3rd Quarter Results

Standard Chartered PLC
26 October 2023
 

 

 

 

 

Standard Chartered PLC

3Q'23 Results

26 October 2023

 

Registered in England under company No. 966425

Registered Office: 1 Basinghall Avenue, London, EC2V 5DD, UK


Table of contents

Performance highlights

1

Statement of results

3

Group Chief Financial Officer's review

4

Supplementary financial information

14

Underlying versus reported results reconciliations

29

Risk review

35

Capital review

39

Financial statements

44

Other supplementary information

49

 

 

 

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 context requires within the 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. Asia includes Australia, Bangladesh, Brunei, Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Nepal, Philippines, Singapore, Sri Lanka, Thailand, Vietnam, Mainland China, Hong Kong, Japan, Korea, Macau, Taiwan; Africa and Middle East (AME) includes Angola, Bahrain, Botswana, Cameroon, Côte d'Ivoire, Egypt, The Gambia, Iraq, Kenya, Lebanon, Mauritius, Nigeria, Oman, Pakistan, Qatar, Saudi Arabia, Sierra Leone, South Africa, Tanzania, UAE, Uganda, Zambia, Zimbabwe; and Europe and Americas (EA) include Argentina, Brazil, Colombia, Falkland Islands, France, Germany, Ireland, Jersey, Poland, Sweden, Turkey, the UK, and the US.

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, and is headquartered in London. The Group's head office provides guidance on governance and regulatory standards. Standard Chartered PLC. Stock codes are: LSE STAN.LN and HKSE 02888.


 

 
Standard Chartered PLC - results for the third quarter ended 30 September 2023

 

All figures are presented on an underlying basis and comparisons are made to 2022 on a reported currency basis, unless otherwise stated. A reconciliation of restructuring and other items excluded from underlying results is set out on pages 29-34.

Bill Winters, Group Chief Executive, said:

"We have continued to make strong progress in the third quarter against the five strategic actions outlined last year, delivering a solid set of results. Wealth Management has continued its recovery with double digit income growth and the Financial Markets performance has been resilient against a strong comparator period. We remain highly liquid, and well capitalised, with a CET1 ratio towards the top of our target range and confident in the delivery of our 2023 financial targets, including a return on tangible equity of 10%."

Selected information on 3Q'23 financial performance with comparisons to 3Q'22 unless otherwise stated

•       Return on tangible equity ("RoTE") of 7.0%, down 2%pts year-on-year ("YoY"), primarily due to a higher tax charge in 3Q'23

•       Income up 6% to $4.4bn, up 7% YoY at constant currency ("ccy")

-      Net interest income ("NII") up 20% at ccy to $2.4bn; Other income down 5% at ccy to $2.0bn

-      Normalised net interest margin ("NIM") 1.67%, a transient reduction of 4bps since 2Q'23; reported NIM 1.63%, including 4bps from one-offs

-      Financial Markets ("FM") down 8% at ccy, down 6% excluding $28m gain on mark-to-market ("MTM") liabilities in 3Q'22

-      Wealth Management ("WM") up 18% at ccy, supported by continued strong Affluent client onboarding

•       Expenses increased 8% YoY at ccy to $2.8bn; down $56m or 2% quarter-on-quarter ("QoQ")

-      Increase due to inflation, business growth and targeted investments, partially funded by productivity saves

•       Credit impairment charge of $294m, up $62m YoY, up $148m QoQ; includes China Commercial Real Estate (CRE) charge of $186m, of which $42m related to the management overlay, now $178m

•       Underlying profit before tax of $1.3bn, down 2%

•       Reduction in China Bohai Bank ("Bohai") value-in-use calculation led to an impairment charge of $0.7bn reflecting subdued 2Q'23 Bohai earnings and challenging macroeconomic outlook; 18bps impact on the CET1 ratio

•       Tax charge of $494m: underlying effective tax rate of 38%, up 14%pts reflecting profit mix and increased losses in the United Kingdom where we cannot recognise a tax benefit

•       The Group's balance sheet remains strong, liquid and well diversified

-      Customer loans and advances of $281bn, down $9bn or 3% since 30.06.23; up $2bn or 1% on an underlying basis

-      Customer deposits of $453bn, down $17bn or 3% since 30.06.23; down $14bn or 3% at ccy; managing liquidity coverage ratio (LCR) and business as usual outflows in Transaction Banking Cash

-      LCR 156% (30.06.23: 164%); Advances-to-deposit ratio 54.5% (30.06.23: 53.6%)

•       RWA of $242bn, down $8bn or 3% since 30.06.23

-      Credit risk RWA down $9bn, primarily from optimisation and efficiency actions, and China Bohai Bank impairment

-      Market risk RWA up $1bn and Operational RWA stable

•       The Group remains strongly capitalised

-      CET1 ratio 13.9% (30.06.23: 14.0%), towards the top end of 13-14% target range

-      ~$1.8bn of the $2bn buy-backs announced in 2023 completed

Selected information on YTD'23 financial performance with comparisons to YTD'22 unless otherwise stated

•       RoTE of 10.4%, up 1%pt YoY

•       Income up 11% to $13.4bn, up 15% YoY at ccy

-      NII up 30% at ccy to $7.2bn; Other income up 1% to $6.2bn

-      NIM up 30bps YoY to 1.66% YTD'23

-      FM flat at ccy, up 7% excluding non-repeat of $244m gain on MTM liabilities in YTD22; WM up 9% at ccy



 

Page 1

Standard Chartered PLC - results for the third quarter ended 30 September 2023

•       Expenses up 8%, 11% at ccy; increase due to inflation, business growth and targeted investments partially funded by gross productivity saves

-      Positive 4% income-to-cost jaws YTD, with cost-to-income ratio improving 2% pts to 62%

•       Credit impairment charge of $466m, down $30m YoY

-      Annualised loan-loss loss rate of 20bps, down 2bps YoY

-      China CRE portfolio Expected Credit Loss provisions $1.1bn on Stage 3 exposures of $1.4bn; cover ratio including collateral 88%

•       Underlying profit before tax of $4.6bn, up 19% at ccy

•       Underlying earnings per share (EPS) increased from 89.6 cents or 10% to 98.4 cents; Reported EPS down 21% to 74.9 cents

Update on strategic actions for YTD'23 unless otherwise stated

•       Drive improved returns in CCIB: Income RoRWA of 7.9%, ahead of 2024 target of 6.5%; ~ $22bn RWA optimised since 1.1.22, nearly achieved $22bn target over a year ahead of plan

•       Transform profitability in CPBB: Cost-to-income ratio of 58%, improved by 11%pts YoY, ahead of 2024 target of 60%; $0.3bn of gross expense savings since 1.1.22

•       Seize China opportunity: China onshore and offshore profit before tax up ~3x YoY to $1.0bn

•       Create operational leverage: $0.7bn gross productivity saves since 1.1.22; Cost-to-income ratio improved by 2%pts YoY to 62%

•       Deliver substantial shareholder returns: $3.9bn of total returns announced since 1.1.22

Other highlights

•       Aviation exit: announced the sale of our global aviation business in August, with the transaction expected to be completed by the end of the year and increase CET1 ratio by 19bps in the fourth quarter

Outlook

We remain confident in the delivery of our RoTE targets, supported by continued strong progress on our five strategic actions.

For 2023 our guidance is as follows:

•       Income to increase in the 12-14% range at ccy

•       Full year average NIM to approach 170bps

•       Underlying asset growth in the low single digit percentage range in 2H'23 (from 30.6.23)

•       RWA to be similar to 31.12.22

•       Positive income-to-cost jaws of around 4%, excluding the UK bank levy at ccy

•       Full year loan loss rate to be in the range of 17-25 bps

•       Underlying effective tax rate expected to be around 30%

•       Operate dynamically within the full 13-14% CET1 target range

•       RoTE of 10%

All 2024 guidance remains unchanged. We continue to expect income growth to be in the 8-10% range at ccy and we remain confident of achieving greater than 11% RoTE.


Page 2

Statement of results


3 months ended 30.09.23
$million

3 months ended 30.09.22
$million

Change1
%

Underlying performance2




Operating income

4,403

4,138

6

Operating expenses (including UK bank levy)

(2,770)

(2,576)

(8)

Credit impairment

(294)

(232)

(27)

Other impairment

(26)

-

nm⁸

Profit from associates and joint ventures

3

16

(81)

Profit before taxation

1,316

1,346

(2)

Profit/(loss) attributable to ordinary shareholders³

644

915

(30)

Return on ordinary shareholders' tangible equity (%)

7.0

9.4

(240)bps

Cost to income ratio (excluding bank levy) (%)

62.9

62.3

(60)bps

Reported performance9




Operating income

4,523

4,329

4

Operating expenses

(2,870)

(2,696)

(6)

Credit impairment

(292)

(227)

(29)

Other impairment

(734)

(31)

nm⁸

Profit from associates and joint ventures

6

16

(63)

Profit before taxation

633

1,391

(54)

Taxation

(494)

(313)

(58)

Profit for the period

139

1,078

(87)

Profit/(loss) attributable to parent company shareholders

145

1,087

(87)

Profit/(loss) attributable to ordinary shareholders3

(35)

964

(104)

Return on ordinary shareholders' tangible equity (%)

(0.4)

10.5

(1,090)bps

Cost to income ratio (including bank levy) (%)

63.5

62.3

(120)bps

Net interest margin (%) (adjusted)7

1.63

1.43

(20)bps

Balance sheet and capital

30.09.23
$million

30.09.22
$million

Change
%

Total assets

825,833

864,435

(4)

Total equity

48,356

50,003

(3)

Average tangible equity attributable to ordinary shareholders

35,693

36,569

(2)

Loans and advances to customers

281,009

298,390

(6)

Customer accounts

453,157

447,259

1

Risk weighted assets

241,506

252,293

(4)

Total capital

51,112

53,491

(4)

Total capital (%)

21.2

21.2

0bps

Common Equity Tier 1

33,569

34,504

(3)

Common Equity Tier 1 ratio (%)

13.9

13.7

20bps

Advances-to-deposits ratio (%)4

54.5

58.1

(3.6)

Liquidity coverage ratio (%)

156.3

156.0

nm⁸

Leverage ratio (%)

4.7

4.8

(10)bps

Information per ordinary share

Cents

Cents

Change
%

Earnings per share - underlying5

23.2

31.0

(7.8)

                - reported5

(1.3)

32.7

(34.0)

Net asset value per share

1,504

1,433

71

Tangible net asset value per share6

1,283

1,243

40

Number of ordinary shares at period end (millions)

2,725

2,905

(6)

 

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 (%), leverage ratio (%), cost-to-income ratio (%) and return on ordinary shareholders' tangible equity (%). 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      Underlying performance for relevant periods in 2022 has been restated for removal of (i) AME exits (ii) Aviation Finance and (iii) DVA. No change to reported performance

3      Profit 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

4      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

5      Represents the underlying or reported earnings divided by the basic weighted average number of shares. Prior period refers to 9 months ended 30.09.22

6      Calculated on period end net asset value, tangible net asset value and number of shares

7      Net interest margin is calculated as adjusted net interest income divided by average interest-earning assets, annualised

8   Not meaningful

9   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 3

Group Chief Financial Officer's review

The Group delivered a solid performance in the third quarter of 2023

Summary of financial performance


3Q'23
$million

3Q'22³
$million

Change
%

Constant currency change¹
%

2Q'23
$million

Change
%

Constant currency change¹
%

YTD'23
$million

YTD'22³
$million

Change
%

Constant currency change¹
%

Underlying net interest income4

2,388

2,017

18

20

2,436

(2)

(2)

7,165

5,711

25

30

Underlying other income4

2,015

2,121

(5)

(5)

2,119

(5)

(4)

6,189

6,286

(2)

1

Underlying operating income

4,403

4,138

6

7

4,555

(3)

(3)

13,354

11,997

11

15

Other operating expenses

(2,770)

(2,576)

(8)

(8)

(2,826)

2

1

(8,271)

(7,677)

(8)

(11)

UK bank levy

-

-

nm⁶

nm⁶

(3)

100

100

(3)

5

(160)

(160)

Underlying operating expenses

(2,770)

(2,576)

(8)

(8)

(2,829)

2

1

(8,274)

(7,672)

(8)

(11)

Underlying operating profit before impairment and taxation

1,633

1,562

5

6

1,726

(5)

(5)

5,080

4,325

17

21

Credit impairment

(294)

(232)

(27)

(37)

(146)

(101)

(101)

(466)

(496)

6

2

Other impairment

(26)

-

nm⁶

nm⁶

(63)

59

60

(89)

(1)

nm⁶

nm⁶

Profit from associates and
joint ventures

3

16

(81)

(80)

83

(96)

(96)

97

169

(43)

(42)

Underlying profit before taxation

1,316

1,346

(2)

(2)

1,600

(18)

(17)

4,622

3,997

16

19

Restructuring

(7)

(10)

30

75

8

(188)

(200)

49

(9)

nm⁶

nm⁶

Goodwill & other impairment⁵

(697)

-

nm⁶

nm⁶

-

nm⁶

nm⁶

(697)

-

nm⁶

nm⁶

DVA

21

55

(62)

(63)

(93)

123

123

(18)

175

(110)

(110)

Reported profit before taxation

633

1,391

(54)

(54)

1,515

(58)

(57)

3,956

4,163

(5)

(2)

Taxation

(494)

(313)

(58)

(65)

(474)

(4)

(5)

(1,432)

(997)

(44)

(57)

Profit for the period

139

1,078

(87)

(87)

1,041

(87)

(86)

2,524

3,166

(20)

(19)

Net interest margin (%)2

1.63

1.43

20


1.71

(8)


1.66

1.36

30


Underlying return on tangible
equity (%)2

7.0

9.4

(240)


12.1

(511)


10.4

9.3

110


Underlying earnings per share (cents)

23.2

31.0

(25)


37.3

(38)


98.4

89.6

10


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.     Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

4.     To be consistent with how we the compute Net Interest Margin (NIM), and to align with the way we manage our business, we have changed our definition of Underlying Net Interest Income (NII) and Underlying Other Income (OI). The adjustments made to NIM, including interest expense relating to funding our trading book, will now be shown against Underlying Other Income rather than Underlying NII. Prior periods have been restated. There is no impact on total income

5.     Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

6.     Not meaningful




Page 4

Group Chief Financial Officer's review continued

Reported financial performance summary


3Q'23
$million

3Q'22
$million

Change
%

Constant currency change¹
%

2Q'23
$million

Change
%

Constant currency change¹
%

YTD'23
$million

YTD'22
$million

Change
%

Constant currency change¹
%

Net interest income

1,925

1,932

-

2

1,978

(3)

(2)

5,909

5,570

6

10

Other income

2,598

2,397

8

9

2,589

-

2

7,741

6,984

11

14

Reported operating income

4,523

4,329

4

6

4,567

(1)

-

13,650

12,554

9

12

Reported operating expenses

(2,870)

(2,696)

(6)

(8)

(2,918)

2

1

(8,538)

(8,024)

(6)

(9)

Reported operating profit before impairment and taxation

1,653

1,633

1

3

1,649

-

1

5,112

4,530

13

17

Credit impairment

(292)

(227)

(29)

(40)

(141)

(107)

(106)

(453)

(490)

8

3

Goodwill & other impairment

(734)

(31)

nm³

nm³

(77)

nm³

nm³

(811)

(46)

nm³

nm³

Profit from associates and
joint ventures

6

16

(63)

(63)

84

(93)

(93)

108

169

(36)

(36)

Reported profit before taxation

633

1,391

(54)

(54)

1,515

(58)

(57)

3,956

4,163

(5)

(2)

Taxation

(494)

(313)

(58)

(65)

(474)

(4)

(5)

(1,432)

(997)

(44)

(57)

Profit/(loss) for the period

139

1,078

(87)

(87)

1,041

(87)

(86)

2,524

3,166

(20)

(19)

Reported return on tangible
equity (%)2

(0.4)

10.5

(1,090)


10.8

(1,120)


7.8

10.1

(230)


Reported earnings per share (cents)

(1.3)

32.7

(104)


34.8

(104)


74.9

94.8

(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

The Group delivered a solid performance in the third quarter of 2023, supported by strong progress on the five strategic actions. The Group's underlying profit before tax of $1.3 billion was 2 per cent lower than in the prior year. Income grew 7 per cent on a constant currency basis with a 20 per cent increase in net interest income partly offset by a 5 per cent reduction in other income. Expenses increased 8 per cent at constant currency but were down 1 per cent compared to the previous quarter. The credit impairment charges in the quarter of $294 million included further charges relating to the China commercial real estate sector. The Group reduced the carrying value of its investment in China Bohai Bank by $697 million resulting in reported profit before tax declining by half to $633 million, with an 18 basis points impact to the CET1 ratio. The Group remains well capitalised and highly liquid with a CET1 ratio of 13.9 per cent, an advances-to-deposits ratio of 55 per cent, and a liquidity coverage ratio of 156 per cent.

All commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a reported currency basis, unless otherwise stated.

•       Operating income of $4.4 billion was up 6 per cent in the third quarter and increased 7 per cent on a constant currency basis, as the Group benefitted from a year-on-year increase in the net interest margin and a strong recovery in Wealth Management income

•       Underlying net interest income increased 18 per cent, or 20 per cent on a constant currency basis as the net interest margin increased 14 per cent or 20 basis points. This was despite a year-on-year incremental 12 basis points drag from hedges. Over the past year, the Group increased its pricing on assets and the yield on its Treasury portfolio more quickly than it repriced its liability base, reflecting strong pricing discipline and passthrough rate management albeit the rate paid increased more quickly than the gross yield on assets during the quarter

•       Underlying other income decreased 5 per cent as Financial Markets income was lower on the back of reduced market volatility and the non-repeat of $28 million of gains on mark-to-market liabilities in the third quarter of 2022. This was partly offset by strong growth in Wealth Management income, which continues to benefit from strong Affluent client onboarding and positive net new money

•       Operating expenses increased 8 per cent reflecting the impact of the Group's continuing investment into business growth initiatives and strategic investments, and higher inflation partly offset by cost efficiency actions. The Group generated 1 per cent negative income-to-cost jaws while the cost-to-income ratio increased 1 percentage point to 63 per cent

•       Credit impairment was a $294 million charge in the quarter, a $62 million increase on the third quarter of 2022, and double the amount booked in the prior quarter. Impairment charges in the quarter include $186 million in relation to the China commercial real estate sector and $115m in relation to the Consumer, Private and Business Banking portfolio. The year-to-date loan loss rate annualises to 20 basis points

 

Page 5

Group Chief Financial Officer's review continued

 

•       Profit from associates and joint ventures decreased $13 million to $3 million due to lower profits at China Bohai Bank (Bohai)

•       Restructuring and other items totalled $683 million in the quarter. The largest item was an impairment charge of $697 million reflecting a reduction in the carrying value of the Group's investment in Bohai following a refresh of the value-in-use calculation. Restructuring charges of $7 million primarily reflect redundancy and property optimisation charges partly offset by the profit from Aviation Finance and Principal Finance while movements in Debit Valuation Adjustment (DVA) were a positive $21 million

•       Taxation was $494 million on a reported basis, with an underlying year-to-date effective tax rate of 31 per cent compared to the prior year rate of 25 per cent reflecting a change in the geographic mix of profits and increased losses in the United Kingdom where we cannot recognise a tax benefit

•       Underlying return on tangible equity (RoTE) decreased by 240 basis points to 7.0 per cent primarily due to a higher effective tax rate partly offset by lower tangible equity benefitting from distributions to shareholders. On a reported basis, return on tangible equity was a negative 40 basis points

 

Operating income by product


3Q'23
$million

3Q'222,3
$million

Change
%

Constant currency change¹
%

2Q'23
$million

Change
%

Constant currency change¹
%

YTD'23
$million

YTD222,3
$million

Change
%

Constant currency change¹
%

Transaction Banking

1,496

1,067

40

42

1,461

2

2

4,356

2,620

66

71

Trade & Working capital

325

335

(3)

(2)

334

(3)

(3)

990

1,027

(4)

(1)

Cash Management

1,171

732

60

61

1,127

4

4

3,366

1,593

111

117

Financial Markets

1,253

1,386

(10)

(8)

1,391

(10)

(8)

4,058

4,198

(3)

-

Macro Trading

634

736

(14)

(11)

825

(23)

(22)

2,289

2,337

(2)

2

Credit Markets

472

455

4

4

462

2

4

1,394

1,325

5

8

Credit Trading

137

152

(10)

(7)

140

(2)

1

449

341

32

39

Financing Solutions & Issuance3

335

303

11

10

322

4

5

945

984

(4)

(2)

Financing & Securities Services3

147

195

(25)

(24)

104

41

42

375

536

(30)

(29)

Lending & Portfolio Management

121

164

(26)

(26)

132

(8)

(8)

387

446

(13)

(10)

Wealth Management

526

454

16

18

495

6

7

1,532

1,438

7

9

Retail Products

1,279

1,099

16

17

1,240

3

4

3,731

2,880

30

33

CCPL & other unsecured lending

297

298

-

2

286

4

5

873

908

(4)

-

Deposits

919

620

48

50

848

8

9

2,538

1,216

109

115

Mortgage & Auto

31

140

(78)

(78)

74

(58)

(57)

219

621

(65)

(64)

Other Retail Products

32

41

(22)

(19)

32

-

3

101

135

(25)

(22)

Treasury

(274)

(5)

nm4

nm4

(160)

(71)

(70)

(667)

510

nm4

nm4

Other

2

(27)

107

78

(4)

150

-

(43)

(95)

55

36

Total underlying operating income

4,403

4,138

6

7

4,555

(3)

(3)

13,354

11,997

11

15

1      Comparisons presented on the basis of the current period's transactional currency rate, ensuring like-for-like currency rates between the two periods

2      Underlying income for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

3      Shipping Finance is now reported under "Financing Solutions & Issuance" which was reported under "Financing & Securities Services" in Q1'23

4      Not meaningful

The operating income by product commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a constant currency basis, unless otherwise stated.

Transaction Banking income increased 42 per cent. Cash Management income was 61 per cent higher reflecting strong pricing discipline and passthrough rate management to take advantage of a rising interest rate environment. Trade & Working Capital decreased 2 per cent reflecting lower balance sheet and contingent volumes partly offset by higher margins as the Group focused on higher-returning trade products.

Financial Markets income was 8 per cent lower compared to a very strong third quarter performance last year and was down 6 per cent excluding the non-repeat of prior year fair value gains on mark-to-market liabilities. There was 3 per cent growth in flow income which was more than offset by a 28 per cent reduction in episodic income, driven by subdued market volatility and the non-repeat of the gains on mark-to-market liabilities. Macro Trading was down 11 per cent with double-digit declines in FX and Commodities.

Page 6

Group Chief Financial Officer's review continued

Credit Markets income was up 4 per cent with lower Credit Trading income offset by higher Financing Solutions & Issuance, with the closure of a number of financing deals and strong origination volumes in primary markets leading to market share gains. Excluding the non-repeat of $28 million of gains on mark-to-market liabilities, Financing & Security Services income was down 14 per cent as higher Securities Services income benefiting from rising interest rates was more than offset by adverse movements in XVA.

Lending and Portfolio Management income decreased 26 per cent with an increase in losses in relation to portfolio management activities, and a decline in lending income from lower volumes, and increased cost of funding on undrawn commitments.

Wealth Management income grew 18 per cent with strong double-digit growth across Bancassurance, up 30 per cent and Treasury Products up 14 per cent. partly offset by lower income from managed investments. There was continued strong growth in net new money , which offset adverse market movements as Wealth Management AUM remained broadly stable.

Retail Products income increased 17 per cent. Deposit income was up 50 per cent due to low passthrough rates in a rising interest rate environment partly offset by migration from CASA into time deposits. Mortgages & Auto income decreased 78 per cent on the back of lower volumes and the impact of the Best Lending Rate cap in Hong Kong restricting the ability to reprice mortgages, despite an increase in funding costs from higher interest rates. Credit Cards & Personal Loans income increased 2 per cent reflecting growth in balances in both Credit Cards and Personal Loans.

Treasury income was a $274 million loss in the quarter primarily due to the $267 million loss from structural and short-term hedges in a rising interest environment and costs for holding additional liquidity centrally rather than it being recharged out to the products. This was in part offset by gains from RoTE-accretive cross-currency FX swaps which were funded by deposits.

Profit before tax by client segment and geographic region


3Q'23
$million

3Q'22²
$million

Change
%

Constant currency change¹
%

2Q'23
$million

Change
%

Constant currency change¹
%

YTD'23
$million

YTD'22²
$million

Change
%

Constant currency change¹
%

Corporate, Commercial &
Institutional Banking

1,255

1,209

4

5

1,430

(12)

(11)

4,170

3,019

38

44

Consumer, Private & Business Banking

669

481

39

38

696

(4)

(4)

2,042

1,195

71

75

Ventures

(117)

(85)

(38)

(34)

(55)

(113)

(113)

(275)

(236)

(17)

(16)

Central & other items (segment)

(491)

(259)

(90)

(92)

(471)

(4)

(6)

(1,315)

19

nm³

nm³

Underlying profit before taxation

1,316

1,346

(2)

(2)

1,600

(18)

(17)

4,622

3,997

16

19













Asia

1,063

1,053

1

-

1,354

(21)

(21)

3,812

2,829

35

37

Africa & Middle East

273

150

82

83

349

(22)

(21)

926

701

32

54

Europe & Americas

(90)

244

(137)

(134)

7

nm³

nm³

(101)

890

(111)

(111)

Central & other items (region)

70

(101)

169

155

(110)

164

161

(15)

(423)

96

96

Underlying profit before taxation

1,316

1,346

(2)

(2)

1,600

(18)

(17)

4,622

3,997

16

19

1      Comparisons presented on the basis of the current period's transactional currency rate, ensuring like-for-like currency rates between the two periods

2      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

3      Not meaningful

The client segment and geographic region commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a constant currency basis, unless otherwise stated.

Corporate, Commercial & Institutional Banking (CCIB) profit increased 5 per cent. Income grew 11 per cent with Cash Management benefitting from disciplined pricing initiatives in a rising interest rate environment partly offset by lower episodic income within Financial Markets and lower Lending income. Expenses were 10 per cent higher and credit impairment increased $72 million reflecting further provisions in the China commercial real estate sector.

Consumer, Private & Business Banking (CPBB) profit increased 38 per cent, with income up 17 per cent as the benefit from higher interest rates on Retail Deposit income and a continued recovery in Wealth Management. This was partly offset by lower Mortgage income negatively impacted by the Best Lending Rate cap in Hong Kong. Expenses increased 6 per cent while credit impairment was $29 million higher.

Page 7

Group Chief Financial Officer's review continued

Ventures loss increased by over a third to $117 million, reflecting the Group's continued investment in transformational digital initiatives. Income more than tripled to $35 million but this increase was offset by increased expenses, albeit expenses were flat quarter-on-quarter. The impairment charge increased $26 million to $30 million reflecting increased delinquencies in Mox and the build of expected credit loss provisions as credit portfolios grow.

Central & other items (segment) recorded a loss of $491 million, an increase of $232 million, with hedge losses increasing by $170 million to $267 million driven by increased US Dollar interest rates. Expenses increased by $20 million while there was a net release in credit impairment relating to exposure reductions. Associate income reduced by $13 million reflecting lower profits at Bohai.

Asia profits were stable as income grew 10 per cent offset by a 9 per cent growth in expenses and a $118 million increase in credit impairments. The income growth reflects strong double-digit increases across Cash Management, Retail Deposits and Wealth Management partly offset by lower Mortgage income and a loss in Treasury Markets. The increase in credit impairment reflects further provisions relating to the China commercial real estate portfolio. The profit share from Bohai reduced by $11 million.

Africa & Middle East (AME) profits increased 83 per cent as income increased 19 per cent with strong growth in Cash Management and Retail Deposit income partly offset by a loss in Treasury Markets following de-risking actions in certain markets. This was partly offset by expenses increasing 9 per cent while credit impairment charges reduced by $71 million, reflecting a non-repeat of the prior year's sovereign-related impairments.

Europe & Americas recorded a loss of $90 million as income reduced by 44 per cent, reflecting the increased cost of hedges within Treasury whilst strong growth in Transaction Banking income was partly offset by lower Financial Markets income. Expenses increased 18 per cent reflecting the impact of inflation and higher investment spend. There was a $16 million reduction in the credit impairment release booked in the quarter.

Central & other items (region) recorded a profit of $70 million compared to a $101 million loss in the third quarter of 2022. The return to profitability is mainly due to higher returns paid to Treasury on the equity provided to the regions in a rising interest rate environment while expenses reduced by 22 per cent.

Adjusted net interest income and margin


3Q'23
$million

3Q'22
$million

Change¹
%

2Q'23
$million

Change¹
%

YTD'23
$million

YTD'22
$million

Change¹
%

Adjusted net interest income2

2,380

2,023

18

2,430

(2)

7,151

5,720

25

Average interest-earning assets

579,713

562,509

3

569,811

2

577,351

564,382

2

Average interest-bearing liabilities

548,297

522,641

5

536,142

2

541,171

525,600

3










Gross yield (%)3

5.06

2.88

218

4.61

45

4.68

2.34

234

Rate paid (%)3

3.63

1.57

206

3.08

55

3.23

1.06

217

Net yield (%)3

1.43

1.31

12

1.53

(10)

1.45

1.28

17

Net interest margin (%)3,4

1.63

1.43

20

1.71

(8)

1.66

1.36

30

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 increased 18 per cent due to a 14 per cent increase in the net interest margin which averaged 163 basis points in the quarter, increasing 20 basis points year-on-year but decreasing 8 basis points compared to the prior quarter. Normalised net interest margin, excluding the impacts of one-offs from a system migration and effective interest rate adjustment in relation to the Singapore mortgage portfolio, averaged 167 basis points in the quarter:

•       Average interest-earning assets increased 2 per cent in the quarter with growth primarily from an increase in the cash and balances at central banks and loans and advances to customers. Gross yields increased 45 basis points compared with the prior quarter with an underlying 31 basis points increase in the quarter, adjusting for one-offs, due to the impact of rising interest rates on customer loan pricing and on Treasury portfolio yields partly offset by a 2 basis points quarter-on-quarter additional loss from hedges

•       Average interest-bearing liabilities increased 2 per cent in the quarter due to an increase in customer accounts and debt securities in issue. The rate paid on liabilities increased 55 basis points compared with the average in the prior quarter with an underlying 38 basis points increase in the quarter, adjusting for one-offs, due to the impact of interest rate movements and a slight deterioration in the liability mix



 

Page 8

Group Chief Financial Officer's review continued

Credit risk summary

Income Statement


3Q'23
$million

3Q'22²
$million

Change1
%

2Q'23
$million

Change1
%

YTD'23
$million

YTD'22²
$million

Change1
%

Total credit impairment charge/(release)

294

232

27

146

101

466

496

(6)

Of which stage 1 and 2

101

183

(45)

27

274

134

172

(22)

Of which stage 3

193

49

294

119

62

332

324

2

1      Variance is increase/(decrease) comparing current reporting period to prior reporting periods

2      Underlying credit impairment for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME and (ii) Aviation Finance. No change to reported credit impairment

Balance sheet


30.09.23
$million

30.06.23
$million

Change1
%

31.12.22
$million

Change1
%

30.09.22
$million

Change1
%

Gross loans and advances to customers2

286,531

295,508

(3)

316,107

(9)

303,538

(6)

Of which stage 1

266,590

277,711

(4)

295,219

(10)

284,877

(6)

Of which stage 2

12,431

10,110

23

13,043

(5)

11,460

8

Of which stage 3

7,510

7,687

(2)

7,845

(4)

7,201

4









Expected credit loss provisions

(5,522)

(5,371)

3

(5,460)

1

(5,148)

7

Of which stage 1

(458)

(451)

2

(559)

(18)

(497)

(8)

Of which stage 2

(440)

(400)

10

(444)

(1)

(434)

1

Of which stage 3

(4,624)

(4,520)

2

(4,457)

4

(4,217)

10









Net loans and advances to customers

281,009

290,137

(3)

310,647

(10)

298,390

(6)

Of which stage 1

266,132

277,260

(4)

294,660

(10)

284,380

(6)

Of which stage 2

11,991

9,710

23

12,599

(5)

11,026

9

Of which stage 3

2,886

3,167

(9)

3,388

(15)

2,984

(3)









Cover ratio of stage 3 before/after collateral (%)3

62/79

59/78

3/1

57/76

5/3

59/77

3/2

Credit grade 12 accounts ($million)

1,132

1,316

(14)

1,574

(28)

1,140

(1)

Early alerts ($million)

5,403

4,443

22

4,967

9

4,957

9

Investment grade corporate exposures (%)3

74

74

-

76

(2)

75

(1)

1.     Variance is increase/(decrease) comparing current reporting period to prior reporting periods

2.     Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $10,267 million at 30 September 2023, $10,950 million at 30 June 2023, $24,498 million at 31 December 2022 and $18,032 million at 30 September 2022

3.     Change is the percentage points difference between the two points rather than the percentage change

Asset quality remained resilient in the third quarter, with an improvement in a number of underlying credit metrics albeit credit impairment charges increased in the quarter. The Group continues to actively manage the credit portfolio whilst remaining alert to a volatile and challenging external environment including increased geopolitical tensions which has led to idiosyncratic stress in a select number of markets and industry sectors.

Credit impairment was a $294 million charge in the third quarter, a $62 million increase year-on-year and represents an annualised year-to-date loan loss rate of 20 basis points. There was a further $186 million impairment charge relating to the China commercial real estate sector, including a $42 million increase in the management overlay which now totals $178 million. The Group has provided $1.1 billion in total in relation to the China commercial real estate sector primarily over the last two years. There was a net release of $7 million relating to sovereign downgrades while there was a $115 million charge in relation to the CPBB portfolio and $30 million charge in Ventures primarily from portfolio growth and increased delinquencies in Mox.

Gross stage 3 loans and advances to customers of $7.5 billion were 2 per cent lower as repayments, client upgrades, reduction in exposures and write-offs more than offset new inflows. Credit-impaired loans represent 2.6 per cent of gross loans and advances, broadly flat on the prior quarter.

Page 9

Group Chief Financial Officer's review continued

The stage 3 cover ratio of 62 per cent increased by 3 percentage points compared to 30 June 2023, while the cover ratio post collateral at 79 per cent increased by 1 percentage point due to an increase in stage 3 provisions in relation to the China commercial real estate sector and a reduction in gross stage 3 balances.

Credit grade 12 balances decreased $184 million to $1.1 billion in the quarter. Early Alert accounts of $5.4 billion have increased by $960 million since 30 June 2023, reflecting new inflows relating to a select number of clients including sovereign-related exposures. The Group is continuing to carefully monitor its exposures in vulnerable sectors and select markets, given the unusual stresses caused by the currently difficult macro-economic environment.

The proportion of investment grade corporate exposures remained stable in the quarter at 74 per cent.

Restructuring, goodwill impairment and other items


3Q'23

3Q'22¹

2Q'23

Restructuring
$million

Goodwill & other Impairment2
$million

DVA
$million

Restructuring
$million

Goodwill & other impairment
$million

DVA
$million

Restructuring
$million

Goodwill & other impairment
$million

DVA
$million

Operating income

99

-

21

136

-

55

105

-

(93)

Operating expenses

(100)

-

-

(120)

-

-

(89)

-

-

Credit impairment

2

-

-

5

-

-

5

-

-

Other impairment

(11)

(697)

-

(31)

-

-

(14)

-

-

Profit from associates and
joint ventures

3

-

-

-

-

-

1

-

-

Loss before taxation

(7)

(697)

21

(10)

-

55

8

-

(93)

1      Restructuring, DVA and other items for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA from underlying operating performance

2      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

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.

The Group has signed sale agreements to exit seven markets in the AME region and will focus solely on the CCIB segment in two more markets . Additionally, following the Group's announcement on 11 January 2023 that it intends to explore alternatives for the ownership of the Aviation Finance business, the Group signed agreements on 28 August 2023 for the sale of its global aviation finance leasing business to Aircraft Leasing Company ("AviLease") for consideration of US$0.7 billion (the "Consideration"), giving rise to an estimated gain on disposal of US$0.3 billion and an increase in Common Equity Tier 1 capital ratio by around 19 basis points. The Consideration is subject to adjustment with reference to the net asset value of the business sold on completion. The $1 billion Aviation Loan businesses will be sold separately, and it is anticipated this will also be completed before the end of 2023. As a result of these announcements, effective 1st January 2023, the Group has not included the exit markets and the Aviation Finance business within the Group's underlying operating profit before taxation but will report them within restructuring.

The Group has also classified movements in the debit valuation adjustment (DVA) out of its underlying operating profit before taxation and into other items.

To aid comparisons with prior periods the Group has removed the exit markets, Aviation Finance business and DVA from its underlying operating profit before taxation for 2022.

Restructuring loss before tax $7 million reflects the impact of actions to transform the organisation to improve productivity, primarily additional redundancy charges and optimising the Group's property footprint partly offset by the profit from the Aviation Finance business and gains on the remaining Principal Finance portfolio.

Other impairment of $697 million is in relation to a further reduction in the carrying value of the Group's investment in its associate Bohai, to align to a lower value-in-use computation reflecting lower forecasted interest rates and a lower net interest margin reported by Bohai in its half-year financial reporting. The carrying value of the Group's investment in Bohai has reduced to $0.8 billion from $1.5 billion.

Movements in DVA were a positive $21 million driven by the widening of Group's asset swap spreads on derivative liability exposures. The size of the portfolio subject to DVA did not change materially during the quarter.

Page 10

Group Chief Financial Officer's review continued

Balance sheet and liquidity


30.09.23
$million

30.06.23
$million

Change1
%

31.12.22
$million

Change1
%

30.09.22
$million

Change1
%

Assets








Loans and advances to banks

46,111

44,602

3

39,519

17

43,315

7

Loans and advances to customers

281,009

290,137

(3)

310,647

(10)

298,390

(6)

Other assets

498,713

503,972

(1)

469,756

6

522,730

(5)

Total assets

825,833

838,711

(2)

819,922

1

864,435

(4)

Liabilities








Deposits by banks

29,744

28,560

4

28,789

3

27,728

7

Customer accounts

453,157

469,567

(3)

461,677

(2)

447,259

1

Other liabilities

294,576

290,903

1

279,440

5

339,445

(13)

Total liabilities

777,477

789,030

(1)

769,906

1

814,432

(5)

Equity

48,356

49,681

(3)

50,016

(3)

50,003

(3)

Total equity and liabilities

825,833

838,711

(2)

819,922

1

864,435

(4)









Advances-to-deposits ratio (%)2

54.5%

53.6%


57.4%


58.1%


Liquidity coverage ratio (%)

156%

164%


147%


156%


1      Variance is increase/(decrease)comparing current reporting period to prior reporting periods

2      The Group now excludes $21,241 million held with central banks (30.06.23: $24,749 million, 31.12.22: $20,798 million, 30.09.22: $21,683 million) that has been confirmed as repayable at the point of stress. Advances exclude repurchase agreement and other similar secured lending of $10,267 million (30.06.23: $10,950 million) and include loans and advances to customers held at fair value through profit or loss of $5,935 million (30.06.23: $5,368 million). Deposits include customer accounts held at fair value through profit or loss of $15,930 million (30.06.23: $15,026 million)

The Group's balance sheet remains strong, liquid and well diversified:

Loans and advances to customers decreased by $9 billion or 3 per cent from 30 June 2023 to $281 billion. This reflects the impact of a $7 billion reduction from Treasury and securities backed loans, primarily reverse repurchase agreements, held to collect, a $2 billion reduction from risk-weighted asset optimisation actions primarily in CCIB and $2 billion reduction from currency translation . Excluding these adjustments, loans and advances grew $2 billion or 1 per cent, in the quarter.

Customer accounts of $453 billion decreased by $17 billion or 3 per cent since 30 June 2023. Excluding a $3 billion reduction from currency translation, customer accounts reduced by $14 billion, or 3 per cent, with lower balances in Cash Management and Financial Markets partly offset by an increase in Retail Time Deposits. The reduction in customer accounts reflect actions undertaken by the Group to manage its liquidity coverage ratio.

Other assets decreased 1 per cent in the third quarter with an increase in cash and balances held at central banks and derivative balances more than offset by a reduction in investment securities and unsettled trade balances. Other liabilities increased 1 per cent with an increase in debt securities in issue partly offset by a reduction in derivative liabilities and unsettled trade liabilities.

The advances-to-deposits ratio increased to 54.5 per cent from 53.6 per cent at 30 June 2023. The point-in-time liquidity coverage ratio decreased 8 percentage points in the quarter to 156 per cent and remains well above the minimum regulatory requirement.


Risk-weighted assets


30.09.23
$million

30.06.23
$million

Change1
%

31.12.22
$million

Change1
%

30.09.22
$million

Change1
%

By risk type








Credit risk

188,294

197,151

(4)

196,855

(4)

202,523

(7)

Operational risk

27,861

27,861

-

27,177

3

27,177

3

Market risk

25,351

24,105

5

20,679

23

22,593

12

Total RWAs

241,506

249,117

(3)

244,711

(1)

252,293

(4)

1      Variance is increase/(decrease) comparing current reporting period to prior reporting periods

 

Page 11

Group Chief Financial Officer's review continued

Total risk-weighted assets (RWAs) decreased $7.6 billion or 3 per cent since 30 June 2023 to $241.5 billion :

•       Credit Risk RWA reduced by $8.9 billion in the third quarter to $188.3 billion. There was a $3.7 billion reduction from optimisation actions, primarily in the CCIB low-returning portfolio, a $1.9 billion reduction from currency translation, a $1.7 billion benefit from model and methodology changes. The impairment of Bohai further reduced RWAs by $1.7 billion. This was partly offset by a $0.6 billion increase from asset growth & mix

•       Operational Risk RWA was flat in the quarter

•       Market Risk RWA increased $1.2 billion to $25.4 billion due to increases in Internal Models Approach traded risk positions and market volatility

 

Capital base and ratios


30.09.23
$million

30.06.23
$million

Change1
%

31.12.22
$million

Change1
%

30.09.22
$million

Change1
%

CET1 capital

33,569

34,896

(4)

34,157

(2)

34,504

(3)

Additional Tier 1 capital (AT1)

5,492

5,492

-

6,484

(15)

6,485

(15)

Tier 1 capital

39,061

40,388

(3)

40,641

(4)

40,989

(5)

Tier 2 capital

12,051

12,281

(2)

12,510

(4)

12,502

(4)

Total capital

51,112

52,669

(3)

53,151

(4)

53,491

(4)

CET1 capital ratio(%)2

13.9

14.0

(0.1)

14.0

(0.1)

13.7

0.2

Total capital ratio(%)2

21.2

21.1

0.1

21.7

(0.5)

21.2

-

Leverage ratio (%)2

4.7

4.8

(0.1)

4.8

(0.1)

4.8

(0.1)

1      Variance is increase/(decrease) comparing current reporting period to prior reporting periods

2      Change is percentage points difference between two points rather than percentage change

The Group's CET1 ratio of 13.9 per cent was 11 basis points lower than as at 30 June 2023. A reduction in CET1 from shareholder distributions and Bohai impairment was offset by underlying profit accretion and a decrease in RWAs. The CET1 ratio remains 3.4 percentage points above the Group's latest regulatory minimum of 10.5 per cent and at the top of the 13-14 per cent target range.

The Group is part way through the $1 billion share buyback programme which it announced on 31 July 2023, and by 30 September 2023 had spent $469 million purchasing 51 million ordinary shares. Even though the share buyback was still ongoing at 30 September 2023, the entire $1 billion is deducted from CET1 in the period, reducing the CET1 ratio by 40 basis points. Including the buyback that was announced on 17 February 2023 and completed on 29 September 2023 , the Group has purchased 168 million shares during the year to 30 September, reducing the share count by approximately 6 per cent.

The Group is accruing a foreseeable dividend in respect of the final 2023 ordinary share dividend in the third quarter. This is not an indication of the Group's final 2023 ordinary share dividend, which will be proposed by the Board at the presentation of the 2023 full year results. The increase in the foreseeable dividend for ordinary dividend and AT1 coupons reduced the CET1 ratio by 17 basis points

The $697 million impairment of Bohai also resulted in an RWA reduction of $1.7 billion, the net effect of which resulted in a reduction of the CET1 ratio by 18 basis points

The above CET1 ratio headwinds were partly offset by 36 basis points uplift from underlying profit accretion in the quarter and 22 basis points from an underlying $3.9 billion reduction in RWA.

The Group is expecting a further 19 basis points uplift in the CET1 ratio upon completion of the sale of its Aviation Finance business, which is anticipated to occur before the end of 2023.

The Group's leverage ratio of 4.7 per cent is 4 basis points lower than at 30 June 2023. This is primarily driven by reduced CET1 capital partly offset by a $21 billion reduction in leverage exposures. The Group's leverage ratio remains significantly above its minimum requirement of 3.7 per cent.



 

Page 12

Group Chief Financial Officer's review continued

Outlook

We remain confident in the delivery of our RoTE targets, supported by continued strong progress on our five strategic actions.

For 2023 our guidance is as follows:

•       Income to increase in the 12 to 14 per cent range at constant currency

•       Full year average net interest margin to approach 170 basis points

•       Underlying asset growth in the low single digit percentage range in 2H'23 (from 30.6.23)

•       RWA to be similar to 31.12.22

•       Positive income-to-cost jaws of around 4%, excluding UK bank levy at constant currency

•       Full year loan loss rate to be in the range of 17-25 basis points

•       Underlying effective tax rate expected to be around 30 per cent

•       Operate dynamically within the full 13-14 per cent CET1 target range

•       RoTE of 10 per cent

All 2024 guidance remains unchanged. We continue to expect 2024 income growth to be in the 8 to 10 per cent range at constant currency, and we remain confident of achieving greater than 11 per cent RoTE.

 

Andy Halford

Group Chief Financial Officer

26 October 2023

 


Page 13

Supplementary financial information

Underlying performance by client segment


3Q'23

Corporate, Commercial & Institutional Banking
$million

Consumer,
Private &
Business
Banking
$million

Ventures
$million

Central &
other items (segment)
$million

Total
$million

Operating income

2,814

1,849

35

(295)

4,403

External

2,084

1,003

35

1,281

4,403

Inter-segment

730

846

-

(1,576)

-

Operating expenses

(1,387)

(1,065)

(109)

(209)

(2,770)

Operating profit/(loss) before impairment losses and taxation

1,427

784

(74)

(504)

1,633

Credit impairment

(159)

(115)

(30)

10

(294)

Other impairment

(13)

-

(9)

(4)

(26)

Profit from associates and joint ventures

-

-

(4)

7

3

Underlying profit/(loss) before taxation

1,255

669

(117)

(491)

1,316

Restructuring

11

(17)

-

(1)

(7)

Goodwill & other impairment³

-

-

-

(697)

(697)

DVA

21

-

-

-

21

Reported profit/(loss) before taxation

1,287

652

(117)

(1,189)

633

Total assets

395,938

126,714

3,398

299,783

825,833

Of which: loans and advances to customers1

177,542

124,178

1,014

26,686

329,420

loans and advances to customers

129,147

124,162

1,014

26,686

281,009

loans held at fair value through profit or loss

48,395

16

-

-

48,411

Total liabilities

471,272

190,925

2,581

112,699

777,477

Of which: customer accounts1

319,785

186,131

2,316

7,590

515,822

Risk-weighted assets

143,386

50,365

1,786

45,969

241,506

Income return on risk-weighted assets (%)

7.8

14.5

8.3

(2.4)

7.1

Underlying return on tangible equity (%)

17.9

27.2

nm⁴

(38.5)

7.0

Cost to income ratio (excluding bank levy) (%)

49.3

57.6

nm⁴

nm⁴

62.9

 


3Q'22²

Corporate, Commercial & Institutional Banking
$million

Consumer,
Private &
Business
Banking
$million

Ventures
$million

Central &
other items (segment)
$million

Total
$million

Operating income

2,572

1,591

10

(35)

4,138

External

2,232

1,278

10

618

4,138

Inter-segment

340

313

-

(653)

-

Operating expenses

(1,276)

(1,024)

(87)

(189)

(2,576)

Operating profit/(loss) before impairment losses and taxation

1,296

567

(77)

(224)

1,562

Credit impairment

(87)

(86)

(4)

(55)

(232)

Other impairment

-

-

-

-

-

Profit from associates and joint ventures

-

-

(4)

20

16

Underlying profit/(loss) before taxation

1,209

481

(85)

(259)

1,346

Restructuring

18

(22)

-

(6)

(10)

DVA

55

-

-

-

55

Reported profit/(loss) before taxation

1,282

459

(85)

(265)

1,391

Total assets

453,985

129,698

1,574

279,178

864,435

Of which: loans and advances to customers1

190,782

126,961

480

35,388

353,611

loans and advances to customers

138,017

126,927

480

32,966

298,390

loans held at fair value through profit or loss

52,765

34

-

2,422

55,221

Total liabilities

534,469

176,087

981

102,895

814,432

Of which: customer accounts1

332,833

171,730

886

6,517

511,966

Risk-weighted assets

149,779

50,923

1,158

50,433

252,293

Income return on risk-weighted assets (%)

6.8

12.3

5.1

(0.3)

6.5

Underlying return on tangible equity (%)

16.5

19.2

nm⁴

(15.9)

9.4

Cost to income ratio (excluding bank levy) (%)

49.5

64.4

nm⁴

nm⁴

62.3

1      Loans and advances to customers includes FVTPL and customer accounts includes FVTPL and repurchase agreements

2      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

3      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

4      Not meaningful


Page 14

Supplementary financial information continued

Corporate, Commercial & Institutional Banking


3Q'23
$million

3Q'221,4
$million

Change3
%

Constant currency change2,3
%

2Q'23
$million

Change3
%

Constant currency change2,3
%

YTD'23
$million

YTD221,4
$million

Change3
%

Constant currency change2,3
%

Operating income

2,814

2,572

9

11

2,931

(4)

(3)

8,637

7,141

21

25

Transaction Banking

1,449

1,034

40

42

1,416

2

2

4,221

2,535

67

71

Trade & Working Capital

312

322

(3)

(2)

322

(3)

(3)

954

983

(3)

-

Cash Management

1,137

712

60

61

1,094

4

4

3,267

1,552

111

116

Financial Markets

1,253

1,386

(10)

(8)

1,391

(10)

(8)

4,058

4,198

(3)

-

Macro Trading

634

736

(14)

(11)

825

(23)

(22)

2,289

2,337

(2)

2

Credit Markets

472

455

4

4

462

2

4

1,394

1,325

5

8

Credit Trading

137

152

(10)

(7)

140

(2)

1

449

341

32

39

Financing Solutions & Issuance4

335

303

11

10

322

4

5

945

984

(4)

(2)

Financing & Securities Services4

147

195

(25)

(24)

104

41

42

375

536

(30)

(29)

Lending & Portfolio Management

115

154

(25)

(25)

125

(8)

(7)

364

414

(12)

(9)

Retail Products

-

-

nm⁸

nm⁸

1

(100)

nm⁸

1

-

nm⁸

nm⁸

Deposits

-

-

nm⁸

nm⁸

1

(100)

nm⁸

1

-

nm⁸

nm⁸

Other

(3)

(2)

(50)

33

(2)

(50)

-

(7)

(6)

(17)

13

Operating expenses

(1,387)

(1,276)

(9)

(10)

(1,403)

1

-

(4,205)

(3,841)

(9)

(12)

Operating profit before impairment losses and taxation

1,427

1,296

10

12

1,528

(7)

(6)

4,432

3,300

34

40

Credit impairment

(159)

(87)

(83)

(100)

(77)

(106)

(114)

(228)

(281)

19

18

Other impairment

(13)

-

nm⁸

nm⁸

(21)

38

36

(34)

-

nm⁸

nm⁸

Underlying profit before taxation

1,255

1,209

4

5

1,430

(12)

(11)

4,170

3,019

38

44

Restructuring

11

18

(39)

21

34

(68)

(43)

84

48

75

140

DVA

21

55

(62)

(63)

(93)

123

123

(18)

175

(110)

(110)

Reported profit before taxation

1,287

1,282

-

2

1,371

(6)

(4)

4,236

3,242

31

36

Total assets

395,938

453,985

(13)

(12)

401,001

(1)

(1)

395,938

453,985

(13)

(12)

Of which: loans and advances to customers5

177,542

190,782

(7)

(7)

174,214

2

3

177,542

190,782

(7)

(7)

Total liabilities

471,272

534,469

(12)

(12)

490,697

(4)

(4)

471,272

534,469

(12)

(12)

Of which: customer accounts5

319,785

332,833

(4)

(4)

333,584

(4)

(4)

319,785

332,833

(4)

(4)

Risk-weighted assets

143,386

149,779

(4)

nm⁸

147,258

(3)

nm⁸

143,386

149,779

(4)

nm⁸

Income return on risk-weighted
assets (%)6

7.8

6.8

100bps

nm⁸

8.1

(30)bps

nm⁸

7.9

6.1

180bps

nm⁸

Underlying return on tangible
equity (%)6

17.9

16.5

140bps

nm⁸

20.4

(250)bps

nm⁸

19.8

13.3

650bps

nm⁸

Cost to income ratio (%)7

49.3

49.5

0.2

0.3

47.9

(1.4)

(1.3)

48.7

53.8

5.1

5.4

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

2      Comparisons presented on the basis of the current period's transactional currency rate, ensuring like-for-like currency rates between the two periods

3      Variance is better/(worse), except for risk-weighted assets, assets and liabilities which is increase/(decrease)

4      Shipping Finance is now reported under "Financing Solutions & Issuance" which was reported under "Financing & Securities Services" in 1Q'23

5      Loans and advances to customers includes FVTPL and customer accounts includes FVTPL and repurchase agreements

6      Change is the basis points (bps) difference between the two periods rather than the percentage change

7      Change is the percentage points difference between the two periods rather than the percentage change

8      Not meaningful



 

Page 15

Supplementary financial information continued

Performance highlights

•       Underlying profit before tax of $1,255 million was up 5 per cent at constant currency ("ccy") driven mainly by higher income partially offset by higher expenses and impairment

•       Underlying operating income of $2,814 million was up 11 per cent at ccy primarily due to continued strong performance in Cash Management from disciplined pricing initiatives in a rising interest rate environment. Financial Markets was down 8 per cent at ccy, mainly from lower trading revenue across products on the back of subdued market volatility and non-repeat of the gains on mark-to-market liabilities in 2022 partly offset by securities services income benefitting from rising interest rates

•       Underlying operating expenses increased 10 per cent at ccy, mainly due to inflation, business growth and targeted investments

•       Credit impairment increased $72m in 3Q'23 reflecting further provisions in the China commercial real estate sector

•       Risk-weighted assets of $143 billion as of 30.09.23 are broadly flat since 31.12.22, as underlying asset growth and mix was offset by optimisation actions of the low-returning portfolio and favourable foreign exchange translation

•       RoTE increased 1.4 percentage points to 17.9 per cent from 16.5 per cent in 3Q'22 



 

Page 16

Supplementary financial information continued

Consumer, Private & Business Banking


3Q'23
$million

3Q'221
$million

Change3
%

Constant currency change2,3
%

2Q'23
$million

Change3
%

Constant currency change2,3
%

YTD23
$million

YTD221
$million

Change3
%

Constant currency change2,3
%

Operating income

1,849

1,591

16

17

1,784

4

4

5,405

4,436

22

25

Transaction Banking

47

33

42

42

45

4

4

135

85

59

65

Trade & Working Capital

13

13

-

-

12

8

8

36

44

(18)

(14)

Cash Management

34

20

70

70

33

3

3

99

41

141

148

Lending & Portfolio Management

6

10

(40)

(33)

7

(14)

(14)

23

32

(28)

(14)

Wealth Management

526

454

16

18

495

6

7

1,532

1,438

7

9

Retail Products

1,266

1,095

16

17

1,227

3

4

3,700

2,871

29

33

CCPL & other unsecured lending

270

292

(8)

(6)

264

2

3

809

896

(10)

(6)

Deposits

933

622

50

51

857

9

9

2,571

1,219

111

117

Mortgage & Auto

31

140

(78)

(78)

74

(58)

(57)

219

621

(65)

(64)

Other Retail Products

32

41

(22)

(21)

32

-

-

101

135

(25)

(22)

Other

4

(1)

nm⁷

nm⁷

10

(60)

(60)

15

10

50

50

Operating expenses

(1,065)

(1,024)

(4)

(6)

(1,042)

(2)

(3)

(3,140)

(3,074)

(2)

(5)

Operating profit before impairment losses and taxation

784

567

38

38

742

6

6

2,265

1,362

66

71

Credit impairment

(115)

(86)

(34)

(40)

(46)

(150)

(152)

(223)

(166)

(34)

(42)

Other impairment

-

-

nm⁷

nm⁷

-

nm⁷

100

-

(1)

100

-

Underlying profit before taxation

669

481

39

38

696

(4)

(4)

2,042

1,195

71

75

Restructuring

(17)

(22)

23

27

(14)

(21)

(23)

(33)

(39)

15

27

Reported profit before taxation

652

459

42

41

682

(4)

(4)

2,009

1,156

74

79

Total assets

126,714

129,698

(2)

(4)

129,660

(2)

(1)

126,714

129,698

(2)

(4)

Of which: loans and advances to customers4

124,178

126,961

(2)

(4)

127,039

(2)

(1)

124,178

126,961

(2)

(4)

Total liabilities

190,925

176,087

8

7

190,690

-

1

190,925

176,087

8

7

Of which: customer accounts4

186,131

171,730

8

7

185,741

-

1

186,131

171,730

8

7

Risk-weighted assets

50,365

50,923

(1)

nm⁷

50,664

(1)

nm⁷

50,365

50,923

(1)

nm⁷

Income return on risk-weighted
assets (%)5

14.5

12.3

220bps

nm⁷

14.1

40bps

nm⁷

14.2

11.3

290bps

-

Underlying return on tangible
equity (%)5

27.2

19.2

800bps

nm⁷

28.3

(110)bps

nm⁷

27.8

15.7

1,210bps

nm⁷

Cost to income ratio (%)6

57.6

64.4

6.8

6.3

58.4

0.8

0.6

58.1

69.3

11.2

11.2

1      Underlying performance for relevant periods in 2022 has been restated for the removal of exit markets and businesses in AME.

2      Comparisons presented on the basis of the current period's transactional currency rate, ensuring like-for-like currency rates between the two periods

3      Variance is better/(worse), except for risk-weighted assets, assets and liabilities which is increase/(decrease)

4      Loans and advances to customers includes FVTPL 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 $669 million was up 38 per cent at constant currency ("ccy") mainly driven by higher income partly offset by higher expenses and impairments

•       Underlying operating income of $1,849 million was up 17 per cent at ccy. The benefit from higher interest rates on Retail Deposit income and a continued recovery in Wealth Management across key footprint markets, was partly offset by lower Mortgage income negatively impacted by the Best Lending Rate cap in Hong Kong

•       Underlying operating expenses increased 6 per cent at ccy, including the benefit of gross productivity saves in 3Q'23; with positive 11 per cent income-to-cost jaws in 3Q'23

•       Credit impairment of $115 million increased $29 million

•       Customer accounts increased 7 per cent at ccy year-on-year, due to strong growth driven by Affluent clients

•       RoTE increased 8 percentage points to 27.2 per cent from 19.2 per cent in 3Q'22



 


Page 17

Supplementary financial information continued

Ventures


3Q'23
$million

3Q'22
$million

Change2
%

Constant currency change1,2
%

2Q'23
$million

Change2
%

Constant currency change1,2
%

YTD23
$million

YTD22
$million

Change2
%

Constant currency change1,2
%

Operating income

35

10

nm⁶

nm⁶

72

(51)

(50)

124

15

nm⁶

nm⁶

Retail Products

13

4

nm⁶

nm⁶

12

8

17

30

9

nm⁶

nm⁶

CCPL & other unsecured lending

27

6

nm⁶

nm⁶

22

23

17

64

12

nm⁶

nm⁶

Deposits

(14)

(2)

nm⁶

nm⁶

(10)

(40)

(27)

(34)

(3)

nm⁶

nm⁶

Other Retail Products

-

-

nm⁶

nm⁶

-

nm⁶

nm⁶

-

-

nm⁶

nm⁶

Treasury

8

-

nm⁶

nm⁶

7

14

29

20

-

nm⁶

nm⁶

Other

14

6

133

160

53

(74)

(75)

74

6

nm⁶

nm⁶

Operating expenses

(109)

(87)

(25)

(24)

(109)

-

-

(320)

(233)

(37)

(37)

Operating Loss before impairment losses and taxation

(74)

(77)

4

8

(37)

(100)

(97)

(196)

(218)

10

11

Credit impairment

(30)

(4)

nm⁶

nm⁶

(13)

(131)

(131)

(53)

(7)

nm⁶

nm⁶

Other impairment

(9)

-

nm⁶

nm⁶

-

nm⁶

nm⁶

(9)

-

nm⁶

nm⁶

Profit from associates and
joint ventures

(4)

(4)

-

(33)

(5)

20

-

(17)

(11)

(55)

(55)

Underlying loss before taxation

(117)

(85)

(38)

(34)

(55)

(113)

(113)

(275)

(236)

(17)

(16)

Restructuring

-

-

nm⁶

nm⁶

(1)

100

nm⁶

(1)

(1)

-

-

Reported loss before taxation

(117)

(85)

(38)

(34)

(56)

(109)

(113)

(276)

(237)

(16)

(16)

Total assets

3,398

1,574

116

125

3,076

10

12

3,398

1,574

116

125

Of which: loans and advances
to customers3

1,014

480

111

110

947

7

7

1,014

480

111

110

Total liabilities

2,581

981

163

160

2,317

11

12

2,581

981

163

160

Of which: customer accounts3

2,316

886

161

159

2,072

12

12

2,316

886

161

158

Risk-weighted assets

1,786

1,158

54

nm⁶

1,925

(7)

nm⁶

1,786

1,158

54

66

Income return on risk-weighted
assets (%)4

8.3

5.1

320bps

nm⁶

18.9

nm⁶

nm⁶

11.2

3.4

nm⁶

nm⁶

Underlying return on tangible
equity (%)4

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

Cost to income ratio (%)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), except for risk-weighted assets, assets and liabilities which is increase/(decrease)

3      Loans and advances to customers includes FVTPL 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 increased 34 per cent at constant currency to $117 million reflecting the Group's continued investment in transformational digital initiatives. Income more than tripled to $35 million but this increase was offset by increased expenses, albeit expenses were flat quarter-on-quarter. The impairment charge increased $26 million to $30 million reflecting the build of expected credit loss provisions as the credit portfolios grow

•       Loans and advances to customers of $1 billion increased 110 per cent year-on-year ("YoY"), whilst customer accounts of $2.3 billion increased 159 per cent YoY, with strong growth in the two digital banks, Mox and Trust

•       Risk Weighted Assets of $1.8 billion increased $0.6 billion



 

Page 18

Supplementary financial information continued

Central & other items (segment)


3Q'23
$million

3Q'221
$million

Change3
%

Constant currency change2,3
%

2Q'23
$million

Change3
%

Constant currency change2,3
%

YTD23
$million

YTD221
$million

Change3
%

Constant currency change2,3
%

Operating income

(295)

(35)

nm⁸

nm⁸

(232)

(27)

(30)

(812)

405

nm⁸

nm⁸

Treasury

(282)

(5)

nm⁸

nm⁸

(167)

(69)

(69)

(687)

510

nm⁸

nm⁸

Other

(13)

(30)

57

(55)

(65)

80

73

(125)

(105)

(19)

(64)

Operating expenses

(209)

(189)

(11)

-

(275)

24

22

(609)

(524)

(16)

(21)

Operating (loss)/profit before impairment losses and taxation

(504)

(224)

(125)

(123)

(507)

1

(2)

(1,421)

(119)

nm⁸

nm⁸

Credit impairment

10

(55)

118

130

(10)

200

nm⁸

38

(42)

190

nm

Other impairment

(4)

-

nm⁸

nm⁸

(42)

90

90

(46)

-

nm⁸

nm⁸

Profit from associates and
joint ventures

7

20

(65)

(61)

88

(92)

(92)

114

180

(37)

(36)

Underlying profit/(loss)
before taxation

(491)

(259)

(90)

(92)

(471)

(4)

(6)

(1,315)

19

nm⁸

nm⁸

Restructuring

(1)

(6)

83

-

(11)

91

71

(1)

(17)

94

88

Goodwill & other impairment7

(697)

-

nm⁸

nm⁸

-

nm⁸

nm⁸

(697)

-

nm

nm

Reported (loss)/profit before taxation

(1,189)

(265)

nm⁸

nm

(482)

(147)

(148)

(2,013)

2

nm⁸

nm⁸

Total assets

299,783

279,178

7

6

304,974

(2)

(1)

299,783

279,178

7

6

Of which: loans and advances
to customers4

26,686

35,388

(25)

(27)

33,623

(21)

(20)

26,686

35,388

(25)

(27)

Total liabilities

112,699

102,895

10

10

105,326

7

7

112,699

102,895

10

10

Of which: customer accounts4

7,590

6,517

16

17

8,394

(10)

(9)

7,590

6,517

16

17

Risk-weighted assets

45,969

50,433

(9)

nm⁸

49,270

(7)

nm⁸

45,969

50,433

(9)

nm⁸

Income return on risk-weighted
assets (%)5

(2.4)

(0.3)

(210)bps

nm⁸

(1.9)

(50)bps

nm⁸

(2.2)

1.0

(320)bps

nm⁸

Underlying return on tangible
equity (%)5

(38.5)

(15.9)

nm⁸

nm⁸

(25.4)

(1,310)bps

nm⁸

(29.8)

(5.8)

nm⁸

nm⁸

Cost to income ratio (%)
(excluding UK bank levy)6

nm⁸

nm⁸

nm⁸

nm⁸

nm⁸

nm⁸

nm⁸

nm⁸

130.6

nm⁸

nm⁸

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets in AME and (ii) Aviation Finance. No change to reported performance

2      Comparisons presented on the basis of the current period's transactional currency rate, ensuring like-for-like currency rates between the two periods

3      Variance is better/(worse), except for risk-weighted assets, assets and liabilities which is increase/(decrease)

4      Loans and advances to customers includes FVTPL 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      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

8      Not meaningful

Performance highlights

•       Underlying loss before tax of $491 million compared to 3Q'22 loss of $259 million primarily due to lower Treasury income and increased operating expenses, while there was a net release in credit impairment relating to exposure reductions. Associate income reduced by $13 million reflecting lower profits at Bohai

•       Underlying operating income was down $260 million year-on-year, with hedge losses increasing by $170 million to $267 million on the back of increased US Dollar interest rates



 

Page 19

Supplementary financial information continued

Underlying performance by region


3Q'23

Asia
$million

 Africa &
Middle East
$million

Europe &
Americas
$million

Central &
other items (region)
$million

Total
$million

Operating income

3,169

677

337

220

4,403

Operating expenses

(1,797)

(398)

(447)

(128)

(2,770)

Operating profit/(loss) before impairment losses and taxation

1,372

279

(110)

92

1,633

Credit impairment

(311)

(2)

18

1

(294)

Other impairment

(7)

(4)

2

(17)

(26)

Profit from associates and joint ventures

9

-

-

(6)

3

Underlying profit/(loss) before taxation

1,063

273

(90)

70

1,316

Restructuring

(36)

(19)

(6)

54

(7)

Goodwill & other impairment⁵

(697)

-

-

-

(697)

DVA

-

16

5

-

21

Reported profit/(loss) before taxation

330

270

(91)

124

633

Total assets

498,242

51,170

267,503

8,918

825,833

Of which: loans and advances to customers1

248,983

22,273

58,164

-

329,420

loans and advances to customers

235,692

19,482

25,835

-

281,009

loans held at fair value through profit or loss

13,291

2,791

32,329

-

48,411

Total liabilities

451,638

41,534

202,250

82,055

777,477

Of which: customer accounts1

356,439

32,276

127,107

-

515,822

Risk-weighted assets

150,842

38,529

48,227

3,908

241,506

Income return on risk-weighted assets (%)2

8.2

6.8

2.7

22.1

7.1

Underlying return on tangible equity (%)2

14.7

13.1

(3.9)

nm⁶

7.0

Cost to income ratio (%)3

56.7

58.8

132.6

nm⁶

62.9

 


3Q'224

Asia
$million

 Africa &
Middle East
$million

Europe &
Americas
$million

Central &
other items (region)
$million

Total
$million

Operating income

2,891

616

580

51

4,138

Operating expenses

(1,665)

(395)

(371)

(145)

(2,576)

Operating profit/(loss) before impairment losses and taxation

1,226

221

209

(94)

1,562

Credit impairment

(193)

(73)

34

-

(232)

Other impairment

-

2

1

(3)

-

Profit from associates and joint ventures

20

-

-

(4)

16

Underlying profit/(loss) before taxation

1,053

150

244

(101)

1,346

Restructuring

(36)

16

18

(8)

(10)

DVA

22

6

27

-

55

Reported profit/(loss) before taxation

1,039

172

289

(109)

1,391

Total assets

497,193

54,724

303,617

8,901

864,435

Of which: loans and advances to customers1

258,911

24,705

69,995

-

353,611

loans and advances to customers

242,700

23,644

32,046

-

298,390

loans held at fair value through profit or loss

16,211

1,061

37,949

-

55,221

Total liabilities

452,959

41,116

249,771

70,586

814,432

Of which: customer accounts1

334,954

31,697

145,315

-

511,966

Risk-weighted assets

156,553

42,746

50,779

2,215

252,293

Income return on risk-weighted assets (%)2

7.3

5.6

4.6

12.3

6.5

Underlying return on tangible equity (%)2

14.1

7.1

10.1

nm⁵

9.4

Cost to income ratio (%)3

57.6

64.1

64.0

nm⁵

62.3

1      Loans and advances to customers includes FVTPL and customer accounts includes FVTPL and repurchase agreements

2      Change is the basis points (bps) difference between the two periods rather than the percentage change

3      Change is the percentage points difference between the two periods rather than the percentage change

4      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

5      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

6      Not meaningful

Page 20

Supplementary financial information continued

Asia


3Q'23
$million

3Q'226
$million

Change2
%

Constant currency change1,2
%

2Q'23
$million

Change2
%

Constant currency change1,2
%

YTD'23
$million

YTD226
$million

Change2
%

Constant currency change1,2
%

Operating income

3,169

2,891

10

10

3,164

-

1

9,524

8,230

16

18

Operating expenses

(1,797)

(1,665)

(8)

(9)

(1,777)

(1)

(2)

(5,324)

(4,983)

(7)

(9)

Operating profit before impairment losses and taxation

1,372

1,226

12

11

1,387

(1)

(1)

4,200

3,247

29

32

Credit impairment

(311)

(193)

(61)

(60)

(118)

(164)

(164)

(493)

(591)

17

15

Other impairment

(7)

-

nm⁸

nm⁸

(3)

(133)

nm⁸

(9)

(3)

(200)

nm⁸

Profit from associates and
joint ventures

9

20

(55)

(53)

88

(90)

(90)

114

176

(35)

(35)

Underlying profit before taxation

1,063

1,053

1

-

1,354

(21)

(21)

3,812

2,829

35

37

Restructuring

(36)

(36)

-

(6)

(15)

(140)

(157)

(58)

(23)

(152)

(132)

Goodwill & other impairment⁷

(697)

-

nm⁸

nm⁸

-

nm⁸

nm⁸

(697)

-

nm⁸

nm⁸

DVA

-

22

(100)

(105)

(35)

100

97

(22)

65

(134)

(134)

Reported profit before taxation

330

1,039

(68)

(68)

1,304

(75)

(74)

3,035

2,871

6

7

Total assets

498,242

497,193

-

(1)

500,118

-

-

498,242

497,193

-

(1)

Of which: loans and advances
to customers3

248,983

258,911

(4)

(5)

255,211

(2)

(2)

248,983

258,911

(4)

(5)

Total liabilities

451,638

452,959

-

(1)

445,833

1

2

451,638

452,959

-

(1)

Of which: customer accounts3

356,439

334,954

6

5

353,487

1

1

356,439

334,954

6

5

Risk-weighted assets

150,842

156,553

(4)

nm⁸

155,410

(3)

nm⁸

150,842

156,553

(4)

nm⁸

Income return on risk-weighted
assets (%)4

8.2

7.3

90bps

nm⁸

8.2

-

nm⁸

8.3

6.7

160bps

nm⁸

Underlying return on tangible
equity (%)4

14.7

14.1

60bps

nm⁸

18.8

(410)bps

nm⁸

17.6

12.2

540bps

nm⁸

Cost to income ratio (%)5

56.7

57.6

0.9

0.6

56.2

(0.5)

(0.6)

55.9

60.5

4.6

4.5

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 includes FVTPL 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      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) Aviation Finance and (ii) DVA. No change to reported performance

7      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

8      Not meaningful

Performance highlights

•       Underlying profit before tax of $1,063 million was up 1 per cent, primarily from broad based income growth offset by a 9 per cent increase in operating expenses at constant currency ("ccy") and a $118m increase in credit impairment reflecting further provisions related to the China commercial real estate portfolio

•       Underlying operating income of $3,169 million was up 10 per cent, mainly strong double-digit increases across Cash Management, Retail Deposits and Wealth Management partly offset by lower Mortgage income and a loss in Treasury Markets

•       The profit share from Bohai reduced by $11 million

•       Loans and advances to customers were down 5 per cent and customer accounts were up 5 per cent at ccy year-on-year ("YoY")

•       Risk-weighted assets down 4 per cent YoY

•       RoTE increased 60 basis points to 14.7 per cent from 14.1 per cent in 3Q'22



 

Page 21

Supplementary financial information continued

Africa & Middle East


3Q'23
$million

3Q'226
$million

Change2
%

Constant currency change1,2
%

2Q'23
$million

Change2
%

Constant currency change1,2
%

YTD'23
$million

YTD226
$million

Change2
%

Constant currency change1,2
%

Operating income

677

616

10

19

765

(12)

(10)

2,118

1,818

17

30

Operating expenses

(398)

(395)

(1)

(9)

(399)

-

(3)

(1,194)

(1,144)

(4)

(12)

Operating profit before impairment losses and taxation

279

221

26

38

366

(24)

(25)

924

674

37

65

Credit impairment

(2)

(73)

97

104

(17)

88

113

7

26

(73)

(74)

Other impairment

(4)

2

nm⁷

nm⁷

-

nm⁷

(33)

(5)

1

nm⁷

nm⁷

Underlying profit before taxation

273

150

82

83

349

(22)

(21)

926

701

32

54

Restructuring

(19)

16

nm⁷

nm⁷

17

nm⁷

nm⁷

16

35

(54)

(6)

DVA

16

6

167

183

(10)

nm⁷

nm⁷

13

21

(38)

(38)

Reported profit before taxation

270

172

57

64

356

(24)

(21)

955

757

26

49

Total assets

51,170

54,724

(6)

-

50,716

1

2

51,170

54,724

(6)

-

Of which: loans and advances
to customers3

22,273

24,705

(10)

(5)

22,498

(1)

-

22,273

24,705

(10)

(5)

Total liabilities

41,534

41,116

1

6

40,487

3

3

41,534

41,116

1

6

Of which: customer accounts3

32,276

31,697

2

7

30,922

4

5

32,276

31,697

2

7

Risk-weighted assets

38,529

42,746

(10)

nm⁷

41,068

(6)

nm⁷

38,529

42,746

(10)

nm⁷

Income return on risk-weighted
assets (%)4

6.8

5.6

(120)bps

nm⁷

7.6

(80)bps

nm⁷

7.0

5.4

160bps

nm⁷

Underlying return on tangible
equity (%)4

13.1

7.1

600bps

nm⁷

17.9

(480)bps

nm⁷

15.4

10.7

470bps

nm⁷

Cost to income ratio (%)5

58.8

64.1

5.3

5.4

52.2

(6.6)

(7.7)

56.4

62.9

6.5

9.1

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 includes FVTPL 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      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME and (ii) DVA. No change to reported performance

7      Not meaningful

Performance highlights

•       Underlying profit before tax of $273 million, was up 83 per cent at constant currency ("ccy"), driven by higher income and lower credit impairment, partly offset by a 9 per cent increase in operating expenses at ccy  

•       Underlying operating income of $677 million was up 19 per cent at ccy, with strong growth in Cash Management and Retail Deposit income partly offset by a loss in Treasury Markets

•       Credit Impairment reduced $71 million to $2m, reflecting a non-repeat of the prior year's sovereign-related impairments  

•       Loans and advances to customers were down 5 per cent at ccy year-on-year ("YoY") partly due de-risking actions; Customer accounts were up 7 per cent at ccy

•       Risk-weighted assets are down 10 per cent YoY

•       RoTE increased 6 percentage points to 13.1 per cent from 7.1 per cent in 3Q'22



 


Page 22

Supplementary financial information continued

Europe & Americas


3Q'23
$million

3Q'226
$million

Change2
%

Constant currency change1,2
%

2Q'23
$million

Change2
%

Constant currency change1,2
%

YTD'23
$million

YTD226
$million

Change2
%

Constant currency change1,2
%

Operating income

337

580

(42)

(44)

437

(23)

(22)

1,187

1,955

(39)

(40)

Operating expenses

(447)

(371)

(20)

(18)

(433)

(3)

(3)

(1,313)

(1,133)

(16)

(16)

Operating (loss)/profit before impairment losses and taxation

(110)

209

(153)

(149)

4

nm⁷

nm⁷

(126)

822

(115)

(115)

Credit impairment

18

34

(47)

(47)

(6)

nm⁷

nm⁷

14

65

(78)

(78)

Other impairment

2

1

100

200

9

(78)

(67)

11

3

nm⁷

nm⁷

Underlying (loss)/profit
before taxation

(90)

244

(137)

(134)

7

nm⁷

nm⁷

(101)

890

(111)

(111)

Restructuring

(6)

18

(133)

(128)

(3)

(100)

(150)

13

6

117

63

DVA

5

27

(81)

(82)

(48)

110

110

(9)

89

(110)

(110)

Reported profit before taxation

(91)

289

(131)

(129)

(44)

(107)

(93)

(97)

985

(110)

(110)

Total assets

267,503

303,617

(12)

(12)

278,561

(4)

(4)

267,503

303,617

(12)

(12)

Of which: loans and advances
to customers3

58,164

69,995

(17)

(18)

58,114

-

1

58,164

69,995

(17)

(18)

Total liabilities

202,250

249,771

(19)

(20)

233,442

(13)

(13)

202,250

249,771

(19)

(20)

Of which: customer accounts3

127,107

145,315

(13)

(13)

145,382

(13)

(12)

127,107

145,315

(13)

(13)

Risk-weighted assets

48,227

50,779

(5)

nm⁷

48,787

(1)

nm⁷

48,227

50,779

(5)

nm⁷

Income return on risk-weighted assets (%)4

2.7

4.6

(190)bps

nm⁷

3.6

(90)bps

nm⁷

3.2

5.1

(190)bps

nm⁷

Underlying return on tangible
equity (%)4

(3.9)

10.1

(1,400)bps

nm⁷

0.2

(410)bps

nm⁷

(1.5)

12.2

(1,370)bps

nm⁷

Cost to income ratio (%)5

132.6

64.0

(68.6)

(69.1)

99.1

(33.5)

(32.5)

110.6

58.0

(52.6)

(53.1)

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 includes FVTPL 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      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) Aviation Finance and (ii) DVA. No change to reported performance

7      Not meaningful

Performance highlights

•       Underlying loss before tax of $90 million compared to profit of $244 million last year was due to lower income, higher expenses and a $16 million lower credit impairment release

•       Underlying operating income down 44 per cent at constant currency ("ccy") reflecting the increased cost of hedges within Treasury, whilst strong growth in Transaction Banking income was partly offset by lower Financial Markets income with both volume and volatility remaining low

•       Expenses up 18 per cent at ccy reflecting the impact of inflation and higher investment spend

•       RoTE was negative 3.9 per cent down 13.9 percentage points from 10.1 per cent in 3Q'22



 

Page 23

Supplementary financial information continued

Central & other items (region)


3Q'23
$million

3Q'225
$million

Change2
%

Constant currency change1,2
%

2Q'23
$million

Change2
%

Constant currency change1,2
%

YTD'23
$million

YTD225
$million

Change2
%

Constant currency change1,2
%

Operating income

220

51

nm⁶

nm⁶

189

16

17

525

(6)

nm⁶

nm⁶

Operating expenses

(128)

(145)

12

22

(220)

42

41

(443)

(412)

(8)

(12)

Operating profit/(loss) before impairment losses and taxation

92

(94)

198

178

(31)

nm⁶

nm⁶

82

(418)

120

120

Credit impairment

1

-

nm⁶

nm⁶

(5)

120

120

6

4

50

100

Other impairment

(17)

(3)

nm⁶

nm⁶

(69)

75

75

(86)

(2)

nm⁶

nm⁶

Profit from associates and
joint ventures

(6)

(4)

(50)

(50)

(5)

(20)

(50)

(17)

(7)

(143)

(113)

Underlying profit/(loss)
before taxation

70

(101)

169

155

(110)

164

161

(15)

(423)

96

96

Restructuring

54

(8)

nm⁶

nm⁶

9

nm⁶

nm⁶

78

(27)

nm⁶

nm⁶

Reported profit/(loss) before taxation

124

(109)

nm⁶

192

(101)

nm⁶

nm⁶

63

(450)

114

114

Total assets

8,918

8,901

-

(1)

9,316

(4)

(4)

8,918

8,901

-

(1)

Total liabilities

82,055

70,586

16

16

69,268

18

18

82,055

70,586

16

16

Risk-weighted assets

3,908

2,215

76

nm⁶

3,852

1

nm⁶

3,908

2,215

76

nm⁶

Income return on risk-weighted
assets (%)3

22.1

12.3

80bps

nm⁶

19.7

nm⁶

nm⁶

18.9

(0.4)

1,930bps

nm⁶

Underlying return on tangible
equity (%)3

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

nm⁶

Cost to income ratio (%)
(excluding UK bank levy)4

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      Change is the basis points (bps) difference between the two periods rather than the percentage change

4      Change is the percentage points difference between the two periods rather than the percentage change

5      Underlying performance for relevant periods in 2022 has been restated for the removal of Aviation Finance. No change to reported performance line

6      Not meaningful

Performance highlights

•       Underlying profit before tax of $70 million compared to $101 million loss in 3Q'22. The return to profitability is mainly due to higher returns paid to Treasury on the equity provided to the regions in a rising interest rate environment, while expenses reduced by 22 per cent at constant currency



 

Page 24

Supplementary financial information continued

Underlying performance by key market


3Q'23

Hong Kong
$million

Korea
$million

China
$million

Taiwan
$million

Singapore
$million

India
$million

Indonesia
$million

UAE
$million

UK
$million

US
$million

Operating income

1,067

275

291

144

635

309

61

191

19

211

Operating expenses

(475)

(181)

(222)

(82)

(295)

(242)

(49)

(99)

(226)

(160)

Operating profit before impairment losses and taxation

592

94

69

62

340

67

12

92

(207)

51

Credit impairment

(203)

(21)

(45)

(1)

(24)

(9)

(10)

12

13

2

(1)

-

(1)

(1)

(2)

(1)

-

-

(4)

7

Profit from associates and joint ventures

-

-

9

-

-

-

-

-

-

-

Underlying profit before taxation

388

73

32

60

314

57

2

104

(198)

60

Total assets employed

180,633

58,751

43,936

22,147

97,981

34,788

5,556

20,835

160,936

90,525

85,199

32,395

16,590

11,003

60,754

14,686

2,547

7,692

25,722

27,546

173,346

49,874

36,085

20,349

106,455

27,014

4,327

18,711

102,747

82,705

144,629

37,368

29,342

17,890

78,878

19,399

2,901

14,064

70,088

46,170

18.2

9.8

3.4

26.6

27.7

6.1

2.3

23.1

(14.2)

6.4

Cost to income ratio (%)

44.5

65.8

76.3

56.9

46.5

78.3

80.3

51.8

nm

75.8

 


2Q'23

Hong Kong
$million

Korea
$million

China
$million

Taiwan
$million

Singapore
$million

India
$million

Indonesia
$million

UAE
$million

UK
$million

US
$million

Operating income

1,055

270

310

142

625

316

61

207

108

218

Operating expenses

(478)

(179)

(217)

(85)

(316)

(211)

(47)

(104)

(222)

(154)

Operating profit before impairment losses and taxation

577

91

93

57

309

105

14

103

(114)

64

Credit impairment

(88)

(8)

(26)

(9)

(15)

(1)

3

7

(10)

2

-

-

-

-

(1)

(1)

-

-

13

(3)

Profit from associates and joint ventures

-

-

88

-

-

-

-

-

-

-

Underlying profit before taxation

489

83

155

48

293

103

17

110

(111)

63

Total assets employed

182,512

62,885

41,808

21,536

99,103

35,830

5,064

19,105

171,028

91,860

85,004

37,764

14,554

10,838

64,268

14,980

2,388

7,519

34,338

19,284

170,945

53,204

34,064

20,448

103,381

27,937

3,922

16,742

132,756

84,648

142,766

41,075

24,127

18,656

77,591

20,788

2,896

12,856

85,767

49,749

23.3

11.4

16.6

23.0

26.9

10.8

12.9

23.9

(7.9)

7.1

Cost to income ratio (%)

45.3

66.3

70.0

59.9

50.6

66.8

77.0

50.2

205.6

70.6

1      Loans and advances to customers includes FVTPL and customer accounts includes FVTPL and repurchase agreements


Page 25

Supplementary financial information continued

 


3Q'222

Hong Kong
$million

Korea
$million

China
$million

Taiwan
$million

Singapore
$million

India
$million

Indonesia
$million

UAE
$million

UK
$million

US
$million

Operating income

945

289

313

119

542

292

47

153

251

263

Operating expenses

(462)

(179)

(214)

(82)

(263)

(189)

(42)

(91)

(176)

(146)

Operating profit before impairment losses and taxation

483

110

99

37

279

103

5

62

75

117

Credit impairment

(145)

(18)

(53)

(2)

65

(11)

2

25

10

12

(4)

-

(1)

-

(2)

(2)

-

(1)

11

(2)

Profit from associates and joint ventures

-

-

19

-

-

-

-

-

-

-

Underlying profit before taxation

334

92

64

35

342

90

7

86

96

127

Total assets employed

177,682

65,950

40,772

24,660

98,714

31,817

5,868

20,160

220,271

68,973

86,348

39,854

15,211

10,938

60,136

15,029

2,185

8,186

46,182

19,962

167,509

56,038

36,599

23,529

109,115

23,998

4,702

16,035

162,730

72,122

132,780

39,297

26,339

19,507

77,179

14,577

3,219

12,569

105,413

31,136

15.4

12.3

6.5

15.5

29.1

9.2

4.8

16.5

6.5

16.2

Cost to income ratio (%)

48.9

61.9

68.4

68.9

48.5

64.7

89.4

59.5

70.1

55.5

1      Loans and advances to customers includes FVTPL and customer accounts includes FVTPL and repurchase agreements

2      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

Quarterly underlying operating income by product


3Q'23
$million

2Q'23
$million

1Q'232
$million

4Q'221,2
$million

3Q'221,2
$million

2Q'221,2
$million

1Q'221,2
$million

4Q'211,2
$million

Transaction Banking

1,496

1,461

1,399

1,254

1,067

824

729

718

Trade & Working capital

325

334

331

316

335

336

356

341

Cash Management

1,171

1,127

1,068

938

732

488

373

377

Financial Markets

1,253

1,391

1,414

1,147

1,386

1,255

1,557

900

Macro Trading

634

825

830

628

736

662

939

427

Credit Markets

472

462

460

436

455

396

474

462

Credit Trading

137

140

172

147

152

84

105

59

Financing Solutions & Issuance2

335

322

288

289

303

312

369

403

Financing & Securities Services2

147

104

124

83

195

197

144

11

Lending & Portfolio Management

121

132

134

112

164

136

146

183

Wealth Management

526

495

511

358

454

456

528

464

Retail Products

1,279

1,240

1,212

1,147

1,099

944

837

823

CCPL & other unsecured lending

297

286

290

294

298

310

300

311

Deposits

919

848

771

805

620

355

241

206

Mortgage & Auto

31

74

114

12

140

235

246

260

Other Retail Products

32

32

37

36

41

44

50

46

Treasury

(274)

(160)

(233)

(173)

(5)

201

314

150

Other

2

(4)

(41)

(80)

(27)

(33)

(35)

(54)

Total underlying operating income

4,403

4,555

4,396

3,765

4,138

3,783

4,076

3,184

1      Restatements relating to (a) exit of seven markets in AME (b) exit of Aviation Finance Business and (c) Reporting DVA outside of Underlying Income, have been made to reflect these items below the line

2      Shipping Finance is now reported under "Financing Solutions & Issuance" which was reported under "Financing & Securities Services" in Q1 '23



 


Page 26

Supplementary financial information continued

Earnings per ordinary share


3Q'23
$million

3Q'22¹
$million

Change
%

2Q'23
$million

Change
%

YTD'23
$million

YTD'22¹
$million

Change
%

Profit for the period attributable to equity holders

139

1,078

(87)

1,041

(87)

2,524

3,166

(20)

Non-controlling interest

6

9

(33)

6

-

9

10

(10)

Dividend payable on preference shares and AT1 classified as equity

(180)

(123)

(46)

(65)

(177)

(423)

(339)

(25)

Profit for the period attributable to
ordinary shareholders

(35)

964

(104)

982

nm⁴

2,110

2,837

(26)










Items normalised:









Restructuring

7

10

(30)

(8)

nm4

(49)

9

nm4

Goodwill and other impairment3

697

-

nm⁴

-

nm4

697

-

nm4

DVA

(21)

(55)

62

93

nm4

18

(175)

nm4

Tax on normalised items

(4)

(4)

-

(15)

nm4

(4)

10

nm4

Underlying profit for the period attributable to
ordinary shareholders

644

915

(30)

1,052

(39)

2,772

2,681

3










Basic - Weighted average number of shares (millions)

2,772

2,949

nm4

2,818

nm4

2,816

2,992

nm4

Diluted - Weighted average number of shares (millions)

2,837

3,011

nm4

2,884

nm4

2,880

3,050

nm4










Basic earnings per ordinary share (cents)2

(1.3)

32.7

(34.0)

34.8

(36.1)

74.9

94.8

(19.9)

Diluted earnings per ordinary share (cents)2

(1.2)

32.0

(33.2)

34.0

(35.2)

73.3

93.0

(19.7)

Underlying basic earnings per ordinary share (cents)2

23.2

31.0

(7.8)

37.3

(14.1)

98.4

89.6

8.8

Underlying diluted earnings per ordinary share (cents)2

22.7

30.4

(7.7)

36.5

(13.8)

96.3

87.9

8.4

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

2      Change is the percentage points difference between the two periods rather than the percentage change

3      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai).

4      Not meaningful



 


Page 27

Supplementary financial information continued

Return on Tangible Equity


3Q'23
$million

3Q'221
$million

Change
%

2Q'23
$million

Change
%

YTD'23
$million

YTD'221
$million

Change
%

Average parent company Shareholders' Equity

43,135

43,592

(1)

43,964

(2)

43,580

44,600

(2)

Less Preference share premium

(1,494)

(1,494)

-

(1,494)

-

(1,494)

(1,494)

-

Less Average intangible assets

(5,948)

(5,529)

(8)

(5,895)

(1)

(5,907)

(5,511)

(7)

Average Ordinary Shareholders' Tangible Equity

35,693

36,569

(2)

36,575

(2)

36,179

37,595

(4)










Profit for the period attributable to equity holders

139

1,078

(87)

1,041

(87)

2,524

3,166

(20)

Non-controlling interests

6

9

(33)

6

-

9

10

(10)

Dividend payable on preference shares and
AT1 classified as equity

(180)

(123)

(46)

(65)

(177)

(423)

(339)

(25)

Profit for the period attributable to
ordinary shareholders

(35)

964

nm3

982

nm3

2,110

2,837

nm3










Items normalised:









Restructuring

7

10

(30)

(8)

nm3

(49)

9

nm3

Goodwill and Other impairment2

697

-

nm3

-

nm3

697

-

nm3

Ventures FVOCI unrealised gains/(losses)
net of tax

(11)

(49)

78

52

nm3

32

(57)

nm3

DVA

(21)

(55)

62

93

nm3

18

(175)

nm3

Tax on normalised items

(4)

(4)

-

(15)

73

(4)

10

nm3

Underlying profit for the period attributable to ordinary shareholders

633

866

(27)

1,104

(43)

2,804

2,624

(58)










Underlying Return on Tangible Equity

7.0%

9.4%

(240)bps

12.1%

(510)bps

10.4%

9.3%

110bps

Reported Return on Tangible Equity

(0.4)%

10.5%

(1,090)bps

10.8%

(1,120)bps

7.8%

10.1%

(230)bps

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

2      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

3      Not meaningful

Net Tangible Asset Value per Share


30.09.23
$million

30.09.22
$million

Change
%

30.06.23
$million

Change
%

31.12.22
$million

Change
%

Parent company shareholders equity

42,466

43,127

(2)

43,803

(3)

43,162

(2)

Less Preference share premium

(1,494)

(1,494)

-

(1,494)

-

(1,494)

-

Less Intangible assets

(5,997)

(5,520)

(9)

(5,898)

(2)

(5,869)

(2)

Net shareholders tangible equity

34,975

36,113

(3)

36,411

(4)

35,799

(2)









Ordinary shares in issue, excluding own shares (millions)

2,725

2,905

(6)

2,797

(3)

2,867

(5)

Net Tangible Asset Value per share (cents)1

1,283

1,243

40

1,302

(19)

1,249

34

1      Change is cents difference between the two periods rather than the percentage change


Page 28

Underlying versus reported results reconciliations

Reconciliations between underlying and reported results are set out in the tables below:

Operating income by client segment


3Q'23

Corporate, Commercial & Institutional Banking
$million

Consumer,
Private &
Business
Banking
$million

Ventures
$million

Central &
other items (segment)
$million

Total
$million

Underlying operating income

2,814

1,849

35

(295)

4,403

Restructuring

77

10

-

12

99

DVA

21

-

-

-

21

Reported operating income

2,912

1,859

35

(283)

4,523

 


3Q'22¹

Corporate, Commercial & Institutional Banking
$million

Consumer,
Private &
Business
Banking
$million

Ventures
$million

Central &
other items (segment)
$million

Total
$million

Underlying operating income

2,572

1,591

10

(35)

4,138

Restructuring

128

9

-

(1)

136

DVA

55

-

-

-

55

Reported operating income

2,755

1,600

10

(36)

4,329

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

Operating income by region


3Q'23

Asia
$million

 Africa &
Middle East
$million

Europe & Americas
$million

Central &
other items (region)
$million

Total
$million

Underlying operating income

3,169

677

337

220

4,403

Restructuring

61

20

8

10

99

DVA

-

16

5

-

21

Reported operating income

3,230

713

350

230

4,523

 


3Q'22¹

Asia
$million

 Africa &
Middle East
$million

Europe &
Americas
$million

Central &
other items (region)
$million

Total
$million

Underlying operating income

2,891

616

580

51

4,138

Restructuring

76

30

25

5

136

DVA

22

6

27

-

55

Reported operating income

2,989

652

632

56

4,329

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance  



 

Page 29

Underlying versus reported results reconciliations continued

Net interest income and Other income


3Q'23

3Q'22

Underlying
$million

Restructuring
$million

Adjustment for Financial Markets funding costs and financial guarantee fees on interest earning assets
$million

Reported
$million

Underlying
$million

Restructuring
$million

Adjustment
for Financial Markets funding costs and financial guarantee
fees on
interest earning assets
$million

Reported
$million

Net interest income1

2,388

(8)

(455)

1,925

2,017

6

(91)

1,932

Other income1

2,015

128

455

2,598

2,121

185

91

2,397

Total income

4,403

120

-

4,523

4,138

191

-

4,329

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 Other Income (OI). The adjustments made to NIM, including Interest expense relating to funding our trading book, will now be shown against Underlying Other Income rather than Underlying NII. There is no impact on total income

Profit before taxation (PBT)


3Q'23

Underlying
$million

Restructuring
$million

Goodwill &
other impairment²
$million

DVA
$million

Reported
$million

Operating income

4,403

99

-

21

4,523

Operating expenses

(2,770)

(100)

-

-

(2,870)

Operating profit/(loss) before impairment losses and taxation

1,633

(1)

-

21

1,653

Credit impairment

(294)

2

-

-

(292)

Other impairment

(26)

(11)

(697)

-

(734)

Profit from associates and joint ventures

3

3

-

-

6

Profit/(loss) before taxation

1,316

(7)

(697)

21

633

 


3Q'22¹

Underlying
$million

Restructuring
$million

Goodwill &
other
impairment
$million

DVA
$million

Reported
$million

Operating income

4,138

136

-

55

4,329

Operating expenses

(2,576)

(120)

-

-

(2,696)

Operating profit/(loss) before impairment losses and taxation

1,562

16

-

55

1,633

Credit impairment

(232)

5

-

-

(227)

Other impairment

-

(31)

-

-

(31)

Profit from associates and joint ventures

16

-

-

-

16

Profit/(loss) before taxation

1,346

(10)

-

55

1,391

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

2      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)



 

Page 30

Underlying versus reported results reconciliations continued

Profit before taxation (PBT) by client segment


3Q'23

Corporate, Commercial & Institutional Banking
$million

Consumer,
Private &
Business
Banking
$million

Ventures
$million

Central &
other items (segment)
$million

Total
$million

Operating income

2,814

1,849

35

(295)

4,403

External

2,084

1,003

35

1,281

4,403

Inter-segment

730

846

-

(1,576)

-

Operating expenses

(1,387)

(1,065)

(109)

(209)

(2,770)

Operating profit/(loss) before impairment losses and taxation

1,427

784

(74)

(504)

1,633

Credit impairment

(159)

(115)

(30)

10

(294)

Other impairment

(13)

-

(9)

(4)

(26)

Profit from associates and joint ventures

-

-

(4)

7

3

Underlying profit/(loss) before taxation

1,255

669

(117)

(491)

1,316

Restructuring

11

(17)

-

(1)

(7)

Goodwill & other impairment2

-

-

-

(697)

(697)

DVA

21

-

-

-

21

Reported profit/(loss) before taxation

1,287

652

(117)

(1,189)

633

 


3Q'22¹

Corporate, Commercial & Institutional Banking
$million

Consumer,
Private &
Business
Banking
$million

Ventures
$million

Central &
other items (segment)
$million

Total
$million

Operating income

2,572

1,591

10

(35)

4,138

External

2,232

1,278

10

618

4,138

Inter-segment

340

313

-

(653)

-

Operating expenses

(1,276)

(1,024)

(87)

(189)

(2,576)

Operating profit/(loss) before impairment losses and taxation

1,296

567

(77)

(224)

1,562

Credit impairment

(87)

(86)

(4)

(55)

(232)

Profit from associates and joint ventures

-

-

(4)

20

16

Underlying profit/(loss) before taxation

1,209

481

(85)

(259)

1,346

Restructuring

18

(22)

-

(6)

(10)

DVA

55

-

-

-

55

Reported profit/(loss) before taxation

1,282

459

(85)

(265)

1,391

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

2      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)



 

Page 31

Underlying versus reported results reconciliations continued

Profit before taxation (PBT) by region


3Q'23

Asia
$million

 Africa &
Middle East
$million

Europe & Americas
$million

Central &
other items (region)
$million

Total
$million

Operating income

3,169

677

337

220

4,403

Operating expenses

(1,797)

(398)

(447)

(128)

(2,770)

Operating profit/(loss) before impairment losses and taxation

1,372

279

(110)

92

1,633

Credit impairment

(311)

(2)

18

1

(294)

Other impairment

(7)

(4)

2

(17)

(26)

Profit from associates and joint ventures

9

-

-

(6)

3

Underlying profit/(loss) before taxation

1,063

273

(90)

70

1,316

Restructuring

(36)

(19)

(6)

54

(7)

Goodwill & other impairment2

(697)

-

-

-

(697)

DVA

-

16

5

-

21

Reported profit/(loss) before taxation

330

270

(91)

124

633

 


3Q'22¹

Asia
$million

 Africa &
Middle East
$million

Europe &
Americas
$million

Central &
other items (region)
$million

Total
$million

Operating income

2,891

616

580

51

4,138

Operating expenses

(1,665)

(395)

(371)

(145)

(2,576)

Operating profit/(loss) before impairment losses and taxation

1,226

221

209

(94)

1,562

Credit impairment

(193)

(73)

34

-

(232)

Other impairment

-

2

1

(3)

-

Profit from associates and joint ventures

20

-

-

(4)

16

Underlying profit/(loss) before taxation

1,053

150

244

(101)

1,346

Restructuring

(36)

16

18

(8)

(10)

DVA

22

6

27

-

55

Reported profit/(loss) before taxation

1,039

172

289

(109)

1,391

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

2      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)



 

Page 32

Underlying versus reported results reconciliations continued

Return on tangible equity (RoTE)


3Q'23

Corporate, Commercial & Institutional Banking
%

Consumer,
Private &
Business
Banking
%

Ventures
%

Central &
other items (segment)
%

Total
%

Underlying RoTE

17.9

27.2

nm²

(38.5)

7.0

Restructuring






Of which: Income

1.4

0.6

-

0.6

1.2

Of which: Expenses

(1.2)

(1.4)

nm²

(0.5)

(1.1)

Of which: Credit impairment

-

(0.1)

-

0.2

-

Of which: Other impairment

-

(0.1)

-

(0.7)

(0.1)

Of which: Profit from associates and joint ventures

-

-

-

0.2

-

Goodwill impairment

-

-

-

(37.9)

(7.7)

Ventures FVOCI Unrealised gains / (losses) net of Taxes

-

-

nm²

-

0.1

DVA

0.4

-

-

-

0.2

Tax on normalised items

(0.1)

0.4

nm²

0.3

-

Reported RoTE

18.4

26.6

nm²

(76.3)

(0.4)

 


3Q'22¹

Corporate, Commercial & Institutional Banking
%

Consumer,
Private &
Business
Banking
%

Ventures
%

Central &
other items (segment)
%

Total
%

Underlying RoTE

16.5

19.2

nm²

(15.9)

9.4

Restructuring






Of which: Income

2.3

0.6

-

-

1.5

Of which: Expenses

(1.5)

(1.7)

nm²

(0.2)

(1.3)

Of which: Credit impairment

0.1

-

-

(0.1)

0.1

Of which: Other impairment

(0.6)

-

-

(0.1)

(0.3)

Of which: Profit from associates and joint ventures

-

-

-

0.1

-

Ventures FVOCI Unrealised gains / (losses) net of Taxes

-

-

nm²

-

0.5

DVA

1.0

-

-

-

0.6

Tax on normalised items

(0.3)

0.3

nm²

1.0

-

Reported RoTE

17.5

18.4

nm²

(15.2)

10.5

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

2      Not Meaningful



 

Page 33

Underlying versus reported results reconciliations continued

Earnings per ordinary share (EPS)


3Q'23

Underlying
$ million

Restructuring
$ million

DVA
$ million

Goodwill impairment2
$ million

Tax on normalised items
$ million

Reported
$ million

Profit for the year attributable to ordinary shareholders

644

(7)

21

(697)

4

(35)

Basic - Weighted average number of shares (millions)

2,772





2,772

Basic earnings per ordinary share (cents)

23.2





(1.3)

 


3Q'22¹

Underlying
$ million

Restructuring
$ million

DVA
$ million

Goodwill impairment
$ million

Tax on normalised items
$ million

Reported
$ million

Profit for the year attributable to ordinary shareholders1

915

(10)

55

-

4

964

Basic - Weighted average number of shares (millions)

2,949





2,949

Basic earnings per ordinary share (cents)

31.0





32.7

1      Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance

2      Goodwill and other impairment include $697 million impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

 


Page 34

Risk review

Credit quality by client segment

Amortised cost

30.09.23

Banks
$million

Customers

Undrawn commitments
$million

Financial Guarantees
$million

Corporate, Commercial & Institutional Banking
$million

Consumer, Private & Business Banking
$million

Ventures
$million

Central & other items
$million

Customer Total
$million

Stage 1

45,761

117,266

121,544

996

26,784

266,590

170,008

71,006

- Strong

36,420

80,201

116,539

988

26,495

224,223

155,564

47,217

- Satisfactory

9,341

37,065

5,005

8

289

42,367

14,444

23,789

Stage 2

306

10,034

2,351

46

-

12,431

5,085

2,594

- Strong

24

1,459

1,626

22

-

3,107

1,196

934

- Satisfactory

192

7,533

429

10

-

7,972

3,445

1,270

- Higher risk

90

1,042

296

14

-

1,352

444

390

Of which (stage 2):









- Less than 30 days past due

-

106

429

10

-

545

-

-

- More than 30 days past due

5

25

296

14

-

335

-

-

Stage 3, credit-impaired financial assets

64

5,932

1,445

9

124

7,510

19

580

Gross balance¹

46,131

133,232

125,340

1,051

26,908

286,531

175,112

74,180

Stage 1

(7)

(110)

(329)

(19)

-

(458)

(49)

(16)

- Strong

(2)

(52)

(268)

(19)

-

(339)

(34)

(9)

- Satisfactory

(5)

(58)

(61)

-

-

(119)

(15)

(7)

Stage 2

(9)

(318)

(115)

(7)

-

(440)

(48)

(14)

- Strong

-

(15)

(37)

(4)

-

(56)

(5)

-

- Satisfactory

(2)

(225)

(33)

(1)

-

(259)

(26)

(4)

- Higher risk

(7)

(78)

(45)

(2)

-

(125)

(17)

(10)

Of which (stage 2):









- Less than 30 days past due

-

(3)

(33)

(1)

-

(37)

-

-

- More than 30 days past due

-

-

(45)

(2)

-

(47)

-

-

Stage 3, credit-impaired financial assets

(4)

(3,835)

(774)

(7)

(8)

(4,624)

(1)

(114)

Total credit impairment

(20)

(4,263)

(1,218)

(33)

(8)

(5,522)

(98)

(144)

Net carrying value

46,111

128,969

124,122

1,018

26,900

281,009



Stage 1

0.0%

0.1%

0.3%

1.9%

0.0%

0.2%

0.0%

0.0%

- Strong

0.0%

0.1%

0.2%

1.9%

0.0%

0.2%

0.0%

0.0%

- Satisfactory

0.1%

0.2%

1.2%

0.0%

0.0%

0.3%

0.1%

0.0%

Stage 2

2.9%

3.2%

4.9%

15.2%

0.0%

3.5%

0.9%

0.5%

- Strong

0.0%

1.0%

2.3%

18.2%

0.0%

1.8%

0.4%

0.0%

- Satisfactory

1.0%

3.0%

7.7%

10.0%

0.0%

3.2%

0.8%

0.3%

- Higher risk

7.8%

7.5%

15.2%

14.3%

0.0%

9.2%

3.8%

2.6%

Of which (stage 2):









- Less than 30 days past due

0.0%

2.8%

7.7%

10.0%

0.0%

6.8%

0.0%

0.0%

- More than 30 days past due

0.0%

0.0%

15.2%

14.3%

0.0%

14.0%

0.0%

0.0%

Stage 3, credit-impaired financial assets (S3)

6.3%

64.6%

53.6%

77.8%

6.5%

61.6%

5.3%

19.7%

Cover ratio

0.0%

3.2%

1.0%

3.1%

0.0%

1.9%

0.1%

0.2%










Fair value through profit or loss









Performing

34,006

48,367

16

-

-

48,383

-

-

- Strong

27,395

31,043

16

-

-

31,059

-

-

- Satisfactory

6,611

17,279

-

-

-

17,279

-

-

- Higher risk

-

45

-

-

-

45

-

-

Defaulted (CG13-14)

-

28

-

-

-

28

-

-

Gross balance (FVTPL)2

34,006

48,395

16

-

-

48,411

-

-

Net carrying value (incl FVTPL)

80,117

177,364

124,138

1,018

26,900

329,420

-

-

1      Loans and advances includes reverse repurchase agreements and other similar secured lending of $10,267 million under Customers and of $719 million under Banks, held at amortised cost

2      Loans and advances includes reverse repurchase agreements and other similar secured lending of $42,475 million under Customers and of $32,019 million under Banks, held at fair value through profit or loss


Page 35

Risk review continued

Amortised cost

30.06.23

Banks
$million

Customers

Undrawn commitments
$million

Financial Guarantees
$million

Corporate, Commercial & Institutional Banking
$million

Consumer, Private & Business Banking1
$million

Ventures
$million

Central & other items
$million

Customer Total
$million

Stage 1

43,980

118,179

124,735

927

33,870

277,711

169,843

65,574

- Strong

33,450

81,296

120,215

920

33,579

236,010

153,463

43,749

- Satisfactory

10,530

36,883

4,520

7

291

41,701

16,380

21,825

Stage 2

565

8,059

2,012

39

-

10,110

4,363

2,238

- Strong

260

1,632

1,519

20

-

3,171

1,091

263

- Satisfactory

50

5,366

336

9

-

5,711

2,785

1,620

- Higher risk

255

1,061

157

10

-

1,228

487

355

Of which (stage 2):









- Less than 30 days past due

-

268

336

9

-

613

-

-

- More than 30 days past due

7

111

157

10

-

278

-

-

Stage 3, credit-impaired financial assets

78

6,038

1,450

6

193

7,687

3

591

Gross balance1

44,623

132,276

128,197

972

34,063

295,508

174,209

68,403

Stage 1

(6)

(105)

(332)

(14)

-

(451)

(45)

(13)

- Strong

(4)

(24)

(238)

(14)

-

(276)

(26)

(7)

- Satisfactory

(2)

(81)

(94)

-

-

(175)

(19)

(6)

Stage 2

(12)

(280)

(116)

(4)

-

(400)

(43)

(20)

- Strong

(1)

(38)

(39)

(2)

-

(79)

(5)

(1)

- Satisfactory

(5)

(162)

(28)

(1)

-

(191)

(21)

(11)

- Higher risk

(6)

(80)

(49)

(1)

-

(130)

(17)

(8)

Of which (stage 2):









- Less than 30 days past due

-

(10)

(28)

(1)

-

(39)

-

-

- More than 30 days past due

-

(1)

(49)

(1)

-

(51)

-

-

Stage 3, credit-impaired financial assets

(3)

(3,724)

(779)

(5)

(12)

(4,520)

(1)

(120)

Total credit impairment

(21)

(4,109)

(1,227)

(23)

(12)

(5,371)

(89)

(153)

Net carrying value

44,602

128,167

126,970

949

34,051

290,137



Stage 1

0.0%

0.1%

0.3%

1.5%

0.0%

0.2%

0.0%

0.0%

- Strong

0.0%

0.0%

0.2%

1.5%

0.0%

0.1%

0.0%

0.0%

- Satisfactory

0.0%

0.2%

2.1%

0.0%

0.0%

0.4%

0.1%

0.0%

Stage 2

2.1%

3.5%

5.8%

10.3%

0.0%

4.0%

1.0%

0.9%

- Strong

0.4%

2.3%

2.6%

10.0%

0.0%

2.5%

0.5%

0.4%

- Satisfactory

10.0%

3.0%

8.3%

11.1%

0.0%

3.3%

0.8%

0.7%

- Higher risk

2.4%

7.5%

31.2%

10.0%

0.0%

10.6%

3.5%

2.3%

Of which (stage 2):









- Less than 30 days past due

0.0%

3.7%

8.3%

11.1%

0.0%

6.4%

0.0%

0.0%

- More than 30 days past due

0.0%

0.9%

31.2%

10.0%

0.0%

18.3%

0.0%

0.0%

Stage 3, credit-impaired financial assets (S3)

3.8%

61.7%

53.7%

83.3%

6.2%

58.8%

33.3%

20.3%

Cover ratio

0.0%

3.1%

1.0%

2.4%

0.0%

1.8%

0.1%

0.2%










Fair value through profit or loss









Performing

36,593

45,641

19

-

1

45,661

-

-

- Strong

31,754

29,652

19

-


29,671

-

-

- Satisfactory

4,839

15,956

-

-

-

15,956

-

-

- Higher risk

-

33

-

-

1

34

-

-

Defaulted (CG13-14)

-

25

-

-

-

25

-

-

Gross balance (FVTPL)2

36,593

45,666

19

-

1

45,686

-

-

Net carrying value (incl FVTPL)

81,195

173,833

126,989

949

34,052

335,823

-

-

1      Loans and advances includes reverse repurchase agreements and other similar secured lending of $10,950 million under Customers and of $1,383 million under Banks, held at amortised cost

2      Loans and advances includes reverse repurchase agreements and other similar secured lending of $40,318 million under Customers and of $34,467 million under Banks, held at fair value through profit or loss


Page 36

Risk review continued

Credit impairment charge


9 months ended 30.09.23

9 months ended 30.09.221

Stage 1 & 2
$million

Stage 3
$million

Total
$million

Stage 1 & 2
$million

Stage 3
$million

Total
$million

Ongoing business portfolio







Corporate, Commercial & Institutional Banking

66

162

228

38

244

282

Consumer, Private & Business Banking

75

148

223

103

62

165

Ventures

28

25

53

6

1

7

Central & other items

(35)

(3)

(38)

25

17

42

Credit impairment charge / (release)

134

332

466

172

324

496

Restructuring business portfolio







Others

(1)

(12)

(13)

(9)

3

(6)

Credit impairment charge / (release)

(1)

(12)

(13)

(9)

3

(6)

Total credit impairment charge / (release)

133

320

453

163

327

490

1      Underlying credit impairment has been restated for the removal of (i) exit markets and businesses in AME and (ii) Aviation Finance. No change in reported credit impairment

Vulnerable and Cyclical Sector

Maximum Exposure

Amortised Cost

30.09.23

Maximum
on Balance Sheet Exposure (net of credit impairment)
$million

Collateral
$million

Net On Balance Sheet Exposure
$million

Undrawn Commitments (net of credit impairment)
$million

Financial Guarantees (net of credit impairment)
$million

Net Off Balance Sheet Exposure
$million

Total On & Off Balance Sheet Net Exposure
$million

Industry:








Aviation1

2,175

1,196

979

1,626

624

2,250

3,229

Commodity Traders

6,239

262

5,977

2,308

6,844

9,152

15,129

Metals & Mining

3,946

330

3,616

3,925

1,276

5,201

8,817

Construction

2,589

383

2,206

2,717

5,804

8,521

10,727

Commercial Real Estate

14,559

7,386

7,173

4,993

330

5,323

12,496

Hotels & Tourism

2,055

862

1,193

1,338

226

1,564

2,757

Oil & Gas

6,956

550

6,406

8,105

6,635

14,740

21,146

Total

38,519

10,969

27,550

25,012

21,739

46,751

74,301

Total Corporate, Commercial & Institutional Banking

128,969

29,802

99,167

98,861

63,465

162,326

261,493

Total Group

327,120

123,769

203,351

175,014

74,036

249,050

452,401

1      In addition, the Group has classified as HFS $3.4 billion of aircraft under operating leases and $0.9 billion of Aviation loans

Amortised Cost

30.06.23

Maximum
On Balance Sheet Exposure
(net of credit impairment)
$million

Collateral
$million

Net On Balance Sheet Exposure
$million

Undrawn Commitments (net of credit impairment)
$million

Financial Guarantees  (net of credit impairment)
$million

Net Off Balance Sheet Exposure
$million

Total On & Off Balance Sheet Net Exposure
$million

Industry:








Aviation1

2,939

1,351

1,588

1,664

637

2,301

3,889

Commodity Traders

7,701

208

7,493

2,743

6,422

9,165

16,658

Metals & Mining

3,652

309

3,343

3,933

1,419

5,352

8,695

Construction

2,939

430

2,509

2,763

5,755

8,518

11,027

Commercial Real Estate

15,199

6,707

8,492

5,788

335

6,123

14,615

Hotels & Tourism

1,739

785

954

1,487

180

1,667

2,621

Oil & Gas

6,831

636

6,195

7,410

6,290

13,700

19,895

Total

41,000

10,426

30,574

25,788

21,038

46,826

77,400

Total Corporate, Commercial & Institutional Banking

128,167

29,849

98,318

99,995

59,318

159,313

257,631

Total Group

334,739

124,145

210,594

174,120

68,250

242,370

452,964

1      In addition, the Group has classified as HFS $3.3 billion of aircraft under operating leases and $0.9 billion of Aviation loans


Page 37

Risk review continued

Loans and advances by stage

Amortised Cost

30.09.23

Stage 1

Stage 2

Stage 3

Total

Gross Balance
$million

Total Credit Impairment
$million

Net Carrying Amount
$million

Gross Balance
$million

Total Credit Impairment
$million

Net Carrying Amount
$million

Gross Balance
$million

Total Credit Impairment
$million

Net Carrying Amount
$million

Gross Balance
$million

Total Credit Impairment
$million

Net Carrying Amount
$million

Industry:













Aviation1

1,979

-

1,979

172

(1)

171

36

(11)

25

2,187

(12)

2,175

Commodity Traders

6,089

(4)

6,085

94

(1)

93

538

(477)

61

6,721

(482)

6,239

Metals & Mining

3,565

-

3,565

295

(3)

292

234

(145)

89

4,094

(148)

3,946

Construction

2,108

(4)

2,104

467

(11)

456

372

(343)

29

2,947

(358)

2,589

Commercial Real Estate

11,286

(12)

11,274

2,957

(189)

2,768

1,622

(1,105)

517

15,865

(1,306)

14,559

Hotels & Tourism

1,682

(2)

1,680

277

(1)

276

124

(25)

99

2,083

(28)

2,055

Oil & Gas

6,165

(9)

6,156

451

(9)

442

738

(380)

358

7,354

(398)

6,956

Total

32,874

(31)

32,843

4,713

(215)

4,498

3,664

(2,486)

1,178

41,251

(2,732)

38,519

Total Corporate, Commercial & Institutional Banking

117,266

(110)

117,156

10,034

(318)

9,716

5,932

(3,835)

2,097

133,232

(4,263)

128,969

Total Group

312,351

(465)

311,886

12,737

(449)

12,288

7,574

(4,628)

2,946

332,662

(5,542)

327,120

1      In addition, the Group has classified as HFS $3.4 billion of aircraft under operating leases and $0.9 billion of Aviation loans

 

Amortised Cost

30.06.23

Stage 1

Stage 2

Stage 3

Total

Gross Balance
$million

Total Credit Impairment
$million

Net Carrying Amount
$million

Gross Balance
$million

Total Credit Impairment
$million

Net Carrying Amount
$million

Gross Balance
$million

Total Credit Impairment
$million

Net Carrying Amount
$million

Gross Balance
$million

Total Credit Impairment
$million

Net Carrying Amount
$million

Industry:













Aviation1

2,706

-

2,706

185

(2)

183

61

(11)

50

2,952

(13)

2,939

Commodity Traders

7,489

(4)

7,485

61

(1)

60

581

(425)

156

8,131

(430)

7,701

Metals & Mining

3,261

-

3,261

238

(2)

236

284

(129)

155

3,783

(131)

3,652

Construction

2,235

(1)

2,234

638

(9)

629

411

(335)

76

3,284

(345)

2,939

Commercial Real Estate

13,254

(51)

13,203

1,454

(113)

1,341

1,600

(945)

655

16,308

(1,109)

15,199

Hotels & Tourism

1,555

(2)

1,553

83

(1)

82

130

(26)

104

1,768

(29)

1,739

Oil & Gas

5,944

(10)

5,934

477

(10)

467

824

(394)

430

7,245

(414)

6,831

Total

36,444

(68)

36,376

3,136

(138)

2,998

3,891

(2,265)

1,626

43,471

(2,471)

41,000

Total Corporate, Commercial & Institutional Banking

118,179

(105)

118,074

8,059

(280)

7,779

6,038

(3,724)

2,314

132,276

(4,109)

128,167

Total Group

321,691

(457)

321,234

10,675

(412)

10,263

7,765

(4,523)

3,242

340,131

(5,392)

334,739

1      In addition, the Group has classified as HFS $3.3 billion of aircraft under operating leases and $0.9 billion of Aviation loans


Page 38

Capital review

Capital ratios


30.09.23

30.06.23

Change 3

31.12.22

Change 3

CET1

13.9%

14.0%

(0.1)

14.0%

(0.1)

Tier 1 capital

16.2%

16.2%

(0.0)

16.6%

(0.4)

Total capital

21.2%

21.1%

0.1

21.7%

(0.5)

Capital base1


30.09.23
$million

30.06.23
$million

Change 4
%

31.12.22
$million

Change 4
%

CET1 instruments and reserves






Capital instruments and the related share premium accounts

5,352

5,389

(1)

5,436

(2)

Of which: share premium accounts

3,989

3,989

-

3,989

-

Retained earnings

25,202

26,549

(5)

25,154

-

Accumulated other comprehensive income (and other reserves)

7,838

7,932

(1)

8,165

(4)

Non-controlling interests (amount allowed in consolidated CET1)

215

190

13

189

14

Independently reviewed interim and year-end profits

2,586

2,386

8

2,988

(13)

Foreseeable dividends

(446)

(377)

18

(648)

(31)

CET1 capital before regulatory adjustments

40,747

42,069

(3)

41,284

(1)

CET1 regulatory adjustments






Additional value adjustments (prudential valuation adjustments)

(613)

(693)

(12)

(854)

(28)

Intangible assets (net of related tax liability)

(5,940)

(5,825)

2

(5,802)

2

Deferred tax assets that rely on future profitability
(excludes those arising from temporary differences)

(31)

(86)

(64)

(76)

(59)

Fair value reserves related to net losses on cash flow hedges

195

317

(38)

564

(65)

Deduction of amounts resulting from the calculation of excess expected loss

(710)

(787)

(10)

(684)

4

Net gains on liabilities at fair value resulting from changes in own credit risk

203

203

-

63

nm5

Defined-benefit pension fund assets

(113)

(134)

(16)

(116)

(3)

Fair value gains arising from the institution's own credit risk related to derivative liabilities

(84)

(64)

31

(90)

(7)

Exposure amounts which could qualify for risk weighting of 1,250%

(36)

(52)

(31)

(103)

(65)

Other regulatory adjustments to CET1 capital 2

(49)

(52)

(6)

(29)

69

Total regulatory adjustments to CET1

(7,178)

(7,173)

-

(7,127)

1

CET1 capital

33,569

34,896

(4)

34,157

(2)

Additional Tier 1 capital (AT1) instruments

5,512

5,512

-

6,504

(15)

AT1 regulatory adjustments

(20)

(20)

-

(20)

-

Tier 1 capital

39,061

40,388

(3)

40,641

(4)







Tier 2 capital instruments

12,081

12,311

(2)

12,540

(4)

Tier 2 regulatory adjustments

(30)

(30)

-

(30)

-

Tier 2 capital

12,051

12,281

(2)

12,510

(4)

Total capital

51,112

52,669

(3)

53,151

(4)

Total risk-weighted assets (unaudited)

241,506

249,117

(3)

244,711

(1)

1   Capital base is prepared on the regulatory scope of consolidation

2      Other regulatory adjustments to CET1 capital includes insufficient coverage for non-performing exposures of $(49) million

3      Change is the percentage point difference between two periods, rather than percentage change

4      Variance is increase/(decrease) comparing current reporting period to prior periods

5   Not meaningful



 

Page 39

Capital review continued

Movement in total capital


9 months ended 30.09.23
$million

12 months ended 31.12.22
$million

CET1 at 1 January

34,157

38,362

Ordinary shares issued in the period and share premium

-

-

Share buy-back

(2,000)

(1,258)

Profit for the period

2,586

2,988

Foreseeable dividends deducted from CET1

(446)

(648)

Difference between dividends paid and foreseeable dividends

(344)

(301)

Movement in goodwill and other intangible assets

(138)

(1,410)

Foreign currency translation differences

(866)

(1,892)

Non-controlling interests

26

(12)

Movement in eligible other comprehensive income

385

(1,224)

Deferred tax assets that rely on future profitability

45

74

Decrease/(increase) in excess expected loss

(26)

(104)

Additional value adjustments (prudential valuation adjustment)

241

(189)

IFRS 9 transitional impact on regulatory reserves including day one

(106)

(146)

Exposure amounts which could qualify for risk weighting

67

(67)

Fair value gains arising from the institution's own Credit Risk related to derivative liabilities

6

(30)

Others

(18)

14

CET1 at 30 September/31 December

33,569

34,157




AT1 at 1 January

6,484

6,791

Net issuances (redemptions)

(1,000)

241

Foreign currency translation difference

8

9

Excess on AT1 grandfathered limit (ineligible)

-

(557)

AT1 at 30 September/31 December

5,492

6,484




Tier 2 capital at 1 January

12,510

12,491

Regulatory amortisation

1,573

778

Net issuances (redemptions)

(2,042)

(1,098)

Foreign currency translation difference

(6)

(337)

Tier 2 ineligible minority interest

13

102

Recognition of ineligible AT1

-

557

Other

3

17

Tier 2 capital at 30 September/31 December

12,051

12,510

Total capital at 30 September/31 December

51,112

53,151

 



 

Page 40

Capital review continued

Risk-weighted assets by business


30.09.23

Credit risk
$million

Operational risk
$million

Market risk
$million

Total risk
$million

Corporate, Commercial & Institutional Banking

104,015

18,083

21,288

143,386

Consumer, Private & Business Banking

41,582

8,783

-

50,365

Ventures

1,749

35

2

1,786

Central & other items

40,948

960

4,061

45,969

Total risk-weighted assets

188,294

27,861

25,351

241,506

 


30.06.23

Credit risk
$million

Operational risk
$million

Market risk
$million

Total risk
$million

Corporate, Commercial & Institutional Banking

109,343

18,083

19,832

147,258

Consumer, Private & Business Banking

41,881

8,783

-

50,664

Ventures

1,888

35

2

1,925

Central & other items

44,039

960

4,271

49,270

Total risk-weighted assets

197,151

27,861

24,105

249,117

 


31.12.22

Credit risk
$million

Operational risk
$million

Market risk
$million

Total risk
$million

Corporate, Commercial & Institutional Banking

110,103

17,039

16,440

143,582

Consumer, Private & Business Banking

42,091

8,639

-

50,730

Ventures

1,350

6

2

1,358

Central & other items

43,311

1,493

4,237

49,041

Total risk-weighted assets

196,855

27,177

20,679

244,711

Risk-weighted assets by geographic region


30.09.23
$million

30.06.23
$million

Change1
%

31.12.22
$million

Change1
%

ASIA

150,842

155,410

(3)

150,816

-

Africa & Middle East

38,529

41,068

(6)

40,716

(5)

Europe & Americas

48,227

48,787

(1)

50,174

(4)

Central & other items

3,908

3,852

1

3,005

30

Total risk-weighted assets

241,506

249,117

(3)

244,711

(1)

1      Variance is increase/(decrease) comparing current reporting period to prior reporting periods



 

Page 41

Capital review continued

Movement in risk-weighted assets


Credit risk

Operational risk
$million

Market risk
$million

Total risk
$million

Corporate, Commercial & Institutional Banking
$million

Consumer, Private & Business Banking
$million

Ventures
$million

Central & other items
$million

Total
$million

At 31 December 2021

125,813

42,731

756

50,288

219,588

27,116

24,529

271,233

At 1 January 2022

125,813

42,731

756

50,288

219,588

27,116

24,529

271,233

Asset growth & mix

(13,213)

(985)

594

(10,033)

(23,637)

-

-

(23,637)

Asset quality

(4,258)

431

-

7,344

3,517

-

-

3,517

Risk-weighted assets efficiencies

-

-

-

-

-

-

-

-

Model updates

4,329

1,420

-

-

5,749

-

(1,000)

4,749

Methodology and policy changes

2,024

85

-

93

2,202

-

1,500

3,702

Acquisitions and disposals

-

-

-

-

-

-

-

-

Foreign currency translation

(4,883)

(1,591)

-

(3,376)

(9,850)

-

-

(9,850)

Other, including non-credit risk movements

291

-

-

(1,005)

(714)

61

(4,350)

(5,003)

At 31 December 2022

110,103

42,091

1,350

43,311

196,855

27,177

20,679

244,711

Asset growth & mix

(3,506)

843

399

(78)

(2,342)

-

-

(2,342)

Asset quality

(322)

(14)

-

779

443

-

-

443

Risk-weighted assets efficiencies

-

-

-

(688)

(688)

-

-

(688)

Model updates

(597)

(153)

-

(151)

(901)

-

1,300

399

Methodology and policy changes

-

(196)

-

-

(196)

-

(600)

(796)

Acquisitions and disposals

-

-

-

-

-

-

-

-

Foreign currency translation

(1,663)

(989)

-

(2,225)

(4,877)

-

-

(4,877)

Other, including non-credit risk movements

-

-

-

-

-

684

3,972

4,656

At 30 September 2023

104,015

41,582

1,749

40,948

188,294

27,861

25,351

241,506



 

Page 42

Capital review continued

Leverage Ratio


30.09.23
$million

30.06.23
$million

Change 3
%

31.12.22
$million

Change 3
%

Tier 1 capital (transitional)

39,061

40,388

(3)

40,641

(4)

Additional Tier 1 capital subject to phase out

-

-

-

-

-

Tier 1 capital (end point)

39,061

40,388

(3)

40,641

(4)

Derivative financial instruments

62,449

60,388

3

63,717

(2)

Derivative cash collateral

10,035

9,304

8

12,515

(20)

Securities financing transactions (SFTs)

85,481

87,118

(2)

89,967

(5)

Loans and advances and other assets

667,868

681,901

(2)

653,723

2

Total on-balance sheet assets

825,833

838,711

(2)

819,922

1

Regulatory consolidation adjustments1

(105,534)

(102,523)

3

(71,728)

47

Derivatives adjustments






Derivatives netting

(46,329)

(44,747)

4

(47,118)

(2)

Adjustments to cash collateral

(8,725)

(7,267)

20

(10,640)

(18)

Net written credit protection

1,139

931

22

548

nm4

Potential future exposure on derivatives

40,737

39,239

4

35,824

14

Total derivatives adjustments

(13,178)

(11,844)

11

(21,386)

(38)

Counterparty risk leverage exposure measure for SFTs

4,586

7,591

(40)

15,553

(71)

Off-balance sheet items

119,136

120,355

(1)

119,049

-

Regulatory deductions from Tier 1 capital

(7,297)

(7,311)

-

(7,099)

3

Total exposure measure excluding claims on central banks

823,546

844,979

(3)

854,311

(4)

Leverage ratio excluding claims on central banks (%)2

4.7%

4.8%

(0.1)

4.8%

(0.1)

Average leverage exposure measure excluding claims on
central banks

838,666

842,493

-

864,605

(3)

Average leverage ratio excluding claims on central banks (%)2

4.7%

4.7%

(0.0)

4.7%

(0.0)

Countercyclical leverage ratio buffer2

0.1%

0.1%

-

0.1%

-

G-SII additional leverage ratio buffer2

0.4%

0.4%

-

0.4%

-

1   Includes adjustment for qualifying central bank claims

2      Change is the percentage point difference two periods, rather than percentage change

3      Variance is increase/(decrease) comparing current reporting period to prior periods

4      Not meaningful


Page 43

Financial statements

Condensed consolidated interim income statement

For the nine months ended 30 September 2023


9 months ended 30.09.23
$million

9 months ended 30.09.22
$million

Interest income

20,218

9,872

Interest expense

(14,309)

(4,302)

Net interest income

5,909

5,570

Fees and commission income

3,153

3,062

Fees and commission expense

(622)

(538)

Net fee and commission income

2,531

2,524

Net trading income

4,805

4,128

Other operating income

405

332

Operating income

13,650

12,554

Staff costs

(6,255)

(5,724)

Premises costs

(313)

(296)

General administrative expenses

(1,149)

(1,118)

Depreciation and amortisation

(821)

(886)

Operating expenses

(8,538)

(8,024)

Operating profit before impairment losses and taxation

5,112

4,530

Credit impairment

(453)

(490)

Goodwill, property, plant and equipment and other impairment

(811)

(46)

Profit from associates and joint ventures

108

169

Profit before taxation

3,956

4,163

Taxation

(1,432)

(997)

Profit for the period

2,524

3,166




Profit attributable to:



Non-controlling interests

(9)

(10)

Parent company shareholders

2,533

3,176

Profit for the period

2,524

3,166

 


cents

cents

Earnings per share:



Basic earnings per ordinary share

74.9

94.8

Diluted earnings per ordinary share

73.3

93.0



 

Page 44

Financial statements continued

Condensed consolidated interim statement of comprehensive income

For the nine months ended 30 September 2023


9 months ended 30.09.23
$million

9 months ended 30.09.22
$million

Profit for the period

2,524

3,166

Other comprehensive (loss)/income:



Items that will not be reclassified to income statement:

(84)

88

Own credit (losses)/gains on financial liabilities designated at fair value through profit or loss

(137)

145

Equity instruments at fair value through other comprehensive income

66

(78)

Actuarial gains on retirement benefit obligations

14

39

Taxation relating to components of other comprehensive income

(27)

(18)

Items that may be reclassified subsequently to income statement:

(364)

(4,407)

Exchange differences on translation of foreign operations:



Net losses taken to equity

(1,363)

(3,338)

Net gains on net investment hedges

446

906

Share of other comprehensive loss from associates and joint ventures

(5)

(82)

Debt instruments at fair value through other comprehensive income:



Net valuation gains/(losses) taken to equity

113

(1,460)

Reclassified to income statement

108

53

Net impact of expected credit losses

(51)

33

Cash flow hedges:



Net movements in cash flow hedge reserve1

422

(758)

Taxation relating to components of other comprehensive income

(34)

239

Other comprehensive loss for the period, net of taxation

(448)

(4,319)

Total comprehensive income/(loss) for the period

2,076

(1,153)




Total comprehensive income/(loss) attributable to:



Non-controlling interests

(46)

(64)

Parent company shareholders

2,122

(1,089)

Total comprehensive income/(loss) for the period

2,076

(1,153)

1   This line item is represented in 2023 as a net balance of all movements in the cash flow hedge reserve



 

Page 45

Financial statements continued

Condensed consolidated interim balance sheet

As at 30 September 2023


30.09.23
$million

31.12.22
$million

Assets



Cash and balances at central banks

89,137

58,263

Financial assets held at fair value through profit or loss

122,307

105,812

Derivative financial instruments

62,449

63,717

Loans and advances to banks

46,111

39,519

Loans and advances to customers

281,009

310,647

Investment securities

157,002

172,448

Other assets

49,133

50,383

Current tax assets

479

503

Prepayments and accrued income

2,989

3,149

Interests in associates and joint ventures

1,062

1,631

Goodwill and intangible assets

5,997

5,869

Property, plant and equipment

2,159

5,522

Deferred tax assets

686

834

Assets classified as held for sale

5,313

1,625

Total assets

825,833

819,922




Liabilities



Deposits by banks

29,744

28,789

Customer accounts

453,157

461,677

Repurchase agreements and other similar secured borrowing

14,286

2,108

Financial liabilities held at fair value through profit or loss

79,712

79,903

Derivative financial instruments

63,590

69,862

Debt securities in issue

68,958

61,242

Other liabilities

46,893

43,527

Current tax liabilities

769

583

Accruals and deferred income

6,538

5,895

Subordinated liabilities and other borrowed funds

11,607

13,715

Deferred tax liabilities

743

769

Provisions for liabilities and charges

319

383

Retirement benefit obligations

140

146

Liabilities included in disposal groups held for sale

1,021

1,307

Total liabilities

777,477

769,906




Equity



Share capital and share premium account

6,846

6,930

Other reserves

7,838

8,165

Retained earnings

27,782

28,067

Total parent company shareholders' equity

42,466

43,162

Other equity instruments

5,512

6,504

Total equity excluding non-controlling interests

47,978

49,666

Non-controlling interests

378

350

Total equity

48,356

50,016

Total equity and liabilities

825,833

819,922



 

Page 46

Financial statements continued

Condensed consolidated statement of changes in equity

For the nine months ended 30 September 2023


Ordinary share capital and share premium account
$million

Preference share capital and share premium account
$million

Capital and merger reserves1
$million

Own credit adjustment reserve
$million

Fair value through other comprehensive income reserve - debt
$million

Fair value through other comprehensive income reserve - equity
$million

Cash flow hedge reserve
$million

Translation reserve
$million

Retained earning
$million

Parent company shareholders' equity
$million

Other equity instruments
$million

Non-controlling interests
$million

Total
$million

As at 01 January 2022

5,528

1,494

17,246

(15)

103

249

(34)

(5,744)

27,184

46,011

6,254

371

52,636

Profit/(loss) for the period

-

-

-

-

-

-

-

-

2,948

2,948

-

(46)

2,902

Other comprehensive (loss)/income

-

-

-

(48)

(1,219)

(43)

(530)

(1,904)

82

(3,736)

-

(42)

(3,778)

Distributions

-

-

-

-

-

-

-

-

-

-

-

(31)

(31)

Other equity instruments issued, net of expenses

-

-

-

-

-

-

-

-

-

-

1,240

-

1,240

Redemption of other
equity instruments

-

-

-

-

-

-

-

-

-

-

(999)

-

(999)

Treasury shares net movement

-

-

-

-

-

-

-

-

(203)

(203)

-

-

(203)

Share option expenses

-

-

-

-

-

-

-

-

163

163

-

-

163

Dividends on
ordinary shares

-

-

-

-

-

-

-

-

(393)

(393)

-

-

(393)

Dividends on preference shares and AT1 securities

-

-

-

-

-

-

-

-

(401)

(401)

-

-

(401)

Share buy-back3,4

(92)

-

92

-

-

-

-

-

(1,258)

(1,258)

-

-

(1,258)

Other movements

-

-

-

-

-

-

-

125

196

31

95

987

138

As at 31 December 2022

5,436