time,
we will take appropriate steps to mitigate them based on their
materiality to the Group.
Macroeconomic and geopolitical considerations
There is a complex interconnectedness between
risks due to the direct influence of geopolitics on macroeconomics,
as well as the global or concentrated nature of key supply chains
for energy, food, semi-conductors and critical minerals.
The Group is exposed to these risks directly
through investments, infrastructure and staff, and also indirectly
through its clients. Whilst the primary impact is financial, there
may be other ramifications such as reputational, compliance or
operational considerations.
Page
32
Expanding array of global tensions and new geopolitical
order
The international order is undergoing
transformation, with a shift towards a multipolar global system
resulting in more transactional and less predictable interactions
between global powers. This can give rise to new and more fluid
political and economic alliances. This transformation has been
accelerated by conflicts in Ukraine and the Middle East.
Whilst the Group has limited direct exposure to
the countries which are currently in direct conflict, it may be
impacted by second order effects on its clients and markets such as
agricultural commodities, oil and gas. The threat of escalation to
the surrounding regions remains and could reach markets in the
Group's footprint.
The positioning of middle powers is complex and
evolving; and there is a rise in mini-lateral groupings of
countries that
are ideologically aligned. The negotiating power of exporters of
energy and other natural resources has expanded and can shape
global markets. With five countries joining in early 2024, BRICS
now encompasses almost half of the world's population and produces
nearly half of global crude oil supplies, giving it significant
leverage, especially as other supply routes remain
strained.
Relations between the West, led by the US and
EU, and China are in a state of flux, with a declining trend likely
to prevail as we head towards the US election. Tariffs, embargos,
sanctions, and restrictions on technology exports and investments
are expected to continue to be ratcheted up in pursuit of both
economic and security goals.
With elections scheduled worldwide in the second
half of 2024, there is uncertainty over the direction of domestic
and foreign policies in many of the affected countries. There is a
significant risk of short-term political expediency taking
precedence over long-term strategic decision-making. So far
elections have ranged from maintaining status quo in India and
Taiwan, to notable shifts in leadership in the UK and France. With
the US election coming in November, there is uncertainty over the
direction of US domestic as well as foreign policy towards some
markets.
The malicious use of artificial intelligence
(AI) enabled disinformation could also cause disruption and
undermine trust in the political process. This, combined with
already fractured societies and persistent inequality, may lead to
heightened societal tensions, with a high risk of unrest regardless
of election outcomes. This will be particularly in focus in
relation to the US presidential election.
Terrorism and cyber warfare are ongoing threats,
with unpredictability exacerbated by the wider range of ideologies
at play. Cyber attacks can disrupt infrastructure and institutions
in rival countries.
West Africa, the Sahel and the Democratic
Republic of the Congo face growing concerns due to conflict,
population displacement and potential disruption to mineral
resource acquisition.
A more complex and less integrated global
political and economic landscape could challenge cross-border
business models but also provide new business
opportunities.
Persistent high interest rates and credit
downturn
Although rate cuts have been signalled in most
major markets, global rates could stay higher than expected for
longer due to structurally higher spending, continued supply
disruptions and other inflationary pressures.
A higher-for-longer interest rate environment
will continue to stretch companies and sovereigns alike, with
global corporate defaults in Q1 2024 at the highest rate since the
global financial crisis.
Despite this, markets have remained surprisingly
resilient to adverse geopolitical conditions and inflation
forecasts in recent months. The conflict in the Middle East has had
a limited immediate impact on commodity prices and the wider global
economy, however, this could change should the conflict spread.
Whilst credit spreads remain below those observed at the outbreak
of the Russia-Ukraine conflict, volatility and abrupt changes in
sentiment remain a risk.
Concern for the credit outlook spans both
commercial and retail lending, with price inflation and the cliff
effects of energy, mortgage and debt repricing ultimately leading
to higher defaults. This has crystallised most notably in the
global commercial real estate sector as well as unsecured lending,
and may extend to mortgages if high rates persist. Existing stress
in commercial real estate has spread beyond China to North America
and Europe. This could result in higher loss rates for the lenders
as well as further exacerbate the risk of global societal
unrest.
Page
33
Economic challenges in China
China's growth rate looks unlikely to return to
pre-pandemic levels. The International Monetary Fund (IMF)
forecasts a decline in China's growth to 5 per cent in 2024 from
5.2 per cent in 2023, with a further drop to 4.5 per cent in 2025.
Most recently, Fitch revised China's outlook to 'negative' from
'stable' in April 2024, indicating reduced clarity on the economic
outlook.
Competition with the US and the EU is intense,
particularly around modern technologies. Areas such as electric
vehicles and AI are key battlegrounds. China's industrial
overcapacity leads to an increased search for export markets;
electric vehicles and steel are prime examples. This is stoking
trade-related frictions and provoking economic countermeasures such
as the May 2024 tariffs announced by the US, and by the EU in June,
although these are not yet implemented.
China is urging some partners to increase the
use of the renminbi (RMB) in trade. In March 2024 RMB's share of
global payments was 4.7 per cent, over double that of a year
earlier, showing potential signs of a slow structural
shift.
Given China's importance to global trade, a
prolonged slowdown would have wider implications across the supply
chain, especially for its trading partners, as well as for
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 deteriorating
across both emerging and advanced economies due to persistently
high interest rates, food and energy prices. In addition, increased
spending on areas such as defence is expected to further stretch
budgets.
After sharp declines in 2021-2022, global public
debt edged up again in 2023 and remained above pre-pandemic levels
by 9 percentage points of GDP. Whilst markets have remained
opened for all categories of sovereign issuers, the refinancing
cost has been rising, and interest payments are an increasing
burden on both emerging and developed markets. Emerging markets
could become affected by weakness in local currencies versus the US
dollar, making refinancing existing debt or accessing hard currency
liquidity more challenging.
Some countries face a heightened risk of failing
to manage social demands, increasing political vulnerability and
possibly social unrest. Food and security challenges exacerbated by
armed conflict and climate change have the potential to drive
social unrest. Disorderly outcomes of fractious elections could
also have implications for sovereign ratings as markets become more
volatile.
Debt moratoria and refinancing initiatives for
some emerging markets are complicated by a 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.
Supply chain issues and key material
shortages
Whilst the initial disruption caused by the
Russia-Ukraine conflict has somewhat abated, recent volatility in
the Red Sea has highlighted the vulnerability of global supply
lines.
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 EU probe into unfair commercial practices in
the provision of renewable energy equipment, particularly subsidies
related to offshore wind and solar energy, may add to strain on
associated supply chains, and add to inflationary
pressures.
The growing need for minerals and rare earth
elements to power green energy technologies can be leveraged to
achieve economic or political aims by restricting access. This can
bolster the negotiating influence of the main refiners and
producers, such as China, Indonesia and some African nations,
whilst prompting some nations to slow down their green transition
plans.
Page
34
How these risks are mitigated
• We remain vigilant in
monitoring risk and assessing impacts from geopolitical and
macroeconomic risks to portfolio concentrations.
• We maintain a
diversified portfolio across products and geographies, with
specific Risk Appetite metrics to monitor
concentrations.
• Mitigations in our
WRB segment include building a resilient revenue base and
maintaining close relations with clients for the awareness of early
alerts.
• Increased scrutiny is
applied when onboarding clients in sensitive industries and in
ensuring compliance with sanctions.
• We utilise Credit
Risk mitigation measures including collateral and credit
insurance.
• We conduct portfolio
reviews as well as macroeconomic, thematic and event-driven stress
tests at Group, country, and business level, with regular reviews
of vulnerable sectors, and undertake mitigating actions.
• We have a dedicated
Country Risk team that closely monitors Sovereign Risk.
• We run a series of
daily Market Risk stress scenarios to assess the impact of unlikely
but plausible market shocks.
• We run a suite of
management scenarios with differing severities to assess their
impact on key Risk Appetite metrics.
Environmental, Social and Governance (ESG)
considerations
ESG risks
Higher frequencies of extreme weather events are
observed each year and the cost of managing the climate impacts is
increasing, with the burden disproportionately borne by developing
markets, where we have a large footprint. Alongside climate, other
environmental risks pose incremental challenges to food, health
systems and energy security, for example, biodiversity loss,
pollution, and depletion of water.
Modern slavery and human rights concerns are
increasingly in focus, with the scope expanding beyond direct
operations to extended supply chain and vendors.
ESG regulation continues to develop across the
world, often with differing taxonomies and disclosure requirements.
This increased regulation is also generating stakeholder scrutiny
on greenwashing risk, with ESG litigation being brought against
corporations and governments in multiple markets.
A succession of political, social and economic
disruptions in recent years have diverted attention and resources
away from longer-term action on climate and sustainable development
as competing spending demands are made of stretched budgets. For
companies and governments, the anticipated trade-off between
pragmatism and environmentalism has started to crystalise, with
several delaying or rolling back targets. A slower transition to
low-carbon business models may impact progress towards the Group's
Net Zero targets and product roadmap.
How these risks are mitigated
• Climate Risk
considerations are embedded across all relevant Principal Risk
Types. This includes client-level Climate Risk assessments,
including setting adequate mitigants or controls as part of
decision-making and portfolio management activities.
• We embed our values
through our Position Statements for sensitive sectors and a list of
prohibited activities. We also maintain environmental and social
risk management standards to identify, assess and manage these
risks when providing financial services to clients.
• The management of
greenwashing risks has been integrated into our Reputational and
Sustainability Risk Framework, Sustainability Risk policy and
Sustainable Finance greenwashing standard.
• Detailed portfolio
reviews and stress tests are conducted to test resilience to
climate-related physical and transition risks and enhance modelling
capabilities to understand the financial risks and opportunities
from climate change. A scenario focusing on ESG litigation has been
introduced in our internal capital adequacy assessment.
• We assess our
relevant corporate clients and suppliers against various
international human rights principles, as well as through our
social safeguards.
Page
35
New business structures, channels and
competition
Speed and breadth of technological
developments
Traditional banking faces challenges in its
external competitive environment from a range of fintechs. At the
same time, banks themselves have an opportunity to defend or
leverage their competitive advantage by harnessing new
technologies, partnerships or new asset classes.
Conventional loan and deposit businesses could
be challenged by digital enterprise business models, which
integrate financial services with emerging technologies like AI,
big data analytics and cloud computing fostering financial
disintermediation.
In the longer term, increased adoption of stable
coins and digital currencies could similarly create alternative
deposit channels and bank disintermediation.
The rapid adoption of new technologies,
partnership models or digital assets by banks brings a range of
inherent risks, requiring clear operating models and risk
frameworks. It is essential to upskill our people to develop
in-house expertise
and capabilities to manage associated risks, including model risks
or managing external third parties which deliver these
technologies. We must ensure that the people, process and
technology agendas are viewed holistically to ensure the most
effective and efficient implementation of new
infrastructure.
Cyber security and data
The Group's digital footprint is expanding. This
increases inherent Cyber Risk as more services and products are
digitised, outsourced and made more accessible. Highly
interconnected and extended enterprises drive efficiencies but can
expand the opportunities available for malicious actors to gain
entry or access to corporate assets. This includes infrastructure
such as cloud services.
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. Increasing cross-border
tensions further drive the arms race to develop new attack types
and commoditise new tools.
How these risks are mitigated
• We monitor emerging
technology trends, business models and opportunities relevant to
the banking sector.
• We invest in our
capabilities to prepare for and protect against disruption and new
risks.
• We have established
enhanced governance for novel areas through the Digital Asset Risk
Committee and Responsible AI Council, which considers emerging
regulatory guidance.
• The Group has
developed the Responsible AI Standard to govern innovative and safe
use of the technology in adherence with responsible AI
principles.
• We manage data risks
through our Compliance Risk Type Framework and information security
risks through our ICS Risk Type Framework. We maintain a dedicated
Group Data Conduct Policy with globally applicable standards. These
standards undergo regular review to ensure alignment with changing
regulations and industry best practice.
• We maintain
programmes to enhance our data risk management capabilities and
controls, including compliance with the Basel Committee on Banking
Supervision 239 requirements on effective risk data aggregation,
with progress tracked at executive level risk governance
committees.
• Risks embedded in key
software programmes are continuously reassessed together with
enhancements made in testing stages of new systems before they go
live.
• 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.
• Work is already
underway to gauge the potential benefits and threats of nascent
technologies such as quantum computing.
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Regulatory considerations
Regulatory evolution and fragmentation
The regulatory framework for banks is expanding,
becoming more complex and remains subject to continual evolution.
Aside from changes in prudential, financial markets, climate and
data regulations, we anticipate a rise in consultations and
regulations relating to the use of AI, and particularly around its
ethical application in decision-making.
Jurisdictional risk arises from internationally
diverging regulations, with differing pace and scale of regulatory
adoption, conflicting rules, extraterritorial and localisation
requirements around data, staff, capital and revenues. Data
sovereignty and ESG regulation are prime examples of jurisdictional
risk.
This makes it challenging for multinational
groups to manage cross-border activities, as well as adding
complexity and cost. Such fragmented regulatory changes can also
create frictions in the market as a whole.
How these risks are mitigated
• We actively monitor
regulatory developments, including those related to sustainable
finance, ESG, digital assets and AI, and respond to consultations
either bilaterally or through well-established industry
bodies.
• We track evolving
country-specific requirements, and actively collaborate with
regulators to support important initiatives.
• We help shape
regulation, particularly in new areas like AI and Central Bank
Digital Currencies through thought leadership, and actively
engaging with policymakers and central banks.
Demographic considerations
Skills of the future
Evolving client expectations and the rapid
development of technologies such as AI are transforming the
workplace,
and further accelerating changes to how people deliver outcomes,
connect and collaborate. The skills needed to grow businesses and
sustain careers are being changed as a result, with a balance of
both technical and human skills becoming increasingly
critical.
Employee priorities also continue to evolve.
'What' work people do and 'how' they get to deliver it have become
differentiators in attracting future-focused talent. Workers have a
greater desire to do work aligned to individual purpose, and have
increasing expectations from employers to invest in skills and
careers. 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 needed
to pursue our strategy.
To sustainably attract, grow and retain the
relevant skills and talent, we must continue to invest in building
future-focused skills as well as further strengthen our Employee
Value Proposition (EVP) and brand promise.
Demographic trends
Divergent demographic trends across developed
and emerging markets create contrasting challenges. Developed
markets' state budgets will be increasingly strained by ageing and
shrinking populations in time, 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.
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How these risks are mitigated
• We are helping
colleagues to upskill and reskill, both through classroom sessions
and our online learning platform.
• We have an internal
Talent Marketplace which enables colleagues to sign up for projects
to access diverse experiences and career opportunities.
• We place emphasis on
skills and aspiration to identify the talent to accelerate, as well
as deploy it in areas with the
highest impact for our clients and the business. We are piloting a
differentiated learning proposition for this talent with the
highest potential.
• We emphasise frequent
two-way feedback through performance and development conversations
to embed a culture of continuous learning and
development.
• Our culture and EVP
work is addressing the emerging expectations of our diverse talent
base, particularly around being purpose-led.
• We provide support
and resources to all colleagues to help balance productivity,
collaboration and wellbeing, with more than 70 per cent of our
workforce having signed up to work flexibly.
Sadia Ricke
Group Chief Risk Officer
30 July 2024
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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
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
For further information, please
contact:
Manus Costello, Global Head of
Investor Relations
+44 (0) 20 7885 0017
LSE Stock code: STAN.LN
HKSE Stock code: 02888
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