Annual Financial Report (part 1 of 2)

Reported profit before tax and balance sheet data for the year ended (continued)
	WPB	CMB	GBM	Corporate Centre	Total
At 31 Dec 2022	£m	£m	£m	£m	£m
Net operating income/(expense) before change in expected credit losses and other credit impairment charges	4,331	3,507	151	(37)	7,952
- external	4,156	3,306	394	96	7,952
- inter-segment	175	201	(243)	(133)	-
- of which: net interest income	3,664	2,531	(1)	9	6,203
Change in expected credit losses and other credit impairment charges	(287)	(195)	-	-	(482)
Net operating income/(expense)	4,044	3,312	151	(37)	7,470
Total operating expenses	(2,309)	(1,170)	(34)	(319)	(3,832)
Operating profit/(loss)	1,735	2,142	117	(356)	3,638
Profit/(loss) before tax	1,735	2,142	117	(356)	3,638
	%	%	%	%	%
Cost efficiency ratio	53.3	33.4	22.5	(862.2)	48.2
Balance sheet information	£m	£m	£m	£m	£m
Loans and advances to customers (net)	138,927	65,408	-	(192)	204,143
Customer accounts	181,785	99,622	-	(312)	281,095

Risk		Description
Externally driven
Geopolitical and macroeconomic risk	p	Our operations and portfolios are subject to risks associated with political instability, civil unrest and military conflict. This could lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets. Geopolitical tensions remain high. The impacts from elevated inflation, high interest rates and geopolitical events, such as the ongoing Russia-Ukraine and Israel-Hamas wars, may affect our customers and our business.
Credit risk	u	We remain focused on assessing and managing the impacts of the cost-of-living crisis and high interest rates on our customers, with our early warning indicators helping us to identify segments that we believe may be at risk due to the macroeconomic situation. This includes our mortgage customers who may be impacted by increased monthly payments and across our lending portfolio, those with reduced affordability due to other cost of living increases. We are ensuring that we have adequate capacity within our Financial Support Team and are contacting customers potentially at risk. We remain focused on managing credit facilities appropriately, and adjusting policy and strategy as needed, including regular refreshes of our affordability models. Industry sector analysis is regularly conducted with particular focus on the Commercial Real Estate (Offices), Construction and Contracting, Hospitality, Hotels, and Retail industry sectors, as well as parts of Agriculture and Manufacturing. We have continued to undertake in-depth monitoring activities with stress tests and other reviews performed to identify portfolios or customers who are likely to experience financial difficulty.
Evolving regulatory environment risk	p	The regulatory risk environment is increasingly complex. There remains ongoing focus by regulators to improve outcomes for banks' consumers, particularly vulnerable ones, as well as the orderly and transparent operation of financial markets. These, alongside other regulatory priorities, are resulting in change requirements across HSBC UK in the short to medium term. We continue to monitor regulatory and wider industry developments closely, engaging with regulators as appropriate.
Financial crime and fraud risk	u	We are exposed to financial crime risk from our customers, staff and third-parties engaging in criminal activity. The financial crime risk environment continues to evolve, due to increasingly complex geopolitical challenges, the macroeconomy, evolving sanctions regulations, technological developments and national data privacy requirements. Fraud, which is becoming ever-more sophisticated, continues to be an area of focus for HSBC UK. Regulatory scrutiny has increased around scams and the impacts from recent changes to the PSR's reimbursement requirements. As a result, we will continue to face the possibility of regulatory enforcement and reputational risk.
Cyber threat and unauthorised access to systems	u	HSBC UK faces a risk of service disruption or loss of data resulting from technology failures or malicious activities by internal or external threats. We continue to monitor ongoing geopolitical events and changes to the threat landscape. HSBC UK operates a continuous improvement programme to help protect our technology operations and to counter a fast-evolving cyber threat environment.
Environmental, social and governance risk	p	We are subject to ESG risks including in relation to climate change, nature and human rights. This risk continues to increase owing to the pace and volume of regulatory developments and stakeholders placing more emphasis on financial institutions' actions and investment decisions in respect of ESG matters. Failure to meet these evolving expectations may result in financial and non-financial risks for HSBC UK, including reputational, legal and regulatory compliance risks.
Digital currencies and disintermediation risk	u	Focus remains on digital currencies from governments, regulatory bodies and central banks. There has been increased debate on CBDC with the BoE and HMT consultation on the subject in the UK and more design studies and pilots taking place in locations such as Hong Kong, India, the eurozone and Japan. The cryptocurrency and stablecoin ecosystem has seen exceedingly volatile prices with some risk of contagion spreading beyond these markets. There is still no suggestion that cryptocurrencies or stablecoins have moved from being a speculative asset to being a replacement for existing fiat currencies. We continue to monitor the evolution of digital assets and decentralised finance across channels including consultations, pilots and issuances to assess the implications for our products and services and our customers.
Internally driven
People risk	q	HSBC UK is exposed to risks associated with employee retention, talent availability and compliance with employment laws and regulations. Whilst overall HSBC UK attrition has continued to ease, we remain vigilant in light of external market factors including the cost of living crisis and an active labour market, that might impact our ability to retain and attract talent. HSBC UK is embedding hybrid working, with further opportunities to continuously enhance our employee proposition.

Internally driven (continued)
IT systems infrastructure and service resilience	u	Whilst our IT estate is complex, strengthening operational resilience remains a strategic imperative. Modernising and simplifying our technology architecture is key to strengthening the resiliency of our environment and remains a core focus, with investment planned in 2024 to modernise and uplift resiliency standards. We are committed to delivering better customer outcomes by reducing disruptions for our customers so they can access services when they need them. To achieve this, we are reducing reliance on non-strategic platforms so we reduce complexity for colleagues and customers and support swifter, safer change deployment. We are also increasing usage of cloud infrastructure so we can benefit from resiliency and support scalability when customer demands rise. An increasing usage of iterative releases with reduced lead time to deploy code will help support easier testing and delivery of new products and features to meet customer needs quicker.
Model risk	u	Model risk arises whenever business decision making includes reliance on models. We use models in both financial and non-financial contexts, as well as in a range of business applications. The model landscape continues to be impacted by regulatory requirements driving material changes to the way model risk is managed across the banking industry in the UK. The PRA's Supervisory Statement (SS 1/23) 'Model Risk Management Principles for Banks' issued in May 2023 requires increased oversight and controls on the management of model risks. The rapidly changing technology environment including generative AI and large language models utilising AI are also impacting the need for enhanced model risk controls.
Conduct and customer detriment	u	The dedicated programme to embed our updated purpose-led conduct approach (PLCA) has concluded. Closely linked to our conduct agenda, the first phase of the Consumer Duty was delivered in July 2023 and is helping to ensure good outcomes for our customers across all retail products and services. Focus has now moved to the second phase of the Consumer Duty Programme which is due to be implemented by July 2024 and primarily concerns delivering good customer outcomes within our closed book of products.
Data risk	u	HSBC UK uses data to serve our customers and run our operations, often in real-time within digital experiences and processes. Data risk remains a key area of focus for HSBC UK and is receiving significant management attention as we continue to enhance our control environment. If our data is not accurate and timely, our ability to serve customers, operate with resilience or meet regulatory requirements could be impacted. We seek to ensure that non-public data is kept confidential, and that we comply with the growing number of regulations that govern data privacy and cross-border movement of data.
Third-party risk	p	HSBC UK procures goods and services from a range of third party providers. Due to the current economic and geopolitical climate, the risk of service disruption in our supply chain has heightened. Any deficiency in the management of risks associated with our third parties could affect our ability to support our customers and meet regulatory expectations. We continue to strengthen our controls, oversight and risk management policies and processes to select and manage third parties, including our third parties' own supply chains, particularly for key activities that could affect our operational resilience.
Execution risk	u	Failure to effectively prioritise, manage and/or deliver transformation across the organisation impacts our ability to achieve our strategic objectives. Given the increased scale, complexity and pace of change at HSBC UK, we continue to monitor, manage and oversee change execution risk to ensure our change portfolio and initiatives continue to deliver the right outcomes for our customers, people, investors and communities.

Description of risks - banking operations
Credit risk (see page 24)
The risk of financial loss if a customer or counterparty fails to meet an obligation under a contract.	Credit risk arises principally from direct lending, trade finance and leasing business, but also from certain other products such as guarantees and derivatives.	Credit risk is: - measured as the amount that could be lost if a customer or counterparty fails to make repayments; - monitored using various internal risk management measures and within limits approved by individuals within a framework of delegated authorities; and - managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance for risk managers.
Treasury risk (see page 52)
The risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, including the risk of adverse impact on earnings or capital due to structural foreign exchange exposures and changes in market interest rates, and including the financial risks arising from historic and current provision of pensions and other post-employment benefits to staff and their dependants.	Treasury risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment.	Treasury risk is: - measured through appetites set as target and ratios; - monitored and projected through appetites and using stress and scenario testing; and - managed through control resources in conjunction with risk profiles and cashflows.
Market risk (see page 59)
The risk that movements in market factors, including but not limited to interest rates, credit spreads and foreign exchange rates, will reduce our income or the value of our portfolios.	Exposure to market risk is separated into two portfolios: - trading portfolios; and - non-trading portfolios.	Market risk is: - measured using sensitivities, value at risk and stress testing, giving a detailed picture of potential gains and losses for a range of market movements and scenarios, as well as tail risks over specified time horizons; - monitored using VaR sensitivities, stress testing and other measures, including the sensitivity of net interest income and the sensitivity of structural foreign exchange; and - managed using risk limits approved by the Risk Management Meeting.

Climate risk (see page 59)
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a net zero economy.	Climate risk can materialise through: - physical risk, which arises from the increased frequency and severity of weather events; - transition risk, which arises from the process of moving to a low-carbon economy; - the risk of greenwashing, which arises from the act of knowingly or unknowingly making inaccurate, unclear, misleading, or unsubstantiated claims regarding sustainability to stakeholders; and - net zero alignment risk may arise, impacting HSBC UK, where HSBC Group fails to meet its net zero commitments or to meet external expectations related to net zero, because of inadequate ambition and/or plans, poor execution, or inability to adapt to changes in external environment.	Climate risk is: - measured using risk appetite metrics and scenario testing; - monitored using risk appetite statements; and - managed through adherence to risk appetite thresholds and through specific policies, enhancements to processes and the development of risk management tools.
Resilience risk (see page 60)
Resilience risk is the risk that we are unable to provide critical services to our customers, affiliates, and counterparties as a result of sustained and significant operational disruption.	Resilience risk arises from failures or inadequacies in processes, people, systems or external events. These may be driven by rapid technological innovation, changing behaviours of our consumers, cyber threats and attacks, cross border dependencies, and third party relationships.	Resilience risk is: - measured through a range of metrics with defined maximum acceptable impact tolerances and against our agreed risk appetite; - monitored through oversight of enterprise processes, risks, controls and strategic change programmes; and - managed by continuous monitoring and thematic review.
Regulatory compliance risk (see page 60)
Regulatory compliance risk is the risk associated with breaching our duty to clients and other counterparties, inappropriate market conduct and breaching related financial services regulatory standards.	Regulatory compliance risk arises from the failure to observe the letter and spirit of relevant laws, codes, rules, regulations and standards of good practice. This could result in poor market or customer outcomes leading to fines, penalties and reputational damage to our business.	Regulatory compliance risk is: - measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement and assessment of our regulatory compliance teams; - monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and - managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Financial crime risk (see page 61)
Financial crime risk is the risk of knowingly or unknowingly helping parties to commit or to further potentially illegal activity through HSBC UK, including money laundering, fraud, bribery and corruption, tax evasion, sanctions breaches, and terrorist and proliferation financing.	Financial crime risk arises from day-to-day banking operations involving customers, third parties and employees.	Financial crime risk is: - measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement of, and assessment by, our compliance teams; - monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and - managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Model risk (see page 62)
Model risk is the potential for adverse consequences from business decisions informed by models, which can be exacerbated by errors in methodology, design or the way they are used.	Model risk arises in both financial and non-financial contexts whenever business decision making includes reliance on models.	Model risk is: - measured by reference to model performance tracking and the output of detailed technical reviews, with key metrics including model review statuses and findings; - monitored against model risk appetite statements, insight from the independent review function, feedback from internal and external audits, and regulatory reviews; and - managed by creating and communicating appropriate policies, procedures and guidance, training employees in their application, and supervising their adoption to ensure operational effectiveness.

Companies

HSBC UK BANK PLC (RT90)

UK 100

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	Strategic report
2	About us
4	Financial highlights
5	Key financial metrics
5	Business performance and KPIs
6	Our purpose and values
6	Our core strengths
6	Our strategy
10	Stakeholder engagement
12	Economic background and outlook
12	Financial summary
15	Risk overview
16	Risk environment
	Report of the Directors
19	Risk review
135	Corporate Governance Report
143	Directors' Report Disclosures table
144	Statement of Directors' Responsibilities in respect of the financial statements
	Financial statements
145	Independent auditors' report to the member of HSBC UK Bank plc
76	Financial statements
85	Notes on the financial statements
	Other information
126	Reconciliation of alternative performance measures
127	Abbreviations

	Year ended
	31 Dec 2023	31 Dec 2022
Reported results
Revenue (£m)¹	10,807	7,952
Profit before tax (£m)²	6,679	3,638
Profit after tax (£m)	5,254	2,876
Profit attributable to the shareholders of the parent company (£m)	5,249	2,871
Net interest margin (%)	2.43	1.89
Cost efficiency ratio (%)²	34.3	48.2
Alternative performance measures
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers (annualised) (%)	0.20	0.24
Return on average ordinary shareholder's equity⁶ (%)	22.8	13.0
Return on average tangible equity^2,6,7 (%)	28.4	16.3

	At
	31 Dec 2023	31 Dec 2022
Balance sheet
Total assets (£m)	332,876	342,441
Net loans and advances to customers (£m)	211,887	204,143
Customer accounts (£m)	268,345	281,095
Average interest-earning assets (£m)	320,354	327,840
Loans and advances to customers as % of customer accounts (%)	79.0	72.6
Total shareholders' equity (£m)	26,010	22,166
Tangible ordinary shareholders equity (£m)	19,463	15,699
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)^2,3	14.0	13.5
Total capital ratio (%)³	19.5	19.3
Risk-weighted assets³ (£m)	101,478	92,413
Leverage ratio³ (%)	6.1	5.9
High-quality liquid assets (liquidity value) (£m)⁴	94,765	110,722
Liquidity coverage ratio (%)⁵	201	226

Summary consolidated income statement for the year ended
	Year ended
	Audited
	31 Dec 2023	31 Dec 2022
	£m	£m
Net interest income	7,787	6,203
Net fee income	1,284	1,245
Net income from financial instruments held for trading or managed on a fair value basis	414	384
Gain on acquisition of subsidiary¹	1,307	-
Other operating income	15	120
Net operating income before change in expected credit losses and other credit impairment charges	10,807	7,952
Change in expected credit losses and other credit impairment charges	(421)	(482)
Net operating income	10,386	7,470
Total operating expenses	(3,707)	(3,832)
Operating profit	6,679	3,638
Profit before tax	6,679	3,638
Tax expense	(1,425)	(762)
Profit for the year	5,254	2,876
Profit attributable to shareholders of the parent company	5,249	2,871
Profit attributable to non-controlling interests	5	5

Net interest income
	Year ended
	At
	31 Dec 2023	31 Dec 2022
	£m	£m
Interest income	12,915	7,592
Interest expense	(5,128)	(1,389)
Net interest income	7,787	6,203
Average interest-earning assets (AIEA)	320,354	327,840
	%	%
Gross interest yield¹	4.03	2.32
Less: Gross interest payable¹	(2.06)	(0.55)
Net interest spread²	1.97	1.77
Net interest margin³	2.43	1.89

Reported profit before tax and balance sheet data for the year ended
At 31 Dec 2023	WPB	CMB	GBM	Corporate Centre	Total
At 31 Dec 2023	£m	£m	£m	£m	£m
Net operating income/(expense) before change in expected credit losses and other credit impairment charges	4,620	6,109	154	(76)	10,807
- external	3,784	6,250	396	377	10,807
- inter-segment	836	(141)	(242)	(453)	-
- of which: net interest income	3,996	3,883	(2)	(90)	7,787
- of which: provisional gain on the acquisition of SVB UK	-	1,307	-	-	1,307
Change in expected credit losses and other credit impairment charges	(18)	(403)	-	-	(421)
Net operating income/(expense)	4,602	5,706	154	(76)	10,386
Total operating income/(expenses)	(2,383)	(1,434)	(38)	148	(3,707)
Operating profit	2,219	4,272	116	72	6,679
Profit before tax	2,219	4,272	116	72	6,679
	%	%	%	%	%
Cost efficiency ratio	51.6	23.5	24.7	194.7	34.3
Balance sheet information	£m	£m	£m	£m	£m
Loans and advances to customers (net)	143,588	68,651	-	(352)	211,887
Customer accounts	170,684	98,093	-	(432)	268,345

Summary consolidated balance sheet as at
	31 Dec	31 Dec
	2023	2022
	£m	£m
Total assets	332,876	342,441
- cash and balances at central banks	65,719	94,407
- financial assets mandatory measured at fair value through profit and loss	135	108
- derivatives	178	546
- loans and advances to banks	7,980	6,357
- loans and advances to customers	211,887	204,143
- reverse repurchase agreements - non-trading	7,686	7,406
- financial investments	26,315	16,092
- other assets	12,976	13,382
Total liabilities	306,806	320,215
- deposits by banks	10,843	10,721
- customer accounts	268,345	281,095
- repurchase agreements - non-trading	4,652	9,333
- derivatives	108	304
- debt securities in issue	1,988	1,299
- other liabilities	20,870	17,463
Total equity	26,070	22,226
- total shareholders' equity¹	26,010	22,166
- non-controlling interests	60	60

●	New risk introduced in 2023
p	Risk has heightened during 2023
u	Risk remains at the same level as 2022
q	Risk has decreased during 2023

19	How we manage our risks
20	Risk management
21	What are our principal risks and uncertainties
21	Top and emerging risks
21	Externally driven
25	Internally driven
26	Our material banking risks
28	Credit risk
113	Treasury risk
128	Market risk
129	Climate risk
131	Resilience risk
131	Regulatory compliance risk
133	Financial crime risk
135	Model risk

Description of risks - banking operations
Risks	Arising from	Measurement, monitoring and management of risk
Credit risk (see page 24)
The risk of financial loss if a customer or counterparty fails to meet an obligation under a contract.	Credit risk arises principally from direct lending, trade finance and leasing business, but also from certain other products such as guarantees and derivatives.	Credit risk is: - measured as the amount that could be lost if a customer or counterparty fails to make repayments; - monitored using various internal risk management measures and within limits approved by individuals within a framework of delegated authorities; and - managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance for risk managers.
Treasury risk (see page 52)
The risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, including the risk of adverse impact on earnings or capital due to structural foreign exchange exposures and changes in market interest rates, and including the financial risks arising from historic and current provision of pensions and other post-employment benefits to staff and their dependants.	Treasury risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment.	Treasury risk is: - measured through appetites set as target and ratios; - monitored and projected through appetites and using stress and scenario testing; and - managed through control resources in conjunction with risk profiles and cashflows.
Market risk (see page 59)
The risk that movements in market factors, including but not limited to interest rates, credit spreads and foreign exchange rates, will reduce our income or the value of our portfolios.	Exposure to market risk is separated into two portfolios: - trading portfolios; and - non-trading portfolios.	Market risk is: - measured using sensitivities, value at risk and stress testing, giving a detailed picture of potential gains and losses for a range of market movements and scenarios, as well as tail risks over specified time horizons; - monitored using VaR sensitivities, stress testing and other measures, including the sensitivity of net interest income and the sensitivity of structural foreign exchange; and - managed using risk limits approved by the Risk Management Meeting.

Climate risk (see page 59)
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a net zero economy.	Climate risk can materialise through: - physical risk, which arises from the increased frequency and severity of weather events; - transition risk, which arises from the process of moving to a low-carbon economy; - the risk of greenwashing, which arises from the act of knowingly or unknowingly making inaccurate, unclear, misleading, or unsubstantiated claims regarding sustainability to stakeholders; and - net zero alignment risk may arise, impacting HSBC UK, where HSBC Group fails to meet its net zero commitments or to meet external expectations related to net zero, because of inadequate ambition and/or plans, poor execution, or inability to adapt to changes in external environment.	Climate risk is: - measured using risk appetite metrics and scenario testing; - monitored using risk appetite statements; and - managed through adherence to risk appetite thresholds and through specific policies, enhancements to processes and the development of risk management tools.
Resilience risk (see page 60)
Resilience risk is the risk that we are unable to provide critical services to our customers, affiliates, and counterparties as a result of sustained and significant operational disruption.	Resilience risk arises from failures or inadequacies in processes, people, systems or external events. These may be driven by rapid technological innovation, changing behaviours of our consumers, cyber threats and attacks, cross border dependencies, and third party relationships.	Resilience risk is: - measured through a range of metrics with defined maximum acceptable impact tolerances and against our agreed risk appetite; - monitored through oversight of enterprise processes, risks, controls and strategic change programmes; and - managed by continuous monitoring and thematic review.
Regulatory compliance risk (see page 60)
Regulatory compliance risk is the risk associated with breaching our duty to clients and other counterparties, inappropriate market conduct and breaching related financial services regulatory standards.	Regulatory compliance risk arises from the failure to observe the letter and spirit of relevant laws, codes, rules, regulations and standards of good practice. This could result in poor market or customer outcomes leading to fines, penalties and reputational damage to our business.	Regulatory compliance risk is: - measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement and assessment of our regulatory compliance teams; - monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and - managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Financial crime risk (see page 61)
Financial crime risk is the risk of knowingly or unknowingly helping parties to commit or to further potentially illegal activity through HSBC UK, including money laundering, fraud, bribery and corruption, tax evasion, sanctions breaches, and terrorist and proliferation financing.	Financial crime risk arises from day-to-day banking operations involving customers, third parties and employees.	Financial crime risk is: - measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement of, and assessment by, our compliance teams; - monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and - managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Model risk (see page 62)
Model risk is the potential for adverse consequences from business decisions informed by models, which can be exacerbated by errors in methodology, design or the way they are used.	Model risk arises in both financial and non-financial contexts whenever business decision making includes reliance on models.	Model risk is: - measured by reference to model performance tracking and the output of detailed technical reviews, with key metrics including model review statuses and findings; - monitored against model risk appetite statements, insight from the independent review function, feedback from internal and external audits, and regulatory reviews; and - managed by creating and communicating appropriate policies, procedures and guidance, training employees in their application, and supervising their adoption to ensure operational effectiveness.

Credit quality classification
	Debt securities and other bills	Wholesale lending		Retail lending
	External credit rating	Internal credit rating	12-month Basel probability of default %	Internal credit rating	12-month probability- weighted PD %
Quality classification^1,2
Strong	A- and above	CRR1 to CRR2	0.000-0.169	Band 1 and 2	0.000-0.500
Good	BBB+ to BBB-	CRR3	0.170-0.740	Band 3	0.501-1.500
Satisfactory	BB+ to B and unrated	CRR4 to CRR5	0.741-4.914	Band 4 and 5	1.501-20.000
Sub-standard	B- to C	CRR6 to CRR8	4.915-99.999	Band 6	20.001-99.999
Credit-impaired	Default	CRR9 to CRR10	100.000	Band 7	100.000

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
(Audited)
The group	At 31 Dec 2023		At 31 Dec 2022
	Gross carrying/nominal amount	Allowance for ECL¹	Gross carrying/nominal amount	Allowance for ECL¹
	£m	£m	£m	£m
Loans and advances to customers at amortised cost	213,591	(1,704)	206,055	(1,912)
- personal	143,315	(703)	138,626	(872)
- corporate and commercial	62,927	(949)	64,955	(1,035)
- non-bank financial institutions	7,349	(52)	2,474	(5)
Loans and advances to banks at amortised cost	7,982	(2)	6,359	(2)
Other financial assets measured at amortised cost	87,253	(10)	109,137	(5)
- cash and balances at central banks	65,719	-	94,407	-
- items in the course of collection from other banks	284	-	353	-
- reverse repurchase agreements - non-trading	7,686	-	7,406	-
- financial investments	11,820	(1)	5,160	-
- prepayments, accrued income and other assets²	1,744	(9)	1,811	(5)
Total gross carrying amount on-balance sheet	308,826	(1,716)	321,551	(1,919)
Loans and other credit related commitments	70,381	(99)	67,628	(91)
- personal	41,180	(10)	42,059	(9)
- corporate and commercial	25,694	(87)	24,669	(82)
- non-bank financial institutions	3,507	(2)	900	-
Financial guarantees	1,121	(2)	1,148	(6)
- personal	312	-	342	-
- corporate and commercial	526	(2)	518	(6)
- non-bank financial institutions	283	-	288	-
Total nominal amount off-balance sheet³	71,502	(101)	68,776	(97)
	380,328	(1,817)	390,327	(2,016)

	Fair value	Memorandum allowance for ECL⁴	Fair value	Memorandum allowance for ECL⁴
	£m	£m	£m	£m
Debt instruments measured at 'FVOCI'	14,495	(1)	10,932	(1)

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2023
(Audited)
	Gross carrying/nominal amount¹					Allowance for ECL					ECL coverage %
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	%	%	%	%	%
Loans and advances to customers at amortised cost	167,396	42,286	3,909	-	213,591	(286)	(755)	(663)	-	(1,704)	0.2	1.8	17.0	-	0.8
- personal	114,765	27,595	955	-	143,315	(119)	(384)	(200)	-	(703)	0.1	1.4	20.9	-	0.5
- corporate and commercial	46,197	13,854	2,876	-	62,927	(156)	(365)	(428)	-	(949)	0.3	2.6	14.9	-	1.5
- non-bank financial institutions	6,434	837	78	-	7,349	(11)	(6)	(35)	-	(52)	0.2	0.7	44.9	-	0.7
Loans and advances to banks at amortised cost	7,980	-	2	-	7,982	-	-	(2)	-	(2)	-	-	100.0	-	-
Other financial assets measured at amortised cost	87,073	154	26	-	87,253	(7)	-	(3)	-	(10)	-	-	11.5	-	-
Loan and other credit-related commitments	65,257	4,794	330	-	70,381	(31)	(25)	(43)	-	(99)	-	0.5	13.0	-	0.1
- personal	40,543	568	69	-	41,180	(8)	-	(2)	-	(10)	-	-	2.9	-	-
- corporate and commercial	21,845	3,608	241	-	25,694	(22)	(24)	(41)	-	(87)	0.1	0.7	17.0	-	0.3
- financial	2,869	618	20	-	3,507	(1)	(1)	-	-	(2)	-	0.2	-	-	0.1
Financial guarantee and similar contracts	810	300	11	-	1,121	-	-	(2)	-	(2)	-	-	18.2	-	0.2
- personal	304	8	-	-	312	-	-	-	-	-	-	-	-	-	-
- corporate and commercial	409	106	11	-	526	-	-	(2)	-	(2)	-	-	18.2	-	0.4
- financial	97	186	-	-	283	-	-	-	-	-	-	-	-	-	-
31 Dec 2023	328,516	47,534	4,278	-	380,328	(324)	(780)	(713)	-	(1,817)	0.1	1.6	16.7	-	0.5

Stage 2 days past due analysis at 31 December 2023
(Audited)
	Gross carrying amount				Allowance for ECL				ECL coverage %
	Stage 2	of which:	of which:	of which:	Stage 2	of which:	of which:	of which:	Stage 2	of which:	of which:	of which:
	Stage 2	Up-to- date	1 to 29 DPD¹	30 and > DPD¹	Stage 2	Up-to- date	1 to 29 DPD¹	30 and > DPD¹	Stage 2	Up-to- date	1 to 29 DPD¹	30 and > DPD¹
	£m	£m	£m	£m	£m	£m	£m	£m	%	%	%	%
Loans and advances to customers at amortised cost:	42,286	41,584	465	237	(755)	(685)	(42)	(28)	1.8	1.6	9.0	11.8
- personal	27,595	27,299	190	106	(384)	(328)	(32)	(24)	1.4	1.2	16.8	22.6
- corporate and commercial	13,854	13,546	206	102	(365)	(351)	(10)	(4)	2.6	2.6	4.9	3.9
- non-bank financial institutions	837	739	69	29	(6)	(6)	-	-	0.7	0.8	-	-
Loans and advances to banks at amortised cost	-	-	-	-	-	-	-	-	-	-	-	-
Other financial assets measured at amortised cost	154	152	1	1	-	-	-	-	-	-	-	-


Loans and advances to customers and banks¹
	At 31 Dec 2023
	Loans and advances to customers						Loans and advances to banks at amortised cost	Total stage 2
	Personal	of which:			Corporate and commercial	Non-bank financial institutions
	Personal	first lien mortgage	credit cards	other personal lending	Corporate and commercial	Non-bank financial institutions
	£m	£m	£m	£m	£m	£m	£m	£m
Quantitative	22,512	21,422	494	596	10,731	795	-	34,038
Qualitative	5,081	3,923	625	533	3,024	13	-	8,118
of which: forbearance	49	7	24	18	381	-	-	430
30 DPD backstop	2	1	-	1	99	29	-	130
Total gross carrying amount	27,595	25,346	1,119	1,130	13,854	837	-	42,286

Quantitative	(284)	(57)	(126)	(101)	(293)	(6)	-	(583)
Qualitative	(100)	(25)	(41)	(34)	(69)	-	-	(169)
of which: forbearance	(1)	-	(1)	-	(5)	-	-	(6)
30 DPD backstop	-	-	-	-	(3)	-	-	(3)
Total allowance for ECL	(384)	(82)	(167)	(135)	(365)	(6)	-	(755)

ECL coverage %	1.4	0.3	14.9	11.9	2.6	0.7	-	1.8

Maximum exposure to credit risk
(Audited)	31 Dec 2023			31 Dec 2022
	Maximum exposure	Offset	Net	Maximum exposure	Offset	Net
The group	£m	£m	£m	£m	£m	£m
Loans and advances to customers held at amortised cost	211,887	(2,922)	208,965	204,143	(2,786)	201,357
- personal	142,612	-	142,612	137,754	-	137,754
- corporate and commercial	61,978	(2,886)	59,092	63,920	(2,752)	61,168
- non-bank financial institutions	7,297	(36)	7,261	2,469	(34)	2,435
Loans and advances to banks at amortised cost	7,980	-	7,980	6,357	-	6,357
Other financial assets held at amortised cost	87,369	-	87,369	109,256	-	109,256
- cash and balances at central banks	65,719	-	65,719	94,407	-	94,407
- items in the course of collection from other banks	284	-	284	353	-	353
- reverse repurchase agreements - non-trading	7,686	-	7,686	7,406	-	7,406
- financial investments	11,819	-	11,819	5,160	-	5,160
- other assets	1,861	-	1,861	1,930	-	1,930
Derivatives	178	(165)	13	546	(522)	24
Total on-balance sheet exposure to credit risk	307,414	(3,087)	304,327	320,302	(3,308)	316,994
Total off-balance sheet	76,522	-	76,522	74,057	-	74,057
- financial guarantees and similar contracts	3,429	-	3,429	3,665	-	3,665
- loan and other credit-related commitments	73,093	-	73,093	70,392	-	70,392

Central scenario
	Average 2024-2028¹	Average 2023-2027¹
	UK%	UK%
GDP growth rate (annual average growth rate, %)	1.3	1.1
Unemployment rate (%)	4.4	4.3
Inflation rate (annual average growth rate, %)	2.4	3.1
House price index (annual average growth rate, %)	0.8	0.4
Central bank policy rate (annual average, %)	4.1	3.8

Consensus Upside scenario best outcome
	2024 Q1- 2028 Q4	2023 Q1- 2027 Q4
GDP growth rate (%, start-to-peak)¹	10.8 (4Q28)	14.6 (4Q27)
Unemployment rate (%, min)²	3.1 (4Q24)	3.5 (4Q23)
House price index (%, start-to-peak)¹	13.0 (4Q28)	7.8 (4Q27)
Inflation rate (YoY % change, Min)³	1.3 (2Q25)	0.7 (1Q24)
Central bank policy rate (%, min)²	3.7 (3Q28)	3.1 (3Q27)

Consensus Downside scenario worst outcome
	2024 Q1- 2028 Q4	2023 Q1- 2027 Q4
GDP growth rate (%, start-to-trough)¹	(1.0) (2Q25)	(3.0) (1Q25)
Unemployment rate (%, max)²	6.4 (1Q25)	5.8 (2Q24)
House price index (%, start-to-trough)¹	(12.0) (2Q25)	(15.0) (4Q24)
Inflation rate (YoY % change, max)³	4.1 (1Q24)	10.8 (1Q23)
Central bank policy rate (%, max)²	5.7 (1Q24)	5.1 (3Q23)

Downside 2 scenario worst outcome
	2024 Q1- 2028 Q4	2023 Q1- 2027 Q4
GDP growth rate (%, start-to-trough)¹	(8.8) (2Q25)	(7.5) (2Q24)
Unemployment rate (%, max)²	8.4 (2Q25)	8.7 (2Q24)
House price index (%, start-to-trough)¹	(30.2) (4Q25)	(32.9) (1Q25)
Inflation rate (YoY % change, max)³	10.1 (2Q24)	13.5 (2Q23)
Central bank policy rate (%, max)²	6.0 (1Q24)	5.6 (4Q23)

Scenario weights %
	4Q23	4Q22
Upside	10.0	5.0
Central	75.0	60.0
Downside	10.0	25.0
Downside 2	5.0	10.0

Management judgemental adjustments to ECL at 31 December 2023¹
	Retail	Wholesale²	Total
	£m	£m	£m
Modelled ECL (A)³	523	488	1,011
Corporate lending adjustments	-	44	44
Inflation related adjustments	30	-	30
Other credit judgements	200	50	250
Total management judgemental adjustments (B)⁴	230	94	324
Other adjustments (C)⁵	(28)	-	(28)
Final ECL (A + B + C)⁶	725	582	1,307

IFRS 9 ECL sensitivity to future economic conditions^1,2,3
	2023	2022
	£m	£m
ECL of financial instruments subject to significant measurement uncertainty at 31 Dec¹
Reported ECL	582	559
Consensus scenarios
Central scenario	542	458
Upside scenario	436	354
Downside scenario	736	606
Downside 2 scenario	1,692	1,604

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees¹
(Audited)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/nominal amount	Allow-ance for ECL	Gross carrying/ nominal amount	Allow-ance for ECL	Gross carrying/ nominal amount	Allow-ance for ECL	Gross carrying/ nominal amount	Allow-ance for ECL	Gross carrying/ nominal amount	Allow-ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	223,956	(277)	51,572	(978)	4,784	(755)	23	(1)	280,335	(2,011)
Transfers of financial instruments:	(6,383)	(364)	4,508	493	1,875	(129)	-	-	-	-
- transfers from Stage 1 to Stage 2	(48,798)	158	48,798	(158)	-	-	-	-	-	-
- transfers from Stage 2 to Stage 1	42,905	(521)	(42,905)	521	-	-	-	-	-	-
- transfers to Stage 3	(697)	8	(1,891)	174	2,588	(182)	-	-	-	-
- transfers from Stage 3	207	(9)	506	(44)	(713)	53	-	-	-	-
Net remeasurement of ECL arising from transfer of stage	-	334	-	(223)	-	(4)	-	-	-	107
Net new and further lending/repayments	22,994	(96)	(8,718)	174	(1,745)	138	(23)	-	12,508	216
Changes to risk parameters - credit quality	-	88	-	(254)	-	(623)	-	1	-	(788)
Changes to model used for ECL calculation	-	(2)	-	8	-	1	-	-	-	7
Assets written off	-	-	-	-	(662)	662	-	-	(662)	662
Others	64	-	-	-	-	-	-	-	64	-
At 31 Dec 2023	240,631	(317)	47,362	(780)	4,252	(710)	-	-	292,245	(1,807)
ECL income statement change for the period		324		(295)		(488)		1		(458)
Recoveries										63
Others										(5)
Total ECL income statement change for the period										(400)

Distribution of financial instruments by credit quality
(Audited)
	Gross carrying/notional amount						Allowance for ECL	Net
	Strong	Good	Satisfactory	Sub-standard	Credit impaired	Total	Allowance for ECL	Net
	£m	£m	£m	£m	£m	£m	£m	£m
In-scope for IFRS 9
Loans and advances to customers held at amortised cost	123,866	43,385	35,581	6,850	3,909	213,591	(1,704)	211,887
- personal	115,161	19,668	7,190	341	955	143,315	(703)	142,612
- corporate and commercial	7,426	20,465	25,845	6,315	2,876	62,927	(949)	61,978
- non-bank financial institutions	1,279	3,252	2,546	194	78	7,349	(52)	7,297
Loans and advances to banks held at amortised cost	7,980	-	-	-	2	7,982	(2)	7,980
Cash and balances at central banks	65,719	-	-	-	-	65,719	-	65,719
Items in the course of collection from other banks	284	-	-	-	-	284	-	284
Reverse repurchase agreements - non-trading	7,686	-	-	-	-	7,686	-	7,686
Financial investments	11,820	-	-	-	-	11,820	(1)	11,819
Other assets	1,214	216	282	6	26	1,744	(9)	1,735
- endorsements and acceptances	3	25	9	-	2	39	(6)	33
- accrued income and other	1,211	191	273	6	24	1,705	(3)	1,702
Debt instruments measured at FVOCI¹	15,020	-	-	-	-	15,020	(1)	15,019
Out-of-scope for IFRS 9 ECL
Derivatives	157	12	5	1	1	176	-	176
Total gross carrying amount on balance sheet	233,746	43,613	35,868	6,857	3,938	324,022	(1,717)	322,305
Percentage of total credit quality	72.1	13.5	11.1	2.1	1.2	100.0	-	-
Loan and other credit related commitments	43,062	14,181	11,906	902	330	70,381	(99)	70,282
Financial guarantees	600	224	215	71	11	1,121	(2)	1,119
In-scope: Irrecoverable loan commitments and financial guarantees	43,662	14,405	12,121	973	341	71,502	(101)	71,401
Loan and other credit related commitments	490	914	1,091	268	48	2,811	-	2,811
Performance and other guarantees	367	645	1,163	114	41	2,330	(20)	2,310
Out-of-scope: Revocable loan commitments and Non-financial guarantees	857	1,559	2,254	382	89	5,141	(20)	5,121
Total nominal amount off balance sheet	44,519	15,964	14,375	1,355	430	76,643	(121)	76,522
At 31 Dec 2023	278,265	59,577	50,243	8,212	4,368	400,665	(1,838)	398,827

In-scope for IFRS 9
Loans and advances to customers held at amortised cost	129,503	32,452	34,283	5,273	4,544	206,055	(1,912)	204,143
- personal	120,776	8,640	7,397	973	840	138,626	(872)	137,754
- corporate and commercial	7,696	23,612	25,679	4,272	3,696	64,955	(1,035)	63,920
- non-bank financial institutions	1,031	200	1,207	28	8	2,474	(5)	2,469
Loans and advances to banks held at amortised cost	6,355	-	-	-	4	6,359	(2)	6,357
Cash and balances at central banks	94,407	-	-	-	-	94,407	-	94,407
Items in the course of collection from other banks	353	-	-	-	-	353	-	353
Reverse repurchase agreements - non-trading	7,406	-	-	-	-	7,406	-	7,406
Financial investments	5,160	-	-	-	-	5,160	-	5,160
Other assets	1,457	126	201	3	24	1,811	(5)	1,806
- endorsements and acceptances	-	32	15	3	1	51	(2)	49
- accrued income and other	1,457	94	186	-	23	1,760	(3)	1,757
Debt instruments measured at FVOCI¹	12,384	-	-	-	-	12,384	(1)	12,383
Out-of-scope for IFRS 9
Derivatives	508	29	7	1	1	546	-	546
Total gross carrying amount on balance sheet	257,533	32,607	34,491	5,277	4,573	334,481	(1,920)	332,561
Percentage of total credit quality	77.0	9.7	10.3	1.6	1.4	100.0	-	-
Loan and other credit related commitments	42,289	14,141	10,407	550	241	67,628	(91)	67,537
Financial guarantees	642	186	264	38	18	1,148	(6)	1,142
In-scope: Irrecoverable loan commitments and financial guarantees	42,931	14,327	10,671	588	259	68,776	(97)	68,679
Loan and other credit related commitments	740	1,072	923	100	20	2,855	-	2,855
Performance and other guarantees	385	889	1,137	87	32	2,530	(7)	2,523
Out-of-scope: Revocable loan commitments and Non-financial guarantees	1,125	1,961	2,060	187	52	5,385	(7)	5,378
Total nominal amount off balance sheet	44,056	16,288	12,731	775	311	74,161	(104)	74,057
At 31 Dec 2022	301,589	48,895	47,222	6,052	4,884	408,642	(2,024)	406,618

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
(Audited)
	Gross carrying/notional amount						Allowance for ECL	Net
	Strong	Good	Satisfactory	Sub- standard	Credit impaired	Total	Allowance for ECL	Net
	£m	£m	£m	£m	£m	£m	£m	£m
Loans and advances to customers at amortised cost	123,866	43,385	35,581	6,850	3,909	213,591	(1,704)	211,887
- Stage 1	112,334	28,852	24,162	2,048	-	167,396	(286)	167,110
- Stage 2	11,532	14,533	11,419	4,802	-	42,286	(755)	41,531
- Stage 3	-	-	-	-	3,909	3,909	(663)	3,246
- POCI	-	-	-	-	-	-	-	-
Loans and advances to banks at amortised cost	7,980	-	-	-	2	7,982	(2)	7,980
- Stage 1	7,980	-	-	-	-	7,980	-	7,980
- Stage 2	-	-	-	-	-	-	-	-
- Stage 3	-	-	-	-	2	2	(2)	-
- POCI	-	-	-	-	-	-	-	-
Other financial assets measured at amortised cost	86,723	216	282	6	26	87,253	(10)	87,243
- Stage 1	86,695	170	203	5	-	87,073	(7)	87,066
- Stage 2	28	46	79	1	-	154	-	154
- Stage 3	-	-	-	-	26	26	(3)	23
- POCI	-	-	-	-	-	-	-	-
Loan and other credit-related commitments	43,062	14,181	11,906	902	330	70,381	(99)	70,282
- Stage 1	42,606	12,838	9,492	321	-	65,257	(31)	65,226
- Stage 2	456	1,343	2,414	581	-	4,794	(25)	4,769
- Stage 3	-	-	-	-	330	330	(43)	287
- POCI	-	-	-	-	-	-	-	-
Financial guarantees	600	224	215	71	11	1,121	(2)	1,119
- Stage 1	448	206	153	3	-	810	-	810
- Stage 2	152	18	62	68	-	300	-	300
- Stage 3	-	-	-	-	11	11	(2)	9
- POCI	-	-	-	-	-	-	-	-
At 31 Dec 2023	262,231	58,006	47,984	7,829	4,278	380,328	(1,817)	378,511
Debt instruments at FVOCI¹	15,020	-	-	-	-	15,020	(1)	15,019
- Stage 1	15,020	-	-	-	-	15,020	(1)	15,019
- Stage 2	-	-	-	-	-	-	-	-
- Stage 3	-	-	-	-	-	-	-	-
- POCI	-	-	-	-	-	-	-	-
At 31 Dec 2023	15,020	-	-	-	-	15,020	(1)	15,019

Forborne loans and advances to customers at amortised costs by stage allocation
	Performing - Forborne	Non-Performing -Forborne		Total Forborne
	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m
Gross carrying amount
Personal	149	408	-	557
- first lien residential mortgages	24	258	-	282
- credit cards	64	41	-	105
- other personal lending which is unsecured	61	109	-	170
Wholesale	1,010	1,110	-	2,120
- corporate and commercial	1,010	1,099	-	2,109
- non-bank financial institutions	-	11	-	11
At 31 Dec 2023	1,159	1,518	-	2,677
Allowance for ECL
Personal	(19)	(101)	-	(120)
- first lien residential mortgages	-	(34)	-	(34)
- credit cards	(9)	(22)	-	(31)
- other personal lending which is unsecured	(10)	(45)	-	(55)
Wholesale	(40)	(125)	-	(165)
- corporate and commercial	(40)	(125)	-	(165)
At 31 Dec 2023	(59)	(226)	-	(285)

Total wholesale lending for loans and advances to banks and customers by stage distribution
	Gross carrying amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Corporate and commercial	46,197	13,854	2,876	-	62,927	(156)	(365)	(428)	-	(949)
- agriculture, forestry and fishing	2,895	1,159	190	-	4,244	(7)	(37)	(24)	-	(68)
- mining and quarrying	508	153	2	-	663	(1)	(4)	-	-	(5)
- manufacturing	4,732	2,472	426	-	7,630	(13)	(62)	(95)	-	(170)
- electricity, gas, steam and air-conditioning supply	727	17	2	-	746	(2)	(1)	(1)	-	(4)
- water supply, sewerage, waste management and remediation	836	145	9	-	990	(2)	(4)	(4)	-	(10)
- real estate and construction	10,055	2,759	564	-	13,378	(27)	(52)	(87)	-	(166)
- wholesale and retail trade, repair of motor vehicles and motorcycles	7,444	2,057	546	-	10,047	(21)	(42)	(84)	-	(147)
- transportation and storage	1,682	364	61	-	2,107	(4)	(9)	(4)	-	(17)
- accommodation and food	3,763	1,943	342	-	6,048	(15)	(37)	(33)	-	(85)
- publishing, audiovisual and broadcasting	2,313	641	110	-	3,064	(25)	(37)	(11)	-	(73)
- professional, scientific and technical activities	3,461	542	169	-	4,172	(13)	(28)	(34)	-	(75)
- administrative and support services	4,339	751	132	-	5,222	(12)	(24)	(13)	-	(49)
- education	522	131	33	-	686	(2)	(5)	(3)	-	(10)
- health and care	1,262	492	106	-	1,860	(5)	(14)	(10)	-	(29)
- arts, entertainment and recreation	874	63	53	-	990	(3)	(3)	(16)	-	(22)
- other services	773	165	131	-	1,069	(4)	(6)	(9)	-	(19)
- activities of households	1	-	-	-	1	-	-	-	-	-
- government	10	-	-	-	10	-	-	-	-	-
Non-bank financial institutions	6,434	837	78	-	7,349	(11)	(6)	(35)	-	(52)
Loans and advances to banks	7,980	-	2	-	7,982	-	-	(2)	-	(2)
At 31 Dec 2023	60,611	14,691	2,956	-	78,258	(167)	(371)	(465)	-	(1,003)

Total wholesale credit-related commitments and financial guarantees by stage distribution
	Nominal amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Corporate and commercial	22,254	3,714	252	-	26,220	(22)	(24)	(43)	-	(89)
Financial	2,966	804	20	-	3,790	(1)	(1)	-	-	(2)
At 31 Dec 2023	25,220	4,518	272	-	30,010	(23)	(25)	(43)	-	(91)

Wholesale lending - reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees¹
(Audited)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/nominal amount	Allow-ance for ECL	Gross carrying/ nominal amount	Allow-ance for ECL	Gross carrying/ nominal amount	Allow-ance for ECL	Gross carrying/ nominal amount	Allow-ance for ECL	Gross carrying/ nominal amount	Allow-ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	75,262	(156)	20,166	(407)	3,857	(566)	23	(1)	99,308	(1,130)
Transfers of financial instruments	(5,492)	(187)	4,042	233	1,450	(46)	-	-	-	-
- transfers from stage 1 to stage 2	(19,937)	71	19,937	(71)	-	-	-	-	-	-
- transfers from stage 2 to stage 1	14,881	(260)	(14,881)	260	-	-	-	-	-	-
- transfers to stage 3	(598)	7	(1,434)	65	2,032	(72)	-	-	-	-
- transfers from stage 3	162	(5)	420	(21)	(582)	26	-	-	-	-
Net remeasurement of ECL arising from transfer of stage	-	146	-	(135)	-	(2)	-	-	-	9
Net new and further lending/repayments	15,185	(62)	(5,017)	72	(1,657)	128	(23)	-	8,488	138
Change to risk parameters - credit quality	-	69	-	(159)	-	(444)	-	1	-	(533)
Changes to models used for ECL calculation	-	-	-	-	-	-	-	-	-	-
Assets written off	-	-	-	-	(422)	422	-	-	(422)	422
Other	64	-	-	-	-	-	-	-	64	-
At 31 Dec 2023	85,019	(190)	19,191	(396)	3,228	(508)	-	-	107,438	(1,094)
ECL income statement change for the period		153		(222)		(318)		1		(386)
Recoveries										4
Others										(5)
Total ECL income statement change for the period										(387)

At 1 Jan 2022	73,650	(218)	18,378	(364)	3,156	(568)	20	(5)	95,204	(1,155)
Transfers of financial instruments	(6,143)	(113)	4,472	155	1,671	(42)	-	-	-	-
- transfers from stage 1 to stage 2	(20,060)	58	20,060	(58)	-	-	-	-	-	-
- transfers from stage 2 to stage 1	14,289	(160)	(14,289)	160	-	-	-	-	-	-
- transfers to stage 3	(562)	3	(1,711)	66	2,273	(69)	-	-	-	-
- transfers from stage 3	190	(14)	412	(13)	(602)	27	-	-	-	-
Net remeasurement of ECL arising from transfer of stage	-	72	-	(127)	-	(2)	-	-	-	(57)
Net new and further lending/repayments	3,905	(7)	(2,684)	32	(724)	112	3	-	500	137
Change to risk parameters - credit quality	-	105	-	(50)	-	(312)	-	4	-	(253)
Changes to models used for ECL calculation	-	5	-	(53)	-	-	-	-	-	(48)
Assets written off	-	-	-	-	(246)	246	-	-	(246)	246
Other²	3,850	-	-	-	-	-	-	-	3,850	-
At 31 Dec 2022	75,262	(156)	20,166	(407)	3,857	(566)	23	(1)	99,308	(1,130)
ECL income statement change for the period		175		(198)		(202)		4		(221)
Recoveries										7
Others										22
Total ECL income statement change for the period										(192)

Wholesale lending - credit risk profile by obligor grade for loans and advances at amortised cost
		Gross carrying amount					Allowance for ECL
	Basel one-year PD range	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total	ECL coverage	Mapped external rating
	%	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	%
Corporate and commercial ¹		46,197	13,854	2,876	-	62,927	(156)	(365)	(428)	-	(949)	1.5
- CRR 1	0.000 to 0.053	392	1	-	-	393	-	(1)	-	-	(1)	0.3	AA- and above
- CRR 2	0.054 to 0.169	6,871	162	-	-	7,033	(5)	(2)	-	-	(7)	0.1	A+ to A-
- CRR 3	0.170 to 0.740	17,704	2,761	-	-	20,465	(26)	(40)	-	-	(66)	0.3	BBB+ to BBB-
- CRR 4	0.741 to 1.927	12,402	3,056	-	-	15,458	(44)	(42)	-	-	(86)	0.6	BB+ to BB-
- CRR 5	1.928 to 4.914	6,984	3,403	-	-	10,387	(59)	(93)	-	-	(152)	1.5	BB- to B
- CRR 6	4.915 to 8.860	844	1,644	-	-	2,488	(14)	(60)	-	-	(74)	3.0	B-
- CRR 7	8.861 to 15.000	343	1,903	-	-	2,246	(4)	(75)	-	-	(79)	3.5	CCC+
- CRR 8	15.001 to 99.999	657	924	-	-	1,581	(4)	(52)	-	-	(56)	3.5	CCC to C
- CRR 9/10	100.000	-	-	2,876	-	2,876	-	-	(428)	-	(428)	14.9	D
Non-bank financial institutions		6,434	837	78	-	7,349	(11)	(6)	(35)	-	(52)	0.7
- CRR 1	0.000 to 0.053	346	-	-	-	346	-	-	-	-	-	-	AA- and above
- CRR 2	0.054 to 0.169	887	46	-	-	933	(1)	-	-	-	(1)	0.1	A+ to A-
- CRR 3	0.170 to 0.740	3,056	196	-	-	3,252	(1)	(1)	-	-	(2)	0.1	BBB+ to BBB-
- CRR 4	0.741 to 1.927	1,874	449	-	-	2,323	(3)	(1)	-	-	(4)	0.2	BB+ to BB-
- CRR 5	1.928 to 4.914	128	95	-	-	223	(1)	(4)	-	-	(5)	2.2	BB- to B
- CRR 6	4.915 to 8.860	130	46	-	-	176	(5)	-	-	-	(5)	2.8	B-
- CRR 7	8.861 to 15.000	8	2	-	-	10	-	-	-	-	-	-	CCC+
- CRR 8	15.001 to 99.999	5	3	-	-	8	-	-	-	-	-	-	CCC to C
- CRR 9/10	100.000	-	-	78	-	78	-	-	(35)	-	(35)	44.9	D
Banks		7,980	-	2	-	7,982	-	-	(2)	-	(2)	-
- CRR 1	0.000 to 0.053	7,913	-	-	-	7,913	-	-	-	-	-	-	AA- and above
- CRR 2	0.054 to 0.169	67	-	-	-	67	-	-	-	-	-	-	A+ to A-
- CRR 3	0.170 to 0.740	-	-	-	-	-	-	-	-	-	-	-	BBB+ to BBB-
- CRR 4	0.741 to 1.927	-	-	-	-	-	-	-	-	-	-	-	BB+ to BB-
- CRR 5	1.928 to 4.914	-	-	-	-	-	-	-	-	-	-	-	BB- to B
- CRR 6	4.915 to 8.860	-	-	-	-	-	-	-	-	-	-	-	B-
- CRR 7	8.861 to 15.000	-	-	-	-	-	-	-	-	-	-	-	CCC+
- CRR 8	15.001 to 99.999	-	-	-	-	-	-	-	-	-	-	-	CCC to C
- CRR 9/10	100.000	-	-	2	-	2	-	-	(2)	-	(2)	100.0	D
At 31 Dec 2023		60,611	14,691	2,956	-	78,258	(167)	(371)	(465)	-	(1,003)	1.3

Commercial real estate lending
	2023	2022
	£m	£m
Gross loans and advances
Stage 1	8,080	9,471
Stage 2	2,558	2,293
Stage 3	348	583
POCI	-	-
At 31 Dec	10,986	12,347
- of which: forborne loans¹	361	178
Allowance for ECL	(116)	(179)

Commercial real estate gross loans and advances maturity analysis
	2023	2022
	£m	£m
< 1 year	2,784	6,903
1-2 years	3,540	2,920
2-5 years	4,244	1,979
> 5 years	418	545
At 31 Dec	10,986	12,347

Wholesale lending: commercial real estate loans and advances including loan commitments by level of collateral (by stage)
(Audited)
	Gross carrying/nominal amount					ECL coverage
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	%	%	%	%	%
Non Collateralised	3,511	970	77	-	4,558	0.4	2.0	12.3	-	0.9
Fully collateralised by LTV ratio	6,981	1,970	210	-	9,161	0.1	1.3	9.4	-	0.6
- less than 50%	2,287	397	40	-	2,724	0.2	1.9	21.6	-	0.7
- 51% to 75%	3,715	1,113	59	-	4,887	0.1	1.1	1.5	-	0.3
- 76% to 90%	496	229	63	-	788	0.1	1.3	14.8	-	1.6
- 91% to 100%	483	231	48	-	762	0.1	1.6	1.9	-	0.7
Partially collateralised (A): LTV > 100%	1,239	187	64	-	1,490	0.1	1.1	34.4	-	1.7
- collateral value on A	411	134	49	-	594
Total at 31 Dec 2023	11,731	3,127	351	-	15,209	0.2	1.5	14.6	-	0.8

Non Collateralised	4,151	1,855	245	-	6,251	0.4	1.5	35.2	-	2.1
Fully collateralised by LTV ratio	7,769	1,624	287	-	9,680	0.1	1.0	5.6	-	0.4
- less than 50%	2,305	515	44	-	2,864	0.2	1.0	4.5	-	0.4
- 51% to 75%	4,753	981	220	-	5,954	0.1	0.9	0.5	-	0.3
- 76% to 90%	375	115	9	-	499	0.2	1.5	20.7	-	0.8
- 91% to 100%	336	13	14	-	363	0.2	0.4	78.2	-	3.3
Partially collateralised (A): LTV > 100%	1,588	139	64	-	1,791	0.1	1.0	29.6	-	1.3
- collateral value on A	920	112	34	-	1,066				-
Total at 31 Dec 2022	13,508	3,618	596	-	17,722	0.2	1.2	20.3	-	1.1