Standard Chartered PLC - Additional Financial information

Highlights

Standard Chartered PLC (the Group) today releases its results for the year ended 31 December 2022. The following pages provide additional information related to the announcement.

Table of contents

Risk review and Capital review
Risk profile	2
Enterprise Risk Management Framework	66
Principal risks	73
Capital review	97
Statement of directors' responsibilities	103
Shareholder information	104

 

Page 1

 

 

Risk profile

Credit Risk (audited)

Basis of preparation

Unless otherwise stated the balance sheet and income statement information presented within this section is based on the Group's management view. This is principally the location from which a client relationship is managed, which may differ from where it is financially booked and may be shared between businesses and/or regions. This view reflects how the client segments and regions are managed internally.

Loans and advances to customers and banks held at amortised cost in this Risk profile section include reverse repurchase agreement balances held at amortised cost, per Note 16 Reverse repurchase and repurchase agreements including other similar secured lending and borrowing.

Credit Risk overview

Credit Risk is the potential for loss due to the failure of a counterparty to meet its contractual obligations to pay the Group. Credit exposures arise from both the banking and trading books.

Impairment model

IFRS 9 mandates an impairment model that requires the recognition of expected credit losses (ECL) on all financial debt instruments held at amortised cost, Fair Value through Other Comprehensive Income (FVOCI), undrawn loan commitments and financial guarantees.

Staging of financial instruments

Financial instruments that are not already credit-impaired are originated into stage 1 and a 12-month expected credit loss provision is recognised.

Instruments will remain in stage 1 until they are repaid, unless they experience significant credit deterioration (stage 2) or they become credit-impaired (stage 3).

Instruments will transfer to stage 2 and a lifetime expected credit loss provision is recognised when there has been a significant change in the Credit Risk compared to what was expected at origination.

The framework used to determine a significant increase in Credit Risk is set out below.

Stage 1

• 12-month ECL

• Performing

Stage 2

• Lifetime expected credit loss

• Performing but has exhibited significant increase in Credit Risk (SICR)

Stage 3

• Credit-impaired

• Non-performing

Page 2

 

IFRS 9 expected credit loss principles and approaches

The main methodology principles and approach adopted by the Group are set out in the following table.

Title	Description	Supplementary information
Approach for determining expected credit losses	For material loan portfolios, the Group has adopted a statistical modelling approach for determining expected credit losses that makes extensive use of credit modelling. These models leveraged existing advanced internal ratings based (IRB) models, where these were available. Where model performance breaches model monitoring thresholds or validation standards, a post model adjustment may be required to correct for identified model issues, which will be removed once those issues have been remedied.	IFRS 9 expected credit loss methodology Determining lifetime expected credit loss for revolving products Post-model adjustments
Incorporation of forward-looking information	The determination of expected credit loss includes various assumptions and judgements in respect of forward-looking macroeconomic information. Refer to for incorporation of forward-looking information, forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact on non-linearity and sensitivity of expected credit loss calculation to macroeconomic variables. Judgemental adjustments, including management overlays may also be used to capture risks not identified in the models.	Incorporation of forward-looking information and impact of non-linearity Forecast of key macroeconomic variables underlying the expected credit loss calculation Judgemental adjustments and sensitivity to macroeconomic variables
Significant increase in Credit Risk (SICR)	Expected credit loss for financial assets will transfer from a 12-month basis (stage 1) to a lifetime basis (stage 2) when there is a significant increase in Credit Risk (SICR) relative to that which was expected at the time of origination, or when the asset becomes credit-impaired. On transfer to a lifetime basis, the expected credit loss for those assets will reflect the impact of a default event expected to occur over the remaining lifetime of the instrument rather than just over the 12 months from the reporting date. SICR is assessed by comparing the risk of default of an exposure at the reporting date with the risk of default at origination (after considering the passage of time). 'Significant' does not mean statistically significant nor is it reflective of the extent of the impact on the Group's financial statements. Whether a change in the risk of default is significant or not is assessed using quantitative and qualitative criteria, the weight of which will depend on the type of product and counterparty.	Quantitative criteria Significant increase in Credit Risk thresholds Specific qualitative and quantitative criteria per segment: Corporate, Commercial & Institutional Banking (CCIB) clients Consumer and Business Banking clients Private Banking clients Debt securities
Assessment of credit-impaired financial assets	Credit-impaired (stage 3) financial assets comprise those assets that have experienced an observed credit event and are in default. Default represents those assets that are at least 90 days past due in respect of principal and interest payments and/or where the assets are otherwise considered unlikely to pay. This definition is consistent with internal Credit Risk management and the regulatory definition of default. Unlikely to pay factors include objective conditions such as bankruptcy, debt restructuring, fraud or death. It also includes credit-related modifications of contractual cashflows due to significant financial difficulty (forbearance) where the Group has granted concessions that it would not ordinarily consider. Interest income for stage 3 assets is recognised by applying the original effective interest rate to the net asset amount (that is, net of credit impairment provisions). When financial assets are transferred from stage 3 to stage 2, any contractual interest recovered in excess of the interest income recognised while the asset was in stage 3 is reported within the credit impairment line.	Consumer and Business Banking clients CCIB and Private Banking clients
Transfers between stages	Assets will transfer from stage 3 to stage 2 when they are no longer considered to be credit-impaired. Assets will not be considered credit-impaired only if the customer makes payments such that the obligations are current in line with the original contractual terms. Assets may transfer to stage 1 if they are no longer considered to have experienced a significant increase in Credit Risk. This will be immediate when the original probability of default based transfer criteria are no longer met (and as long as none of the other transfer criteria apply). Where assets were transferred using other measures, the assets will only transfer back to stage 1 when the condition that caused the significant increase in Credit Risk no longer applies (and as long as none of the other transfer criteria apply).	Movement in loan exposures and expected credit losses

Page 3

 

 

Modified financial assets	Where the contractual terms of a financial instrument have been modified, and this does not result in the instrument being derecognised, a modification gain or loss is recognised in the income statement representing the difference between the original cashflows and the modified cashflows, discounted at the effective interest rate. The modification gain/loss is directly applied to the gross carrying amount of the instrument. If the modification is credit related, such as forbearance or where the Group has granted concessions that it would not ordinarily consider, then it will be considered credit-impaired. Modifications that are not credit related will be subject to an assessment of whether the asset's Credit Risk has increased significantly since origination by comparing the remaining lifetime PD based on the modified terms with the remaining lifetime PD based on the original contractual terms.	COVID-19 relief measures Forbearance and other modified loans
Governance and application of expert credit judgement in respect of expected credit losses	The models used in determining ECL are reviewed and approved by the Group Credit Model Assessment Committee and have been validated by Group model validation, which is independent of the business. A quarterly model monitoring process is in place that uses recent data to compare the differences between model predictions and actual outcomes against approved thresholds. Where a model's performance breaches the monitoring thresholds then an assessment of whether an ECL adjustment is required to correct for the identified model issue is completed. The determination of expected credit losses requires a significant degree of management judgement which had an impact on governance processes, with the output of the expected credit models assessed by the IFRS 9 Impairment Committee.	Group Credit Model Assessment Committee IFRS 9 Impairment Committee

Maximum exposure to Credit Risk (audited)

The table below presents the Group's maximum exposure to Credit Risk for its on-balance sheet and off-balance sheet financial instruments as at 31 December 2022, before and after taking into account any collateral held or other Credit Risk mitigation.

The Group's on-balance sheet maximum exposure to Credit Risk reduced by $6 billion to $790 billion (31 December 2021: $796 billion).

Loans and advances to customers increased by $12 billion to $311 billion (31 December 2021: $298 billion). This includes a $24 billion increase in Treasury and securities backed loans held to collect partly offset by a $13 billion reduction from risk-weighted asset optimisation actions undertaken by CCIB and a $8 billion reduction from currency translation. Excluding the above, there was 3 per cent underlying loan growth, with growth in Trade partly offset by deleveraging in Wealth Management.

Excluding reverse repurchase agreements, loans and advances to customers reduced by $5 billion. The reduction was primarily in the CPBB business and was mainly driven by a decrease in Private Bank exposure (largely from UK, Hong Kong, and Singapore in all classes) and Residential Mortgage segment in Korea (due to tightened Debt Service Ratio following new government guidelines). This was partly offset by $0.6 billion increase in Ventures from portfolio growth in Mox and the launch of Trust Bank in Singapore.

Derivative exposures increased by $11.3 billion to $64 billion and investment debt securities increased by $9 billion to $172 billion. This was offset by a decrease of $14 billion of cash and balances at Central banks.

Off-balance sheet instruments increased by $12 billion to $229 billion, driven by higher undrawn commitments which increased from $159 billion to $169 billion.

Page 4

 

	2022					2021
	Maximum exposure $million	Credit risk management		Net exposure $million		Maximum exposure $million	Credit risk management		Net exposure $million
		Collateral8 $million	Master netting agreements $million				Collateral⁸ $million	Master netting agreements $million
On-balance sheet
Cash and balances at central banks	58,263			58,263		72,663			72,663
Loans and advances to banks¹	39,519	978		38,541		44,383	1,079		43,304
of which - reverse repurchase agreements and other similar secured lending7	978	978		-		1,079	1,079		-
Loans and advances to customers1	310,647	135,194		175,453		298,468	131,397		167,071
of which - reverse repurchase agreements and other similar secured lending7	24,498	24,498		-		7,331	7,331		-
Investment securities - Debt securities and other eligible bills2	171,640			171,640		162,700			162,700
Fair value through profit or loss3, 7	102,575	64,491	-	38,084		123,234	80,009	-	43,225
Loans and advances to banks	976			976		3,847			3,847
Loans and advances to customers	6,546			6,546		9,953			9,953
Reverse repurchase agreements and other similar lending7	64,491	64,491		-		80,009	80,009		-
Investment securities - Debt securities and other eligible bills2	30,562			30,562		29,425			29,425
Derivative financial instruments4, 7	63,717	9,206	50,133	4,378		52,445	8,092	39,502	4,851
Accrued income	2,706			2,706		1,674			1,674
Assets held for sale	1,388			1,388		52			52
Other assets5	39,295			39,295		40,068			40,068
Total balance sheet	789,750	209,869	50,133	529,748		795,687	220,577	39,502	535,608
Off-balance sheet6
Undrawn Commitments	168,668	2,951		165,717		158,523	3,848		154,675
Financial Guarantees and other equivalents	60,410	2,592		57,818		58,535	2,240		56,295
Total off-balance sheet	229,078	5,543	-	223,535		217,058	6,088	-	210,970
Total	1,018,828	215,412	50,133	753,283		1,012,745	226,665	39,502	746,578

1 An analysis of credit quality is set out in the credit quality analysis section. Further details of collateral held by client segment and stage are set out in the collateral analysis section

2 Excludes equity and other investments of $808 million (31 December 2021: $737 million). Further details are set out in Note 13 Financial instruments

3 Excludes equity and other investments of $3,230 million (31 December 2021: $5,861 million). Further details are set out in Note 13 Financial instruments

4 The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the positive and negative mark-to-market values of applicable derivative transactions

5 Other assets include Hong Kong certificates of indebtedness, cash collateral, and acceptances, in addition to unsettled trades and other financial assets

6 Excludes ECL allowances which are reported under Provisions for liabilities and charges

7 Collateral capped at maximum exposure (over-collateralised)

8 Adjusted for over-collateralisation, which has been determined with reference to the drawn and undrawn component as this best reflects the effect on the amount arising from expected credit losses.

Page 5

 

Analysis of financial instrument by stage (audited)

The total balance of financial instruments held increased by $15.3 billion to $858 billion (31 December 2021: $843 billion).

Total stage 1 balances increased by $22 billion, of which around $16 billion was in loans and advances to customers, primarily due to increased levels of reverse repurchase agreements in Central and other items segment. CPBB decreased by $5.2 billion due to mortgages and secured wealth. CCIB increased by $4 billion to $126 billion (31 December 2021: $122 billion). Off-balance sheet exposures increased by $15 billion primarily in undrawn commitments from increased customer demand.

Stage 2 financial instruments reduced to $28.1 billion (31 December 2021: $34.6 billion) due to exposure changes and transfers to stage 1 in CCIB, particularly in the Transport, telecoms and utilities and Energy sectors, partly offset by increase in commercial real estate, primarily in Asia. As a result, the proportion of loans and advances to customers classified in stage 2 reduced by $3.8 billion.

Stage 3 financial instruments were stable at $9.3 billion (31 December 2021: $9.1 billion).

	2022
	Stage 1				Stage 2				Stage 3				Total
	Gross balance1 $million	Total credit impair-ment $million	Net carrying value $million		Gross balance1 $million	Total credit impair-ment $million	Net carrying value $million		Gross balance1 $million	Total credit impair-ment $million	Net carrying value $million		Gross balance1 $million	Total credit impair-ment $million	Net carrying value $million
Cash and balances at central banks	57,643	-	57,643		333	(8)	325		295	-	295		58,271	(8)	58,263
Loans and advances to banks (amortised cost)	39,149	(9)	39,140		337	(3)	334		59	(14)	45		39,545	(26)	39,519
Loans and advances to customers (amortised cost)	295,219	(559)	294,660		13,043	(444)	12,599		7,845	(4,457)	3,388		316,107	(5,460)	310,647
Debt securities and other eligible bills5	166,103	(25)			5,455	(90)			144	(106)			171,702	(221)
Amortised cost	59,427	(9)	59,418		271	(2)	269		78	(51)	27		59,776	(62)	59,714
FVOCI2	106,676	(16)			5,184	(88)			66	(55)			111,926	(159)	-
Accrued income (amortised cost)4	2,706		2,706				-				-		2,706	-	2,706
Assets held for sale	1,083	(6)	1,077		262	(4)	258		120	(67)	53		1,465	(77)	1,388
Other assets	39,294	-	39,294		-	-	-		4	(3)	1		39,298	(3)	39,295
Undrawn commitments3	162,958	(41)			5,582	(53)			128	-			168,668	(94)
Financial guarantees, trade credits and irrevocable letters of credit3	56,683	(11)			3,062	(28)			665	(147)			60,410	(186)
Total	820,838	(651)			28,074	(630)			9,260	(4,794)			858,172	(6,075)

1 Gross carrying amount for off-balance sheet refers to notional values

2 These instruments are held at fair value on the balance sheet. The ECL provision in respect of debt securities measured at FVOCI is held within the OCI reserve

3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financial liability and therefore there is no "net carrying amount". ECL allowances on off-balance sheet instruments are held as liability provisions to the extent that the drawn and undrawn components of loan exposures can be separately identified. Otherwise they will be reported against the drawn component

4 Stage 1 ECL is not material

5 Stage 3 gross includes $28 million (2021: $33 million) originated credit-impaired debt securities with impairment of $13 million (2021: Nil)

        Page 6

 

 

	2021
	Stage 1				Stage 2				Stage 3				Total
	Gross balance¹ $million	Total credit impair-ment $million	Net carrying value $million		Gross balance¹ $million	Total credit impair-ment $million	Net carrying value $million		Gross balance¹ $million	Total credit impair-ment $million	Net carrying value $million		Gross balance1 $million	Total credit impair-ment $million	Net carrying value $million
Cash and balances at central banks	72,601	-	72,601		66	(4)	62		-	-	-		72,667	(4)	72,663
Loans and advances to banks (amortised cost)	43,776	(12)	43,764		580	(4)	576		54	(11)	43		44,410	(27)	44,383
Loans and advances to customers (amortised cost)	279,178	(473)	278,705		16,849	(524)	16,325		8,095	(4,657)	3,438		304,122	(5,654)	298,468
Debt securities and other eligible bills5	157,352	(67)			5,315	(42)			113	(66)			162,780	(175)
Amortised cost	41,092	(13)	41,079		200	(1)	199		113	(66)	47		41,405	(80)	41,325
FVOCI2	116,260	(54)			5,115	(41)			-	-			121,375	(95)
Accrued income (amortised cost)4	1,674		1,674				-				-		1,674	-	1,674
Assets held for sale4	52		52				-				-		52	-	52
Other assets	40,067	-	40,067		-	-	-		4	(3)	1		40,071	(3)	40,068
Undrawn commitments3	149,530	(42)			8,993	(60)			-	-			158,523	(102)
Financial guarantees, trade credits and irrevocable letters of credit3	54,923	(15)			2,813	(22)			799	(207)			58,535	(244)
Total	799,153	(609)			34,616	(656)			9,065	(4,944)			842,834	(6,209)

1 Gross carrying amount for off-balance sheet refers to notional values

2 These instruments are held at fair value on the balance sheet. The ECL provision in respect of debt securities measured at FVOCI is held within the OCI reserve

3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financial liability and therefore there is no "net carrying amount". ECL allowances on off-balance sheet instruments are held as liability provisions to the extent that the drawn and undrawn components of loan exposures can be separately identified. Otherwise they will be reported against the drawn component

4 Stage 1 ECL is not material

5 Stage 3 gross includes $33 million originated credit-impaired debt securities and Nil impairment

Credit quality analysis (audited)

Credit quality by client segment

For CCIB, exposures are analysed by credit grade (CG), which plays a central role in the quality assessment and monitoring of risk. All loans are assigned a CG, which is reviewed periodically and amended in light of changes in the borrower's circumstances or behaviour. CGs 1 to 12 are assigned to stage 1 and stage 2 (performing) clients or accounts, while CGs 13 and 14 are assigned to stage 3 (credit-impaired) clients. Consumer and Business Banking portfolios are analysed by days past due and Private Banking by the type of collateral held.

Mapping of credit quality

The Group uses the following internal risk mapping to determine the credit quality for loans.

Credit quality description	Corporate, Commercial & Institutional Banking				Private Banking1		Consumer & Business Banking4
	Internal grade mapping	S&P external ratings equivalent	Regulatory PD range (%)		Internal ratings		Number of days past due
Strong	1A to 5B	AAA/AA+ to BBB-/BB+	0 to 0.425		Class I and Class IV		Current loans (no past dues nor impaired)
Satisfactory	6A to 11C	BB+/BB to B-/CCC+2	0.426 to 15.75		Class II and Class III		Loans past due till 29 days
Higher risk	Grade 12	CCC+ to C3	15.751 to 99.999		Stressed Assets Group (SAG) managed		Past due loans 30 days and over till 90 days

1 For Private Banking, classes of risk represent the type of collateral held. Class I represents facilities with liquid collateral, such as cash and marketable securities. Class II represents unsecured/partially secured facilities and those with illiquid collateral, such as equity in private enterprises. Class III represents facilities with residential or Commercial real estate collateral. Class IV covers margin trading facilities

2 Banks' rating: BB to CCC/C

3 Banks' rating: CCC to C

4 Medium enterprise clients within Business Banking are managed using the same internal credit grades as CCIB

Page 7

 

 

The table overleaf sets out the gross loans and advances held at amortised cost, expected credit loss provisions and expected credit loss coverage by business segment and stage. Expected credit loss coverage represents the expected credit loss reported for each segment and stage as a proportion of the gross loan balance for each segment and stage.

Stage 1:

Stage 1 gross loans and advances to customers increased by $16 billion to $295 billion (31 December 2021: $279 billion) and represent an increase of 1 percentage point to 93 per cent of loans and advances to customers (31 December 2021: 92 per cent). The stage 1 coverage ratio remained at 0.2 per cent compared with 31 December 2021.

In CCIB, the proportion of stage 1 loans has increased to $126 billion, being 88 per cent (31 December 2021: 85 per cent), and the percentage of stage 1 loans rated as strong is higher at $90 billion, being 71 per cent (31 December 2021: 64 per cent) as the Group continues to focus on the origination of investment grade lending. This is primarily due to a $10.5 billion increase in exposures in Financing, insurance and non-banking from a few notable clients, $1.5 billion from rating upgrades in Transport, telecom and utilities clients, offset by $2.8 billion decrease in Manufacturing and $5.3 billion decrease in China Real Estate sector from repayments and downgrades into stage 2.

CPBB stage 1 loans decreased by $5 billion to $129 billion (31 December 2021: $134 billion), mainly driven by a decrease in Private Bank exposure (largely from UK, Hong Kong, and Singapore in all classes), and a decrease in exposure of the Residential Mortgage segment in Korea (due to tightened Debt Service Ratio following new government guidelines). The proportion of loans and advances rated as strong increased to 97 per cent (31 December 2021: 96 per cent).

Ventures increased by $609 million to $691 million (31 December 2021: $82 million) from new lending in Mox Bank and the launch of Trust Bank in Singapore.

Central and other items segment increased by $17 billion to $39.1 billion (31 December 2021: $22.4 billion), due to higher levels of reverse repurchase agreements with Non Bank Financial Institutions and placements with governments.

Stage 2:

Stage 2 loans and advances to customers decreased by $4 billion to $13.0 billion (31 December 2021: $16.8 billion), primarily in CCIB due to exposure reductions and rating upgrades in Transport, telecom and utilities sectors, $1 billion decrease in the Energy sector, offset by increase in stage 2 in China commercial real estate. The proportion of stage 2 loans also reduced to 4.1 per cent (31 December 2021: 5.5 per cent).

Stage 2 loans to customers classified as 'Higher risk' was at $1.8 billion due to the downgrade of Pakistan. This was largely offset by downgrades to stage 3 primarily as a result of Sri Lanka and Ghana sovereign rating downgrade.

CPBB stage 2 loans reduced by $0.2 billion primarily due to the transfers into stage 1 arising from the change in Credit Risk thresholds for certain credit card portfolios, largely in Asia.

The overall stage 2 cover ratio increased by 0.3 per cent to 3.4 per cent (31 December 2021: 3.1 per cent). CCIB cover ratio increased to 2.8 per cent (31 December 2021: 2.3 per cent) primarily within higher risk exposures from sovereign downgrades offset by full release of COVID-19 overlay. CPBB stage 2 cover ratio decreased to 7.2 per cent (31 December 2021: 9.5 per cent), primarily driven by the release of $30 million of COVID-19 management overlays arising from the reassessment of residual risk after manifestation of such risk through individual impairments, partly offset by worsening macroeconomic variables and portfolio maturity in the China loan book.

Stage 3:

Gross stage 3 loans decreased by $0.3 billion to $7.8 billion (31 December 2021: $8.1 billion) as a result of upgrades and debt sales in CCIB which was offset by the downgrade of Sri Lanka and Ghana and China commercial real estate clients.

CPBB stage 3 loans were materially unchanged at $1.5 billion, the $0.1 billion decrease was largely in Secured wealth and Mortgages portfolio.

Ventures stage 3 was $1 million primarily driven by downgrades in Mox Bank Hong Kong.

Central and other items stage 3 balances increased to $248 million (31 December 2021: Nil) due to downgrade of local currency loans to Sri Lanka Sovereign.

 

Page 8

 

Loans and advances by client segment (audited)

Amortised cost	2022
	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	39,149		126,261	129,134	691	39,133	295,219		162,958	56,683
- Strong	27,941		89,567	124,734	685	39,133	254,119		148,303	39,612
- Satisfactory	11,208		36,694	4,400	6	-	41,100		14,655	17,071
Stage 2	337		11,355	1,670	18	-	13,043		5,582	3,062
- Strong	148		2,068	1,215	10	-	3,293		1,449	522
- Satisfactory	119		7,783	146	4	-	7,933		3,454	2,134
- Higher risk	70		1,504	309	4	-	1,817		679	406
Of which (stage 2):
- Less than 30 days past due	5		109	148	4	-	261		-	-
- More than 30 days past due	6		23	310	4	-	337		-	-
Stage 3, credit-impaired financial assets	59		6,143	1,453	1	248	7,845		128	665
Gross balance¹	39,545		143,759	132,257	710	39,381	316,107		168,668	60,410
Stage 1	(9)		(143)	(406)	(10)	-	(559)		(41)	(11)
- Strong	(3)		(43)	(332)	(10)	-	(385)		(28)	(3)
- Satisfactory	(6)		(100)	(74)	-	-	(174)		(13)	(8)
Stage 2	(3)		(323)	(120)	(1)	-	(444)		(53)	(28)
- Strong	-		(30)	(62)	(1)	-	(93)		(6)	-
- Satisfactory	(2)		(159)	(17)	-	-	(176)		(42)	(15)
- Higher risk	(1)		(134)	(41)	-	-	(175)		(5)	(13)
Of which (stage 2):
- Less than 30 days past due	-		(2)	(17)	-	-	(19)		-	-
- More than 30 days past due	-		(1)	(41)	-	-	(42)		-	-
Stage 3, credit-impaired financial assets	(14)		(3,662)	(776)	(1)	(18)	(4,457)		-	(147)
Total credit impairment	(26)		(4,128)	(1,302)	(12)	(18)	(5,460)		(94)	(186)
Net carrying value	39,519		139,631	130,955	698	39,363	310,647
Stage 1	0.0%		0.1%	0.3%	1.4%	0.0%	0.2%		0.0%	0.0%
- Strong	0.0%		0.0%	0.3%	1.5%	0.0%	0.2%		0.0%	0.0%
- Satisfactory	0.1%		0.3%	1.7%	0.0%	0.0%	0.4%		0.1%	0.0%
Stage 2	0.9%		2.8%	7.2%	5.6%	0.0%	3.4%		0.9%	0.9%
- Strong	0.0%		1.5%	5.1%	10.0%	0.0%	2.8%		0.4%	0.0%
- Satisfactory	1.7%		2.0%	11.6%	0.0%	0.0%	2.2%		1.2%	0.7%
- Higher risk	1.4%		8.9%	13.3%	0.0%	0.0%	9.6%		0.7%	3.2%
Of which (stage 2):
- Less than 30 days past due	0.0%		1.8%	11.5%	0.0%	0.0%	7.3%		0.0%	0.0%
- More than 30 days past due	0.0%		4.3%	13.2%	0.0%	0.0%	12.5%		0.0%	0.0%
Stage 3, credit-impaired financial assets (S3)	23.7%		59.6%	53.4%	100.0%	7.3%	56.8%		0.0%	22.1%
Cover ratio	0.1%		2.9%	1.0%	1.7%	0.0%	1.7%		0.1%	0.3%
Fair value through profit or loss
Performing	24,930		44,461	28	-	2,557	47,046		-	-
- Strong	21,451		36,454	27	-	2,409	38,890		-	-
- Satisfactory	3,479		8,007	1	-	148	8,156		-	-
- Higher risk	-		-	-	-	-	-		-	-
Defaulted (CG13-14)	-		37	-	-	-	37		-	-
Gross balance (FVTPL)2	24,930		44,498	28	-	2,557	47,083		-	-
Net carrying value (incl FVTPL)	64,449		184,129	130,983	698	41,920	357,730		-	-

1 Loans and advances includes reverse repurchase agreements and other similar secured lending of $24,498 million under Customers and of $978 million under Banks, held at amortised cost

2 Loans and advances includes reverse repurchase agreements and other similar secured lending of $40,537 million under Customers and of $23,954 million under Banks, held at fair value through profit or loss

 

Page 9

 

Amortised cost	2021 (Restated)1
	Banks $million		Customers						Undrawn commitments $million	Financial Guarantees $million
			Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking1 $million	Ventures1  $million	Central & other items $million	Customer Total $million
Stage 1	43,776		122,368	134,289	82	22,439	279,178		149,530	54,923
- Strong	30,813		77,826	129,486	82	22,333	229,727		132,274	37,418
- Satisfactory	12,963		44,542	4,803	-	106	49,451		17,256	17,505
Stage 2	580		14,818	1,912	9	110	16,849		8,993	2,813
- Strong	126		2,366	1,253	-	-	3,619		2,786	714
- Satisfactory	105		11,180	308	-	-	11,488		5,235	1,546
- Higher risk	349		1,272	351	9	110	1,742		972	553
Of which (stage 2):
- Less than 30 days past due	-		77	308	-	-	385		-	-
- More than 30 days past due	-		49	351	9	-	409		-	-
Stage 3, credit-impaired financial assets	54		6,520	1,575	-	-	8,095		-	799
Gross balance2	44,410		143,706	137,776	91	22,549	304,122		158,523	58,535
Stage 1	(12)		(103)	(369)	(1)	-	(473)		(42)	(15)
- Strong	(4)		(58)	(282)	(1)	-	(341)		(23)	(5)
- Satisfactory	(8)		(45)	(87)	-	-	(132)		(19)	(10)
Stage 2	(4)		(341)	(181)	(2)	-	(524)		(60)	(22)
- Strong	(2)		(62)	(104)	-	-	(166)		(6)	(1)
- Satisfactory	(2)		(179)	(32)	-	-	(211)		(46)	(9)
- Higher risk	-		(100)	(45)	(2)	-	(147)		(8)	(12)
Of which (stage 2):
- Less than 30 days past due	-		(2)	(32)	-	-	(34)		-	-
- More than 30 days past due	-		(3)	(45)	(2)	-	(50)		-	-
Stage 3, credit-impaired financial assets	(11)		(3,861)	(796)	-	-	(4,657)		-	(207)
Total credit impairment	(27)		(4,305)	(1,346)	(3)	-	(5,654)		(102)	(244)
Net carrying value	44,383		139,401	136,430	88	22,549	298,468
Stage 1	0.0%		0.1%	0.3%	1.2%	0.0%	0.2%		0.0%	0.0%
- Strong	0.0%		0.1%	0.2%	1.2%	0.0%	0.1%		0.0%	0.0%
- Satisfactory	0.1%		0.1%	1.8%	0.0%	0.0%	0.3%		0.1%	0.1%
Stage 2	0.7%		2.3%	9.5%	22.2%	0.0%	3.1%		0.7%	0.8%
- Strong	1.6%		2.6%	8.3%	0.0%	0.0%	4.6%		0.2%	0.1%
- Satisfactory	1.9%		1.6%	10.4%	0.0%	0.0%	1.8%		0.9%	0.6%
- Higher risk	0.0%		7.9%	12.8%	22.2%	0.0%	8.4%		0.8%	2.2%
Of which (stage 2):
- Less than 30 days past due	0.0%		2.6%	10.4%	0.0%	0.0%	8.8%		0.0%	0.0%
- More than 30 days past due	0.0%		6.1%	12.8%	22.2%	0.0%	12.2%		0.0%	0.0%
Stage 3, credit-impaired financial assets (S3)	20.4%		59.2%	50.5%	0.0%	0.0%	57.5%		0.0%	25.9%
Cover ratio	0.1%		3.0%	1.0%	3.3%	0.0%	1.9%		0.1%	0.4%
Fair value through profit or loss
Performing	22,574		69,356	67	-	1,774	71,197		-	-
- Strong	20,132		53,756	67	-	1,772	55,595		-	-
- Satisfactory	2,442		15,600	-	-	2	15,602		-	-
- Higher risk	-		-	-	-	-	-		-	-
Defaulted (CG13-14)	-		38	-	-	-	38		-	-
Gross balance (FVTPL)3	22,574		69,394	67	-	1,774	71,235		-	-
Net carrying value (incl FVTPL)	66,957		208,795	136,497	88	24,323	369,703		-	-

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from January 2022. Prior period has been restated

2 Loans and advances includes reverse repurchase agreements and other similar secured lending of $7,331 million under Customers and of $1,079 million under Banks, held at amortised cost

3 Loans and advances includes reverse repurchase agreements and other similar secured lending of $61,282 million under Customers and of $18,727 million under Banks, held at fair value through profit or loss

 

Page 10

 

Loans and advances by client segment credit quality analysis

Credit grade	Regulatory 1 year PD range (%)	S&P external ratings equivalent	Corporate, Commercial & Institutional Banking
			2022
			Gross					Credit impairment
			Stage 1	Stage 2	Stage 3	Total		Stage 1	Stage 2	Stage 3	Total
Strong			89,567	2,068	-	91,635		(43)	(30)	-	(73)
1A-2B	0 - 0.045	AA- and above	8,247	117	-	8,364		(4)	-	-	(4)
3A-4A	0.046 - 0.110	A+ to A-	36,379	321	-	36,700		(5)	-	-	(5)
4B-5B	0.111 - 0.425	BBB+ to BBB-/BB+	44,941	1,630	-	46,571		(34)	(30)	-	(64)
Satisfactory			36,694	7,783	-	44,477		(100)	(159)	-	(259)
6A-7B	0.426 - 1.350	BB+/BB to BB-	23,196	2,684	-	25,880		(67)	(94)	-	(161)
8A-9B	1.351 - 4.000	BB-/B+ to B+/B	9,979	3,116	-	13,095		(20)	(35)	-	(55)
10A-11C	4.001 - 15.75	B to B-/CCC+	3,519	1,983	-	5,502		(13)	(30)	-	(43)
Higher risk			-	1,504	-	1,504		-	(134)	-	(134)
12	15.751 - 99.999	CCC+/C	-	1,504	-	1,504		-	(134)	-	(134)
Credit-impaired			-	-	6,143	6,143		-	-	(3,662)	(3,662)
13-14	100	Defaulted	-	-	6,143	6,143		-	-	(3,662)	(3,662)
Total			126,261	11,355	6,143	143,759		(143)	(323)	(3,662)	(4,128)

 

Credit grade	Regulatory 1 year PD range (%)	S&P external ratings equivalent	2021
			Gross					Credit impairment
			Stage 1	Stage 2	Stage 3	Total		Stage 1	Stage 2	Stage 3	Total
Strong			77,826	2,366	-	80,192		(58)	(62)	-	(120)
1A-2B	0 - 0.045	AA- and above	14,013	216	-	14,229		(1)	-	-	(1)
3A-4A	0.046 - 0.110	A+ to A-	23,173	515	-	23,688		(3)	-	-	(3)
4B-5B	0.111 - 0.425	BBB+ to BBB-/BB+	40,640	1,635	-	42,275		(54)	(62)	-	(116)
Satisfactory			44,542	11,180	-	55,722		(45)	(179)	-	(224)
6A-7B	0.426 - 1.350	BB+/BB to BB-	27,009	2,894	-	29,903		(21)	(40)	-	(61)
8A-9B	1.351 - 4.000	BB-/B+ to B+/B	11,910	5,592	-	17,502		(13)	(90)	-	(103)
10A-11C	4.001 - 15.75	B to B-/CCC+	5,623	2,694	-	8,317		(11)	(49)	-	(60)
Higher risk			-	1,272	-	1,272		-	(100)	-	(100)
12	15.751 - 99.999	CCC+/C	-	1,272	-	1,272		-	(100)	-	(100)
Credit-impaired			-	-	6,520	6,520		-	-	(3,861)	(3,861)
13-14	100	Defaulted	-	-	6,520	6,520		-	-	(3,861)	(3,861)
Total			122,368	14,818	6,520	143,706		(103)	(341)	(3,861)	(4,305)

 

Credit grade	Consumer, Private & Business Banking
	2022
	Gross					Credit impairment
	Stage 1	Stage 2	Stage 3	Total		Stage 1	Stage 2	Stage 3	Total
Strong	124,734	1,215	-	125,949		(332)	(62)	-	(394)
Secured	107,262	995	-	108,257		(48)	(12)	-	(60)
Unsecured	17,472	220	-	17,692		(284)	(50)	-	(334)
Satisfactory	4,400	146	-	4,546		(74)	(17)	-	(91)
Secured	4,006	115	-	4,121		(11)	(1)	-	(12)
Unsecured	394	31	-	425		(63)	(16)	-	(79)
Higher risk	-	309	-	309		-	(41)	-	(41)
Secured	-	216	-	216		-	(6)	-	(6)
Unsecured	-	93	-	93		-	(35)	-	(35)
Credit-impaired	-	-	1,453	1,453		-	-	(776)	(776)
Secured			1,028	1,028				(552)	(552)
Unsecured	-	-	425	425		-	-	(224)	(224)
Total	129,134	1,670	1,453	132,257		(406)	(120)	(776)	(1,302)

 

Page 11

 

 

Credit grade	2021 (Restated1)
	Gross					Credit impairment
	Stage 1	Stage 2	Stage 3	Total		Stage 1	Stage 2	Stage 3	Total
Strong	129,486	1,253	-	130,739		(282)	(104)	-	(386)
Secured	112,167	884	-	113,051		(48)	(19)	-	(67)
Unsecured	17,319	369	-	17,688		(234)	(85)	-	(319)
Satisfactory	4,803	308	-	5,111		(87)	(32)	-	(119)
Secured	4,524	164	-	4,688		(44)	(1)	-	(45)
Unsecured	279	144	-	423		(43)	(31)	-	(74)
Higher risk	-	351	-	351		-	(45)	-	(45)
Secured	-	250	-	250		-	(11)	-	(11)
Unsecured	-	101	-	101		-	(34)	-	(34)
Credit-impaired	-	-	1,575	1,575		-	-	(796)	(796)
Secured			1,107	1,107				(516)	(516)
Unsecured	-	-	468	468		-	-	(280)	(280)
Total	134,289	1,912	1,575	137,776		(369)	(181)	(796)	(1,346)

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 1 January 2022. Prior period has been restated. Detailed credit quality analysis not presented as amounts are not sufficiently material

Credit quality by geographic region

The following table sets out the credit quality for gross loans and advances to customers and banks, held at amortised cost, by geographic region and stage.

Loans and advances to customers

Amortised cost	2022					2021
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million		Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Gross (stage 1)	248,625	17,553	29,041	295,219		235,123	19,990	24,065	279,178
Provision (stage 1)	(454)	(73)	(32)	(559)		(371)	(86)	(16)	(473)
Gross (stage 2)	8,302	3,122	1,619	13,043		8,779	4,077	3,993	16,849
Provision (stage 2)	(337)	(104)	(3)	(444)		(318)	(137)	(69)	(524)
Gross (stage 3)	4,562	2,725	558	7,845		4,448	2,918	729	8,095
Provision (stage 3)	(2,483)	(1,765)	(209)	(4,457)		(2,400)	(1,970)	(287)	(4,657)
Net loans1	258,215	21,458	30,974	310,647		245,261	24,792	28,415	298,468

1 Includes reverse repurchase agreements and other similar secured lending

Loans and advances to banks

Amortised cost	2022					2021
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million		Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Gross (stage 1)	21,806	3,818	13,525	39,149		29,916	5,828	8,032	43,776
Provision (stage 1)	(3)	(4)	(2)	(9)		(3)	(5)	(4)	(12)
Gross (stage 2)	212	116	9	337		346	144	90	580
Provision (stage 2)	(2)	(1)	-	(3)		(1)	(1)	(2)	(4)
Gross (stage 3)	59	-	-	59		54	-	-	54
Provision (stage 3)	(14)	-	-	(14)		(11)	-	-	(11)
Net loans¹	22,058	3,929	13,532	39,519		30,301	5,966	8,116	44,383

1          Includes reverse repurchase agreements and other similar secured lending

 

Page 12

 

Movement in gross exposures and credit impairment for loans and advances, debt securities, undrawn commitments and financial guarantees (audited)

The tables overleaf set out the movement in gross exposures and credit impairment by stage in respect of amortised cost loans to banks and customers, undrawn commitments, financial guarantees and debt securities classified at amortised cost and FVOCI. The tables are presented for the Group, debt securities and other eligible bills.

Methodology

The movement lines within the tables are an aggregation of monthly movements over the year and will therefore reflect the accumulation of multiple trades during the year. The credit impairment charge in the income statement comprises the amounts within the boxes in the table below, less recoveries of amounts previously written off. Discount unwind is reported in net interest income and related to stage 3 financial instruments only.

The approach for determining the key line items in the tables is set out below.

• Transfers - transfers between stages are deemed to occur at the beginning of a month based on prior month closing balances

• Net remeasurement from stage changes - the remeasurement of credit impairment provisions arising from a change in stage is reported within the stage that the assets are transferred to. For example, assets transferred into stage 2 are remeasured from a 12-month to a lifetime expected credit loss, with the effect of remeasurement reported in stage 2. For stage 3, this represents the initial remeasurement from specific provisions recognised on individual assets transferred into stage 3 in the year

• Net changes in exposures - new business written less repayments in the year. Within stage 1, new business written will attract up to 12 months of expected credit loss charges. Repayments of non-amortising loans (primarily within CCIB) will have low amounts of expected credit loss provisions attributed to them, due to the release of provisions over the term to maturity. In stages 2 and 3, the amounts principally reflect repayments although stage 2 may include new business written where clients are on non-purely precautionary early alert, are CG 12, or when non-investment grade debt securities are acquired.

• Changes in risk parameters - for stages 1 and 2, this reflects changes in the probability of default (PD), loss given default (LGD) and exposure at default (EAD) of assets during the year, which includes the impact of releasing provisions over the term to maturity. It also includes the effect of changes in forecasts of macroeconomic variables during the year. In stage 3, this line represents additional specific provisions recognised on exposures held within stage 3

• Interest due but not paid - change in contractual amount of interest due in stage 3 financial instruments but not paid, being the net of accruals, repayments and write-offs, together with the corresponding change in credit impairment

Changes to ECL models, which incorporate changes to model approaches and methodologies, are not reported as a separate line item as these have an impact over a number of lines and stages.

Movements during the year

Stage 1 gross exposures increased by $35 billion to $720 billion when compared with 31 December 2021. $2 billion net increase was in CCIB, from new originations largely reverse repurchase agreements from a change in booking model and undrawn commitments. There was a $2 billion net increase in CPBB due to an increase in undrawn commitments of $7 billion. Debt securities increased by $9 billion in stage 1. The rest of the increase is largely Central and other items segment due to lending to Governments in Asia.

 

Page 13

 

Total stage 1 provisions increased by $36 million to $645 million. CPBB increase is $36 million primarily in unsecured lending from net change in exposures, MEV changes and book growth in Asia offset by partial release of COVID-19 overlay. CCIB provisions increased by $31 million primarily due to new originations. Debt Security provision decreased by $42 million largely due to stage transfers following sovereign downgrades in Asia and Africa and the Middle East.

Stage 2 gross exposures decreased by $7 billion to $27 billion, primarily driven by $6 billion of net outflows from exposure changes and transfers to stage 1 in CCIB, particularly in the Energy and Transport, Telecom and Utilities sectors. CPBB exposures decreased by $1.9 billion, of which $1.3 billion was from the secured portfolio. Debt securities were broadly stable as exits were offset by the sovereign downgrade of Pakistan.

Stage 2 provisions decreased by $34 million to $618 million compared to 31 December 2021. $14 million decrease is from CCIB from full release of judgemental COVID-19 overlay of $102 million offset by the impact of sovereign downgrades and an increase in provisions for China commercial real estate. CPBB provisions decreased by $67 million, mainly in unsecured lending as a result of significant increase in credit risk thresholds which resulted in a decrease of ECL of $15 million and model changes resulted in ECL decrease of $7 million, and partial release of COVID-19 overlay.

In CCIB, gross stage 3 loans decreased by $0.4 billion compared with 31 December 2021 due to upgrades and repayments offset by sovereign downgrades in Africa and the Middle East and increased exposure to China commercial real estate. CCIB provisions decreased by $0.3 billion to $3.8 billion. CPBB total stage 3 loans decreased by $0.1 billion to $1.5 billion and provision decreased by $21 million driven by Personal loans and other unsecured lending portfolio as markets returned to normalised flows following the expiry of the majority of COVID-19 relief schemes in 2021 offset by increase in provisions secured portfolio. Debt Security Gross assets increased by $31 million to $144 million (31 December 2021: $113 million) due to new downgrade of Ghana Sovereign, offset by one corporate write-off.

 

Page 14

 

All segments (audited)

Amortised cost and FVOCI	Stage 1				Stage 2				Stage 35				Total
	Gross balance3 $million	Total credit impair-ment $million	Net $million		Gross balance3 $million	Total credit impair-ment $million	Net $million		Gross balance3 $million	Total credit impair-ment $million	Net $million		Gross balance3 million	Total credit impair-ment $million	Net $million
As at 1 January 2021	642,960	(663)	642,297		39,787	(881)	38,906		10,100	(5,593)	4,507		692,847	(7,137)	685,710
Transfers to stage 1	25,975	(620)	25,355		(25,924)	620	(25,304)		(51)	-	(51)		-	-	-
Transfers to stage 2	(53,994)	211	(53,783)		54,335	(220)	54,115		(341)	9	(332)		-	-	-
Transfers to stage 3	(212)	3	(209)		(2,822)	335	(2,487)		3,034	(338)	2,696		-	-	-
Net change in exposures	84,288	(132)	84,156		(30,551)	169	(30,382)		(2,429)	661	(1,768)		51,308	698	52,006
Net remeasurement from stage changes	-	54	54		-	(157)	(157)		-	(212)	(212)		-	(315)	(315)
Changes in risk parameters	-	79	79		-	(89)	(89)		-	(915)	(915)		-	(925)	(925)
Write-offs	-	-	-		-	-	-		(1,215)	1,215	-		(1,215)	1,215	-
Interest due but unpaid	-	-	-		-	-	-		(189)	189	-		(189)	189	-
Discount unwind	-	-	-		-	-	-		-	227	227		-	227	227
Exchange translation differences and other movements¹	(14,258)	459	(13,799)		(275)	(429)	(704)		152	(184)	(32)		(14,381)	(154)	(14,535)
As at 31 December 2021²	684,759	(609)	684,150		34,550	(652)	33,898		9,061	(4,941)	4,120		728,370	(6,202)	722,168
Income statement ECL (charge)/release		1				(77)				(466)				(542)
Recoveries of amounts previously written off		-				-				288				288
Total credit impairment (charge)/release		1				(77)				(178)				(254)
As at 1 January 2022	684,759	(609)	684,150		34,550	(652)	33,898		9,061	(4,941)	4,120		728,370	(6,202)	722,168
Transfers to stage 1	24,666	(555)	24,111		(24,633)	555	(24,078)		(33)	-	(33)		-	-	-
Transfers to stage 2	(46,960)	228	(46,732)		47,479	(246)	47,233		(519)	18	(501)		-	-	-
Transfers to stage 3	(176)	74	(102)		(3,630)	253	(3,377)		3,806	(327)	3,479		-	-	-
Net change in exposures	83,204	(137)	83,067		(24,324)	93	(24,231)		(1,710)	338	(1,372)		57,170	294	57,464
Net remeasurement from stage changes	-	45	45		-	(126)	(126)		-	(168)	(168)		-	(249)	(249)
Changes in risk parameters	-	106	106		-	(387)	(387)		-	(895)	(895)		-	(1,176)	(1,176)
Write-offs	-	-	-		-	-	-		(949)	949	-		(949)	949	-
Interest due but unpaid	-	-	-		-	-	-		(157)	157	-		(157)	157	-
Discount unwind	-	-	-		-	-	-		-	136	136		-	136	136
Exchange translation differences and other movements¹	(25,381)	203	(25,178)		(1,963)	(108)	(2,071)		(658)	9	(649)		(28,002)	104	(27,898)
As at 31 December 2022²	720,112	(645)	719,467		27,479	(618)	26,861		8,841	(4,724)	4,117		756,432	(5,987)	750,445
Income statement ECL (charge)/release6		14				(420)				(725)				(1,131)
Recoveries of amounts previously written off		-				-				293				293
Total credit impairment (charge)/release4		14				(420)				(432)				(838)

1 Includes fair value adjustments and amortisation on debt securities

2 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets gross balances of $101,743 million (2021: $114,464 million) and Total credit impairment of $88 million (2021: $7 million)

3 The gross balance includes the notional amount of off balance sheet instruments

4 Statutory basis

5  Stage 3 gross includes $28 million (2021: $33 million) originated credit-impaired debt securities with impairment of $13 million (2021: Nil)

6 Does not include $2 million (2021: Nil) release relating to Other assets

Page 15

 

Of which - movement of debt securities, alternative tier one and other eligible bills (audited)

Amortised cost and FVOCI	Stage 1				Stage 2				Stage 32				Total
	Gross balance $million	Total credit impair-ment $million	Net $million		Gross balance $million	Total credit impair-ment $million	Net $million		Gross balance $million	Total credit impair-ment $million	Net $million		Gross balance $million	Total credit impair-ment $million	Net3 $million
As at 1 January 2021	149,316	(56)	149,260		3,506	(26)	3,480		114	(58)	56		152,936	(140)	152,796
Transfers to stage 1	403	(11)	392		(403)	11	(392)		-	-	-		-	-	-
Transfers to stage 2	(2,358)	16	(2,342)		2,358	(16)	2,342		-	-	-		-	-	-
Transfers to stage 3	-	-	-		-	-	-		-	-	-		-	-	-
Net change in exposures	14,670	(39)	14,631		(155)	(11)	(166)		-	1	1		14,515	(49)	14,466
Net remeasurement from stage changes	-	13	13		-	(17)	(17)		-	-	-		-	(4)	(4)
Changes in risk parameters	-	21	21		-	8	8		-	(3)	(3)		-	26	26
Write-offs	-	-	-		-	-	-		-	-	-		-	-	-
Interest due but unpaid	-	-	-		-	-	-		-	-	-		-	-	-
Exchange translation differences and other movements1	(4,679)	(11)	(4,690)		9	9	18		(1)	(6)	(7)		(4,671)	(8)	(4,679)
As at 31 December 2021	157,352	(67)	157,285		5,315	(42)	5,273		113	(66)	47		162,780	(175)	162,605
Income statement ECL (charge)/release		(5)				(20)				(2)				(27)
Recoveries of amounts previously written off		-				-				-				-
Total credit impairment (charge)/release		(5)				(20)				(2)				(27)
As at 1 January 2022	157,352	(67)	157,285		5,315	(42)	5,273		113	(66)	47		162,780	(175)	162,605
Transfers to stage 1	2,296	(22)	2,274		(2,296)	22	(2,274)		-	-	-		-	-	-
Transfers to stage 2	(3,942)	38	(3,904)		3,942	(38)	3,904		-	-	-		-	-	-
Transfers to stage 3	-	-	-		(66)	42	(24)		66	(42)	24		-	-	-
Net change in exposures	21,613	(44)	21,569		(752)	9	(743)		-	1	1		20,861	(34)	20,827
Net remeasurement from stage changes	-	10	10		-	(2)	(2)		-	(23)	(23)		-	(15)	(15)
Changes in risk parameters	-	38	38		-	(98)	(98)		-	(13)	(13)		-	(73)	(73)
Write-offs	-	-	-		-	-	-		(30)	30	-		(30)	30	-
Interest due but unpaid	-	-	-		-	-	-		-	-	-		-	-	-
Exchange translation differences and other movements1	(11,216)	22	(11,194)		(688)	17	(671)		(5)	7	2		(11,909)	46	(11,863)
As at 31 December 2022	166,103	(25)	166,078		5,455	(90)	5,365		144	(106)	38		171,702	(221)	171,481
Income statement ECL (charge)/release		4				(91)				(35)				(122)
Recoveries of amounts previously written off		-				-				-				-
Total credit impairment (charge)/release		4				(91)				(35)				(122)

1 Includes fair value adjustments and amortisation on debt securities

2 Stage 3 gross includes $28 million (2021: $33 million) originated credit-impaired debt securities with impairment of $13 million (2021: Nil)

3   FVOCI instruments are not presented net of ECL. While the presentation is on a net basis for the table, the total net on-balance sheet amount to $171,640 million (31 December 2021: $162,700 million. Refer to the Analysis of financial instrument by stage table

Page 16

Corporate, Commercial & Institutional Banking (audited)

Amortised cost and FVOCI	Stage 1				Stage 2				Stage 3				Total
	Gross balance1  $million	Total credit impair-ment $million	Net $million		Gross balance1  $million	Total credit impair-ment $million	Net $million		Gross balance1  $million	Total credit impair-ment $million	Net $million		Gross balance1  $million	Total credit impair-ment $million	Net $million
As at 1 January 2021	292,453	(154)	292,299		31,742	(599)	31,143		8,422	(4,803)	3,619		332,617	(5,556)	327,061
Transfers to stage 1	21,123	(243)	20,880		(21,123)	243	(20,880)		-	-	-		-	-	-
Transfers to stage 2	(45,354)	103	(45,251)		45,556	(112)	45,444		(202)	9	(193)		-	-	-
Transfers to stage 3	(69)	-	(69)		(1,989)	164	(1,825)		2,058	(164)	1,894		-	-	-
Net change in exposures	50,762	(62)	50,700		(28,447)	133	(28,314)		(2,082)	636	(1,446)		20,233	707	20,940
Net remeasurement from stage changes	-	1	1		-	(27)	(27)		-	(145)	(145)		-	(171)	(171)
Changes in risk parameters	-	41	41		-	(105)	(105)		-	(434)	(434)		-	(498)	(498)
Write-offs	-	-	-		-	-	-		(510)	510	-		(510)	510	-
Interest due but unpaid	-	-	-		-	-	-		(224)	224	-		(224)	224	-
Discount unwind	-	-	-		-	-	-		-	191	191		-	191	191
Exchange translation differences and other movements	(5,783)	151	(5,632)		(302)	(122)	(424)		(90)	(103)	(193)		(6,175)	(74)	(6,249)
As at 31 December 2021	313,132	(163)	312,969		25,437	(425)	25,012		7,372	(4,079)	3,293		345,941	(4,667)	341,274
Income statement ECL (charge)/release2		(20)				1				57				38
Recoveries of amounts previously written off		-				-				19				19
Total credit impairment (charge)/release		(20)				1				76				57
As at 1 January 2022	313,132	(163)	312,969		25,437	(425)	25,012		7,372	(4,079)	3,293		345,941	(4,667)	341,274
Transfers to stage 1	17,565	(227)	17,338		(17,565)	227	(17,338)		-	-	-		-	-	-
Transfers to stage 2	(37,505)	48	(37,457)		37,944	(66)	37,878		(439)	18	(421)		-	-	-
Transfers to stage 3	(42)	-	(42)		(2,478)	134	(2,344)		2,520	(134)	2,386		-	-	-
Net change in exposures	30,508	(44)	30,464		(21,915)	65	(21,850)		(1,314)	340	(974)		7,279	361	7,640
Net remeasurement from stage changes	-	2	2		-	(42)	(42)		-	(104)	(104)		-	(144)	(144)
Changes in risk parameters	-	21	21		-	(154)	(154)		-	(551)	(551)		-	(684)	(684)
Write-offs	-	-	-		-	-	-		(384)	384	-		(384)	384	-
Interest due but unpaid	-	-	-		-	-	-		(130)	130	-		(130)	130	-
Discount unwind	-	-	-		-	-	-		-	110	110		-	110	110
Exchange translation differences and other movements	(8,221)	169	(8,052)		(1,275)	(150)	(1,425)		(631)	64	(567)		(10,127)	83	(10,044)
As at 31 December 2022	315,437	(194)	315,243		20,148	(411)	19,737		6,994	(3,822)	3,172		342,579	(4,427)	338,152
Income statement ECL (charge)/release2		(21)				(131)				(315)				(467)
Recoveries of amounts previously written off		-				-				49				49
Total credit impairment (charge)/release		(21)				(131)				(266)				(418)

1 The gross balance includes the notional amount of off balance sheet instruments

2 Does not include $2 million (2021: Nil) release relating to Other assets

 

Page 17

 

Consumer, Private and Business Banking (restated)¹ (audited)

Amortised cost and FVOCI	Stage 1				Stage 2				Stage 3				Total
	Gross balance2  $million	Total credit impair ment $million	Net $million		Gross balance2  $million	Total credit impair ment $million	Net $million		Gross balance2  $million	Total credit impair ment $million	Net $million		Gross balance2  $million	Total credit impair ment $million	Net $million
As at 1 January 2021	182,044	(445)	181,599		4,534	(259)	4,275		1,561	(730)	831		188,139	(1,434)	186,705
Transfers to stage 1	4,450	(365)	4,085		(4,399)	365	(4,034)		(51)	-	(51)		-	-	-
Transfers to stage 2	(6,270)	89	(6,181)		6,409	(89)	6,320		(139)	-	(139)		-	-	-
Transfers to stage 3	(144)	2	(142)		(833)	172	(661)		977	(174)	803		-	-	-
Net change in exposures	14,055	(28)	14,027		(2,060)	47	(2,013)		(347)	24	(323)		11,648	43	11,691
Net remeasurement from stage changes	-	40	40		-	(113)	(113)		-	(66)	(66)		-	(139)	(139)
Changes in risk parameters	-	17	17		-	8	8		-	(480)	(480)		-	(455)	(455)
Write-offs	-	-	-		-	-	-		(705)	705	-		(705)	705	-
Interest due but unpaid	-	-	-		-	-	-		35	(35)	-		35	(35)	-
Discount unwind	-	-	-		-	-	-		-	36	36		-	36	36
Exchange translation differences and other movements	(3,275)	313	(2,962)		24	(316)	(292)		247	(77)	170		(3,004)	(80)	(3,084)
As at 31 December 2021	190,860	(377)	190,483		3,675	(185)	3,490		1,578	(797)	781		196,113	(1,359)	194,754
Income statement ECL (charge)/release		29				(58)				(522)				(551)
Recoveries of amounts previously written off		-				-				269				269
Total credit impairment (charge)/release		29				(58)				(253)				(282)
As at 1 January 2022	190,860	(377)	190,483		3,675	(185)	3,490		1,578	(797)	781		196,113	(1,359)	194,754
Transfers to stage 1	4,798	(314)	4,484		(4,765)	314	(4,451)		(33)	-	(33)		-	-	-
Transfers to stage 2	(5,498)	92	(5,406)		5,578	(92)	5,486		(80)	-	(80)		-	-	-
Transfers to stage 3	(81)	-	(81)		(890)	151	(739)		971	(151)	820		-	-	-
Net change in exposures	9,072	(49)	9,023		(1,611)	19	(1,592)		(396)	-	(396)		7,065	(30)	7,035
Net remeasurement from stage changes	-	32	32		-	(82)	(82)		-	(25)	(25)		-	(75)	(75)
Changes in risk parameters	-	63	63		-	(132)	(132)		-	(331)	(331)		-	(400)	(400)
Write-offs	-	-	-		-	-	-		(535)	535	-		(535)	535	-
Interest due but unpaid	-	-	-		-	-	-		(27)	27	-		(27)	27	-
Discount unwind	-	-	-		-	-	-		-	26	26		-	26	26
Exchange translation differences and other movements	(5,912)	140	(5,772)		(166)	(111)	(277)		(24)	(60)	(84)		(6,102)	(31)	(6,133)
As at 31 December 2022	193,239	(413)	192,826		1,821	(118)	1,703		1,454	(776)	678		196,514	(1,307)	195,207
Income statement ECL (charge)/release		46				(195)				(356)				(505)
Recoveries of amounts previously written off		-				-				245				245
Total credit impairment (charge)/release		46				(195)				(111)				(260)

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 2022. Prior period has been restated

2 The gross balance includes the notional amount of off balance sheet instruments 

 

Page 18

 

Consumer, Private and Business Banking - Secured (restated)¹ (audited)

Amortised cost and FVOCI	Stage 1				Stage 2				Stage 3				Total
	Gross balance2  $million	Total credit impair-ment $million	Net $million		Gross balance2  $million	Total credit impair-ment $million	Net $million		Gross balance2  $million	Total credit impair-ment $million	Net $million		Gross balance2  $million	Total credit impair-ment $million	Net $million
As at 1 January 2021	127,448	(72)	127,376		3,363	(52)	3,311		1,058	(418)	640		131,869	(542)	131,327
Transfers to stage 1	2,884	(37)	2,847		(2,843)	37	(2,806)		(41)	-	(41)		-	-	-
Transfers to stage 2	(3,888)	9	(3,879)		4,007	(9)	3,998		(119)	-	(119)		-	-	-
Transfers to stage 3	(107)	1	(106)		(400)	8	(392)		507	(9)	498		-	-	-
Net change in exposures	13,009	(9)	13,000		(1,452)	3	(1,449)		(224)	24	(200)		11,333	18	11,351
Net remeasurement from stage changes	-	(1)	(1)		-	(2)	(2)		-	(1)	(1)		-	(4)	(4)
Changes in risk parameters	-	4	4		-	14	14		-	(144)	(144)		-	(126)	(126)
Write-offs	-	-	-		-	-	-		(125)	125	-		(125)	125	-
Interest due but unpaid	-	-	-		-	-	-		(3)	3	-		(3)	3	-
Discount unwind	-	-	-		-	-	-		-	34	34		-	34	34
Exchange translation differences and other movements	(2,746)	9	(2,737)		10	(31)	(21)		50	(131)	(81)		(2,686)	(153)	(2,839)
As at 31 December 2021	136,600	(96)	136,504		2,685	(32)	2,653		1,103	(517)	586		140,388	(645)	139,743
Income statement ECL (charge)/release		(6)				15				(121)				(112)
Recoveries of amounts previously written off		-				-				68				68
Total credit impairment (charge)/release		(6)				15				(53)				(44)
As at 1 January 2022	136,600	(96)	136,504		2,685	(32)	2,653		1,103	(517)	586		140,388	(645)	139,743
Transfers to stage 1	3,080	(28)	3,052		(3,054)	28	(3,026)		(26)	-	(26)		-	-	-
Transfers to stage 2	(3,254)	11	(3,243)		3,319	(11)	3,308		(65)	-	(65)		-	-	-
Transfers to stage 3	(38)	1	(37)		(473)	1	(472)		511	(2)	509		-	-	-
Net change in exposures	3,093	(8)	3,085		(945)	1	(944)		(259)	-	(259)		1,889	(7)	1,882
Net remeasurement from stage changes	-	1	1		-	(1)	(1)		-	(4)	(4)		-	(4)	(4)
Changes in risk parameters	-	(4)	(4)		-	48	48		-	(80)	(80)		-	(36)	(36)
Write-offs	-	-	-		-	-	-		(78)	78	-		(78)	78	-
Interest due but unpaid	-	-	-		-	-	-		-	-	-		-	-	-
Discount unwind	-	-	-		-	-	-		-	-	-		-	-	-
Exchange translation differences and other movements	(4,119)	63	(4,056)		(119)	(51)	(170)		(158)	(27)	(185)		(4,396)	(15)	(4,411)
As at 31 December 2022	135,362	(60)	135,302		1,413	(17)	1,396		1,028	(552)	476		137,803	(629)	137,174
Income statement ECL (charge)/release		(11)				48				(84)				(47)
Recoveries of amounts previously written off		-				-				55				55
Total credit impairment (charge)/release		(11)				48				(29)				8

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 2022. Prior period has been restated

2 The gross balance includes the notional amount of off balance sheet instruments

Page 19

 

Consumer, Private and Business Banking - Unsecured (restated)¹ (audited)

Amortised cost and FVOCI	Stage 1				Stage 2				Stage 3				Total
	Gross balance2  $million	Total credit impair-ment $million	Net $million		Gross balance2  $million	Total credit impair-ment $million	Net $million		Gross balance²  $million	Total credit impair-ment $million	Net $million		Gross balance²  $million	Total credit impair-ment $million	Net $million
As at 1 January 2021	54,596	(373)	54,223		1,171	(207)	964		503	(312)	191		56,270	(892)	55,378
Transfers to stage 1	1,566	(328)	1,238		(1,556)	328	(1,228)		(10)	-	(10)		-	-	-
Transfers to stage 2	(2,382)	80	(2,302)		2,402	(80)	2,322		(20)	-	(20)		-	-	-
Transfers to stage 3	(37)	1	(36)		(433)	164	(269)		470	(165)	305		-	-	-
Net change in exposures	1,046	(19)	1,027		(608)	44	(564)		(123)	-	(123)		315	25	340
Net remeasurement from stage changes	-	41	41		-	(111)	(111)		-	(65)	(65)		-	(135)	(135)
Changes in risk parameters	-	13	13		-	(6)	(6)		-	(336)	(336)		-	(329)	(329)
Write-offs	-	-	-		-	-	-		(580)	580	-		(580)	580	-
Interest due but unpaid	-	-	-		-	-	-		38	(38)	-		38	(38)	-
Discount unwind	-	-	-		-	-	-		-	2	2		-	2	2
Exchange translation differences and other movements	(529)	304	(225)		14	(285)	(271)		197	54	251		(318)	73	(245)
As at 31 December 2021	54,260	(281)	53,979		990	(153)	837		475	(280)	195		55,725	(714)	55,011
Income statement ECL (charge)/release		35				(73)				(401)				(439)
Recoveries of amounts previously written off		-				-				201				201
Total credit impairment (charge)/release		35				(73)				(200)				(238)
As at 1 January 2022	54,260	(281)	53,979		990	(153)	837		475	(280)	195		55,725	(714)	55,011
Transfers to stage 1	1,718	(286)	1,432		(1,711)	286	(1,425)		(7)	-	(7)		-	-	-
Transfers to stage 2	(2,244)	81	(2,163)		2,259	(81)	2,178		(15)	-	(15)		-	-	-
Transfers to stage 3	(43)	(1)	(44)		(417)	150	(267)		460	(149)	311		-	-	-
Net change in exposures	5,979	(41)	5,938		(666)	18	(648)		(137)	-	(137)		5,176	(23)	5,153
Net remeasurement from stage changes	-	31	31		-	(81)	(81)		-	(21)	(21)		-	(71)	(71)
Changes in risk parameters	-	67	67		-	(180)	(180)		-	(251)	(251)		-	(364)	(364)
Write-offs	-	-	-		-	-	-		(457)	457	-		(457)	457	-
Interest due but unpaid	-	-	-		-	-	-		(27)	27	-		(27)	27	-
Discount unwind	-	-	-		-	-	-		-	26	26		-	26	26
Exchange translation differences and other movements	(1,793)	77	(1,716)		(47)	(60)	(107)		134	(33)	101		(1,706)	(16)	(1,722)
As at 31 December 2022	57,877	(353)	57,524		408	(101)	307		426	(224)	202		58,711	(678)	58,033
Income statement ECL (charge)/release		57				(243)				(272)				(458)
Recoveries of amounts previously written off		-				-				190				190
Total credit impairment (charge)/release		57				(243)				(82)				(268)

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 2022. Prior period has been restated

2 The gross balance includes the notional amount of off balance sheet instruments

 

Page 20

 

Analysis of stage 2 balances

The table below analyses total stage 2 gross on-and off-balance sheet exposures and associated expected credit provisions by the key significant increase in Credit Risk (SICR) driver that caused the exposures to be classified as stage 2 as at 31 December 2022 and 31 December 2021 for each segment.

Where multiple drivers apply, the exposure is allocated based on the table order. For example, a loan may have breached the PD thresholds and could also be on non-purely precautionary early alert; in this instance, the exposure is reported under 'Increase in PD'.

	2022
	Corporate, Commercial & Institutional Banking				Consumer, Private & Business Banking				Ventures				Central & other items				Total
	Gross $million	ECL $million	Coverage %		Gross $million	ECL $million	Coverage %		Gross $million	ECL $million	Coverage %		Gross $million	ECL $million	Coverage %		Gross $million	ECL $million	Coverage %
Increase in PD	13,620	192	1.4%		1,389	89	6.4%		-	-	0.0%		2,973	11	0.4%		17,982	292	1.6%
Non-purely precautionary early alert	3,272	12	0.4%		35	-	0.0%		-	-	0.0%		5	-	0.0%		3,312	12	0.4%
Higher risk (CG12)	653	30	4.6%		18	1	5.6%		-	-	0.0%		2,534	69	2.7%		3,205	100	3.1%
Sub-investment grade	-	-	0.0%		-	-	0.0%		-	-	0.0%		95	11	11.6%		95	11	11.6%
Top up/Sell down (Private Banking)	-	-	0.0%		111	-	0.0%		-	-	0.0%		-	-	0.0%		111	-	0.0%
Others	2,603	41	1.6%		122	4	3.3%		-	-	0.0%		451	7	1.6%		3,176	52	1.6%
30 days past due	-	-	0.0%		146	12	8.2%		47	3	6.4%		-	-	0.0%		193	15	7.8%
Management overlay	-	136	0.0%		-	12	0.0%		-	-	0.0%		-	-	0.0%		-	148	0.0%
Total stage 2	20,148	411	2.0%		1,821	118	6.5%		47	3	6.4%		6,058	98	1.6%		28,074	630	2.2%

 

	2021 (Restated)1
	Corporate, Commercial & Institutional Banking				Consumer, Private & Business Banking				Ventures				Central & other items				Total
	Gross $million	ECL $million	Coverage %		Gross $million	ECL $million	Coverage %		Gross $million	ECL $million	Coverage %		Gross $million	ECL $million	Coverage %		Gross $million	ECL $million	Coverage %
Increase in PD	14,737	187	1.3%		2,704	123	4.5%		-	-	0.0%		4,691	22	0.5%		22,132	332	1.5%
Non-purely precautionary early alert	5,000	26	0.5%		83	-	0.0%		-	-	0.0%		-	-	0.0%		5,083	26	0.5%
Higher risk (CG12)	1,075	37	3.4%		27	1	3.2%		-	-	0.0%		631	20	3.1%		1,733	58	3.3%
Sub-investment grade	235	1	0.3%		-	-	0.0%		-	-	0.0%		-	-	0.0%		235	1	0.3%
Top up/Sell down (Private Banking)	-	-	0.0%		493	1	0.2%		-	-	0.0%		-	-	0.0%		493	1	0.2%
Others	4,390	8	0.2%		178	2	1.2%		-	-	0.0%		173	2	1.3%		4,741	12	0.3%
30 days past due	-	-	0.0%		190	16	8.7%		9	2	22.2%		-	-	0.0%		199	18	9.3%
Management overlay	-	166	0.0%		-	42	0.0%		-	-	0.0%		-	-	0.0%		-	208	0.0%
Total stage 2	25,437	425	1.7%		3,675	185	5.0%		9	2	22.2%		5,495	44	0.8%		34,616	656	1.9%

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 1 January 2022. Prior period has been restated

The majority of exposures and the associated expected credit loss provisions continue to be in stage 2 due to increases in the probability of default.

The amount of exposures in CCIB placed on non-purely precautionary early alert and PD have decreased from repayments and upgrades offset by sovereign downgrade of Pakistan.

In CPBB, 10 per cent of the provisions held against stage 2 arise from the application of the 30 days past due backstop, although this represents only 8 per cent of exposures.

Central and other items segment has seen a significant increase in the 'Higher risk' category as at 31 December 2022 due to Pakistan Sovereign downgrade.

'Others' primarily incorporates exposures where origination data is incomplete and the exposures are allocated into stage 2.

Page 21

 

Credit impairment charge (restated)¹ (audited)

The ongoing credit impairment was a net charge of $838 million (31 December 2021: $263 million), which consists of $432 million in stage 3 (31 December 2021: $185 million) and $406 million in stage 1 and 2 (31 December 2021: $78 million).

Stage 1 and 2 impairment charge increased by $328 million to $406 million (31 December 2021: $78 million), including a $83 million charge relating to the sovereign ratings downgrade of Pakistan into credit grade 12. The management overlay relating to stage 1 and 2 assets was $210 million (31 December 2021: $344 million). There was a $212 million reduction in the COVID-19 element of the overlay, which now total $37 million, whereas the element relating to China commercial real estate sector increased by $78 million to $173 million.

CCIB Stage 1 and 2 impairments of $148 million are driven by China commercial real estate downgrades including a $78 million increase for China commercial real estate overlay and sovereign downgrades in Africa and the Middle East which is offset by $102 million full release of COVID-19 overlay. Stage 3 impairment of $279 million is largely from China commercial real estate downgrades, clients' rating changes due to the Sri Lanka and Ghana Sovereign rating downgrades, offset by releases and repayments of a few notable clients.

CPBB charge decreased by $20 million to $262 million (31 December 2021: $282 million). Stage 1 and 2 charge increased by $121 million to $150 million (31 December 2021: $29 million). Stage 3 charge decreased by $141 million to $112 million (31 December 2021: $253 million) as markets returned to normalised flows following the expiry of majority of COVID-19 relief schemes in 2021. In 2022, there were increased charges for Korea and Taiwan due to worsening macroeconomic forecasts, as well as China due to portfolio maturity and book growth. This was offset by a net release of $110 million (31 December 2021: $15 million) in management overlays and a $25 million release from significant increase in Credit Risk (SICR) methodology changes and model updates largely in the Asia region.

Ventures impairment charge increased by $13 million to $16 million (31 December 2021: $3 million) due to book growth in Mox Bank and Trust Bank Singapore.

Central and other items stage 1 and 2 impairments of $95 million was driven by the sovereign downgrade in Ghana and Pakistan. Stage 3 charge of $38 million was driven by the sovereign downgrade of Ghana and Sri Lanka.

	2022				2021 (Restated)1
	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	148	279	427		23	(67)	(44)
Consumer, Private & Business Banking1	150	112	262		29	253	282
Ventures1	13	3	16		3	-	3
Central & other items	95	38	133		23	(1)	22
Credit impairment charge	406	432	838		78	185	263
Restructuring business portfolio
Others	(2)	-	(2)		(2)	(7)	(9)
Credit impairment charge	(2)	-	(2)		(2)	(7)	(9)
Total credit impairment charge	404	432	836		76	178	254

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 1 January 2022. Prior period has been restated

COVID-19 relief measures

The table below sets out the extent to which payment reliefs are in place across the Group's CPBB loan portfolio based on the amount outstanding at 31 December 2022. The accounting for temporary changes to loan contractual term is unchanged from that presented on page 220 of the 2021 Annual Report.

COVID-19 payment-related relief measures in most markets have now expired. The CPBB loans under payment relief schemes reduced to $237 million ($184 million is from secured products) compared to $1.2 billion at the end of 2021 and a peak of $8.9 billion in the first half of 2020, with the remaining balance concentrated in Asia. This represents 0.2 per cent of CPBB's gross loans and advances to customers, mainly in Hong Kong, China and India.

Page 22

 

 

Segment1/Product	Total			Asia			Africa & Middle East
	Outstanding $million	% of portfolio2		Outstanding $million	% of portfolio2		Outstanding $million	% of portfolio2
Credit card & Personal loans	14	0.1%		14	0.1%		-	-
Mortgages & Auto	90	0.1%		90	0.1%		-	-
Business Banking	133	1.3%		133	1.4%		-	-
Total Consumer, Private & Business Banking at 31 December 2022	237	0.2%		237	0.2%		-	-
Total Consumer, Private & Business Banking at 31 December 2021	1,182	0.9%		1,029	0.9%		153	3.1%

1   Outstanding relief balance for Corporate, Commercial and Institutional Banking are less than $100 million (31 December 2021: $1,195 million) and nil (31 December 2021: nil) for Ventures³

2 Percentage of portfolio represents the outstanding amount as a percentage of the gross loans and advances to customers by product and segment

3 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate segment from 1 January 2022

Problem credit management and provisioning (audited)

Forborne and other modified loans by client segment

A forborne loan arises when a concession has been made to the contractual terms of a loan in response to a customer's financial difficulties.

Net forborne loans decreased by $404 million to $1,125 million (31 December 2021: $1,529 million), of which $176 million decrease was in performing forborne loans and $228 million decrease was in non-performing forborne loans. Performing forborne loans reduction in CCIB was driven by COVID-19 relief measures in 2021 which have expired across most of our markets while non-performing forborne loans reduction was due to a major repayment.

The table below presents loans with forbearance measures by segment.

Amortised cost	2022					2021
	Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking $million	Ventures $million	Total $million		Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking $million	Ventures1 $million	Total $million
All loans with forbearance measures	2,129	377	-	2,506		2,526	406	-	2,932
Credit impairment (stage 1 and 2)	(1)	-	-	(1)		(4)	-	-	(4)
Credit impairment (stage 3)	(1,253)	(127)	-	(1,380)		(1,237)	(162)	-	(1,399)
Net carrying value	875	250	-	1,125		1,285	244	-	1,529
Included within the above table
Gross performing forborne loans	89	63	-	152		272	59	-	331
Modification of terms and conditions2	89	63	-	152		257	59	-	316
Refinancing3	-	-	-	-		15	-	-	15
Impairment provisions	(1)	-	-	(1)		(4)	-	-	(4)
Modification of terms and conditions2	(1)	-	-	(1)		(4)	-	-	(4)
Refinancing3	-	-	-	-		-	-	-	-
Net performing forborne loans	88	63	-	151		268	59	-	327
Collateral	7	60	-	67		65	56	-	121
Gross non-performing forborne loans	2,040	314	-	2,354		2,253	348	-	2,601
Modification of terms and conditions2	1,997	314	-	2,311		2,095	348	-	2,443
Refinancing3	43	-	-	43		158	-	-	158
Impairment provisions	(1,253)	(127)	-	(1,380)		(1,237)	(162)	-	(1,399)
Modification of terms and conditions2	(1,210)	(127)	-	(1,337)		(1,106)	(162)	-	(1,268)
Refinancing3	(43)	-	-	(43)		(131)	-	-	(131)
Net non-performing forborne loans	787	187	-	974		1,016	186	-	1,202
Collateral	243	68	-	311		236	62	-	298

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 1 January 2022

2 Modification of terms is any contractual change apart from refinancing, as a result of credit stress of the counterparty, i.e. interest reductions, loan covenant waivers

3 Refinancing is a new contract to a lender in credit stress, such that they are refinanced and can pay other debt contracts that they were unable to honour

Page 23

 

Forborne and other modified loans by region

Net forborne loans decreased by $404 million to $1,125 million (31 December 2021: $1,529 million), driven by CCIB mainly due to a repayment within Europe and the Americas.

Amortised cost	2022					2021
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million		Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Performing forborne loans	129	9	13	151		205	76	46	327
Stage 3 forborne loans	568	144	262	974		572	137	493	1,202
Net forborne loans	697	153	275	1,125		777	213	539	1,529

Credit-impaired (stage 3) loans and advances by client segment (audited)

Gross stage 3 loans for the Group is $7.8 billion (31 December 2021: $8.1 billion). The reduction in loans was primarily driven by the following:

In CCIB, stage 3 loans decreased by $0.4 billion to $6.1 billion (31 December 2021: $6.5 billion) due to $2.4 billion outflows in debt sales, write-offs and material upgrades. This was offset by $2 billion inflows due to downgrades of Ghana and Sri Lanka Sovereign related clients as well as China commercial real estate clients.

CPBB stage 3 loans were materially unchanged at $1.5 billion with $0.1 billion decrease from mortgages and secured wealth products.

Ventures loans increased to $1 million (31 December 2021: Nil) due to downgrades in Mox Bank Hong Kong.

Central and other items includes new inflows relating to local currency default of Sri Lanka.

Stage 3 cover ratio (audited)

The stage 3 cover ratio measures the proportion of stage 3 impairment provisions to gross stage 3 loans, and is a metric commonly used in considering impairment trends. This metric does not allow for variations in the composition of stage 3 loans and should be used in conjunction with other Credit Risk information provided, including the level of collateral cover.

The balance of stage 3 loans not covered by stage 3 impairment provisions represents the adjusted value of collateral held and the net outcome of any workout or recovery strategies. Collateral provides risk mitigation to some degree in all client segments and supports the credit quality and cover ratio assessments post impairment provisions.

Further information on collateral is provided in the Credit Risk mitigation section.

The CCIB cover ratio increased by 1 per cent to 60 per cent (31 December 2021: 59 per cent) due to repayments and write-offs, which was offset by provisions taken on Ghana Sovereign downgrade and China commercial real estate clients.

The CPBB cover ratio increased by 2 per cent to 53 per cent (31 December 2021: 51 per cent) due to stage 3 loan balances reducing across secured wealth and mortgage portfolios.

	2022						2021 (Restated)¹
	Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking $million	Ventures $million	Central & Others $million	Total $million		Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking1 $million	Ventures $million	Central & Others $million	Total $million
Gross credit-impaired	6,143	1,453	1	248	7,845		6,520	1,575	-	-	8,095
Credit impairment provisions	(3,662)	(776)	(1)	(18)	(4,457)		(3,861)	(796)	-	-	(4,657)
Net credit-impaired	2,481	677	-	230	3,388		2,659	779	-	-	3,438
Cover ratio	60%	53%	100%	7%	57%		59%	51%	-	-	58%
Collateral ($ million)	956	543	-	-	1,499		805	641	-	-	1,446
Cover ratio (after collateral)	75%	91%	100%	7%	76%		72%	91%	-	-	75%

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 1 January 2022. Prior period has been restated.

Page 24

 

Credit-impaired (stage 3) loans and advances by geographic region

Stage 3 gross loans decreased by $0.3 billion to $7.8 billion (31 December 2021: $8.1 billion). The decrease was primarily driven by CCIB debt sales and repayments in Africa and the Middle East and in Europe and the Americas regions offset by the sovereign downgrade of Ghana and Sri Lanka.

Amortised cost	2022					2021
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million		Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Gross credit-impaired	4,562	2,725	558	7,845		4,448	2,918	729	8,095
Credit impairment provisions	(2,483)	(1,765)	(209)	(4,457)		(2,401)	(1,970)	(286)	(4,657)
Net credit-impaired	2,079	960	349	3,388		2,047	948	443	3,438
Cover ratio	54%	65%	37%	57%		54%	68%	39%	58%

Credit Risk mitigation

Potential credit losses from any given account, customer or portfolio are mitigated using a range of tools such as collateral, netting arrangements, credit insurance and credit derivatives, taking into account expected volatility and guarantees.

The reliance that can be placed on these mitigants is carefully assessed in light of issues such as legal certainty and enforceability, market valuation correlation and counterparty risk of the guarantor.

A secured loan is one where the borrower pledges an asset as collateral of which the Group is able to take possession in the event that the borrower defaults.

The unadjusted market value of collateral across all asset types, in respect of CCIB, without adjusting for over-collateralisation, was $345 billon (31 December 2021: $346 billon).

The collateral values in the table below (which covers loans and advances to banks and customers, excluding those held at fair value through profit or loss) are adjusted where appropriate in accordance with our risk mitigation policy and for the effect of over-collateralisation. The extent of overcollateralization has been determined with reference to both the drawn and undrawn components of exposure as this best reflects the effect of collateral and other credit enhancements on the amounts arising from expected credit losses. The value of collateral reflects management's best estimate and is backtested against our prior experience. On average, across all types of non-cash collateral, the value ascribed is approximately half of its current market value.

CCIB collateral increased by $9 billion to $38.2 billion (31 December 2021: $29.4 billion) due to an increase in reverse repurchase agreements.

CPBB collateral decreased by $10 billion to $92.4 billion (31 December 2021: $102.8 billion) due to a decrease in mortgages and secured wealth product balances.

Stage 2 collateral reduced by $1.1 billion to $5.0 billon (31 December 2021: $6.1 billion) due to a decrease in CCIB loan balances.

Total collateral for Central and other items increased by $4.8 billion to $11.2 billion (31 December 2021: $6.4 billion) due to an increase in lending under reverse repurchase agreements.

Collateral held on loans and advances

The table below details collateral held against exposures, separately disclosing stage 2 and stage 3 exposure and corresponding collateral.

Amortised cost	2022
	Net amount outstanding				Collateral				Net exposure
	Total $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million		Total2  $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million		Total $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million
Corporate, Commercial & Institutional Banking1	179,150	11,366	2,526		38,151	3,973	956		140,999	7,393	1,570
Consumer, Private & Business Banking	130,955	1,550	677		92,350	1,019	543		38,605	531	134
Ventures	698	17	-		-	-	-		698	17	-
Central & other items	39,363	-	230		11,214	-	-		28,149	-	230
Total	350,166	12,933	3,433		141,715	4,992	1,499		208,451	7,941	1,934

 

Page 25

 

 

Amortised cost	2021 (Restated)3
	Net amount outstanding				Collateral				Net exposure
	Total $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million		Total2  $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million		Total $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million
Corporate, Commercial & Institutional Banking1	183,784	15,053	2,702		29,414	5,077	805		154,370	9,976	1,897
Consumer, Private & Business Banking3	136,430	1,731	779		102,769	1,045	641		33,661	686	138
Ventures3	88	7	-		-	-	-		88	7	-
Central & other items	22,549	110	-		6,381	-	-		16,168	110	-
Total	342,851	16,901	3,481		138,564	6,122	1,446		204,287	10,779	2,035

1 Includes loans and advances to banks

2 Adjusted for over-collateralisation based on the drawn and undrawn components of exposures

3 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment in 2022. Prior period has been restated

Collateral - CCIB (audited)

Collateral held against CCIB exposures amounted to $38 billion.

Collateral taken for longer-term and sub-investment grade corporate loans improved to 53 per cent (31 December 2021: 49 per cent).

Our underwriting standards encourage taking specific charges on assets and we consistently seek high-quality, investment-grade collateral.

79 per cent of tangible collateral excluding reverse repurchase agreements (31 December 2021: 76 per cent) held comprises physical assets or is property based, and investment securities. Overall collateral increased by $8.7 billion to $38 billion (31 December 2021: $29 billion) due to an increase in reverse repurchase agreements.

Non-tangible collateral, such as guarantees and standby letters of credit, is also held against corporate exposures, although the financial effect of this type of collateral is less significant in terms of recoveries. However, this is considered when determining the probability of default and other credit-related factors. Collateral is also held against off-balance sheet exposures, including undrawn commitments and trade-related instruments.

Corporate, Commercial & Institutional Banking

Amortised cost	2022 $million	2021 $million
Maximum exposure	179,150	183,784
Property	10,152	10,589
Plant, machinery and other stock	1,168	1,411
Cash	2,797	3,549
Reverse repos	14,305	2,042
A- to AA+	10,551	122
BBB- to BBB+	1,485	483
Unrated	2,269	1,437
Financial guarantees and insurance	5,096	6,616
Commodities	37	198
Ships and aircraft	4,596	5,009
Total value of collateral1	38,151	29,414
Net exposure	140,999	154,370

1 Adjusted for over-collateralisation based on the drawn and undrawn components of exposures

Page 26

 

Collateral - CPBB (audited)

In CPBB, $113 billion which equates to 86 per cent of the portfolio is fully secured (31 December 2021: 86 per cent).

The following table presents an analysis of loans to individuals by product; split between fully secured, partially secured and unsecured.

Amortised cost	2022					2021 (Restated)3
	Fully secured $million	Partially secured $million	Unsecured $million	Total $million		Fully secured $million	Partially secured $million	Unsecured $million	Total $million
Maximum exposure	112,556	449	17,950	130,955		117,129	1,329	17,972	136,430
Loans to individuals
Mortgages	87,212	-	-	87,212		89,222	-	-	89,222
CCPL	221	-	16,711	16,932		150	-	16,943	17,093
Auto	502	-	-	502		542	-	-	542
Secured wealth products	19,551	-	-	19,551		21,495	-	-	21,495
Other	5,070	449	1,239	6,758		5,720	1,329	1,029	8,078
Total collateral1				92,350					102,769
Net exposure2				38,605					33,661
Percentage of total loans	86%	0%	14%			86%	1%	13%

1 Collateral values are adjusted where appropriate in accordance with our risk mitigation policy and for the effect of over-collateralisation

2 Amounts net of ECL

3 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment in 2022. Prior period has been restated

Mortgage loan-to-value ratios by geography (audited)

Loan-to-value (LTV) ratios measure the ratio of the current mortgage outstanding to the current fair value of the properties on which they are secured.

In mortgages, the value of property held as security significantly exceeds principal outstanding of the mortgage loans. The average LTV of the overall mortgage portfolio increased to 44.7 per cent (31 December 2021: 41.1 per cent) mainly from Hong Kong due to a drop in the Property Price Index. Hong Kong, which represents 40 per cent of the mortgage portfolio, has an average LTV of 52.6 per cent (31 December 2021: 43.8 per cent). All of our other key markets continue to have low portfolio LTVs (Korea, Singapore and Taiwan at 37.3 per cent, 42.9 per cent and 45.1 per cent respectively).

An analysis of LTV ratios by geography for the mortgage portfolio is presented in the table below.

Amortised cost	2022
	Asia % Gross	Africa & Middle East % Gross	Europe & Americas % Gross	Total % Gross
Less than 50 per cent	60.9	43.0	32.2	60.1
50 per cent to 59 per cent	15.5	18.2	19.2	15.6
60 per cent to 69 per cent	9.8	16.8	31.3	10.2
70 per cent to 79 per cent	6.5	12.8	14.8	6.7
80 per cent to 89 per cent	3.6	5.1	1.1	3.6
90 per cent to 99 per cent	2.5	2.0	-	2.4
100 per cent and greater	1.4	2.2	1.3	1.4
Average portfolio loan-to-value	44.4	54.3	56.6	44.7
Loans to individuals - mortgages ($million)	83,954	1,388	1,870	87,212

 

Page 27

 

Amortised cost	2021
	Asia1 % Gross	Africa & Middle East % Gross	Europe & Americas % Gross	Total % Gross
Less than 50 per cent	68.2	27.6	16.8	66.4
50 per cent to 59 per cent	11.6	18.6	19.9	11.9
60 per cent to 69 per cent	8.1	19.6	37.5	8.9
70 per cent to 79 per cent	9.1	16.5	17.1	9.4
80 per cent to 89 per cent	2.4	9.1	8.7	2.7
90 per cent to 99 per cent	0.5	4.8	-	0.5
100 per cent and greater	0.1	3.8	-	0.2
Average portfolio loan-to-value	40.5	61.9	60.8	41.1
Loans to individuals - mortgages ($million)	85,765	1,651	1,806	89,222

Collateral and other credit enhancements possessed or called upon (audited)

The Group obtains assets by taking possession of collateral or calling upon other credit enhancements (such as guarantees). Repossessed properties are sold in an orderly fashion. Where the proceeds are in excess of the outstanding loan balance the excess is returned to the borrower.

Certain equity securities acquired may be held by the Group for investment purposes and are classified as fair value through profit or loss, and the related loan written off. The carrying value of collateral possessed and held by the Group is $14.9 million (31 December 2021: $11.8 million).

	2022 $million	2021 $million
Property, plant and equipment	9.6	5.8
Guarantees	5.3	6.0
Total	14.9	11.8

Other Credit Risk mitigation (audited)

Other forms of credit risk mitigation are set out below.

Credit default swaps

The Group has entered into credit default swaps for portfolio management purposes, referencing loan assets with a notional value of $5.1 billion (31 December 2021: $12.1 billion). These credit default swaps are accounted for as financial guarantees as per IFRS 9 as they will only reimburse the holder for an incurred loss on an underlying debt instrument. The Group continues to hold the underlying assets referenced in the credit default swaps and it continues to be exposed to related Credit Risk and Foreign Exchange Rate Risk on these assets.

Credit linked notes

The Group has issued credit linked notes for portfolio management purposes, referencing loan assets with a notional value of $13.5 billion (31 December 2021: $10.0 billion). The Group continues to hold the underlying assets for which the credit linked notes provide mitigation.

Derivative financial instruments

The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the positive and negative mark-to-market values of applicable derivative transactions. Credit Risk mitigation for derivative financial instruments is set out below.

Off-balance sheet exposures

For certain types of exposure, such as letters of credit and guarantees, the Group obtains collateral such as cash depending on internal Credit Risk assessments, as well as in the case of letters of credit holding legal title to the underlying assets should a default take place.

Other portfolio analysis

This section provides maturity analysis by credit quality by industry and industry and retail products analysis by region.

Page 28

 

Contractual maturity analysis of loans and advances by client segment

Loans and advances to the CCIB segment remain predominantly short-term, with $98.3 billion or 68 per cent (31 December 2021: $95.5 billion or 66 per cent) maturing in less than one year.

Loans and advances to banks decreased by $4.9 billion to $39.5 billion (31 December 2021: $44.4 billion) of which 96 per cent mature in less than one year (31 December 2021: 98 per cent).

The CPBB short-term book of one year or less is stable at 25 per cent (31 December 2021: 26 per cent) and long term book over five years increased to 64 per cent (31 December 2021: 62 per cent) of the total portfolio.

Amortised cost	2022
	One year or less $million	One to five years $million	Over five years $million	Total $million
Corporate, Commercial & Institutional Banking	98,335	34,635	10,789	143,759
Consumer, Private & Business Banking	33,365	14,161	84,731	132,257
Ventures	548	162	-	710
Central & other items	39,373	-	8	39,381
Gross loans and advances to customers	171,621	48,958	95,528	316,107
Impairment provisions	(4,767)	(574)	(119)	(5,460)
Net loans and advances to customers	166,854	48,384	95,409	310,647
Net loans and advances to banks	38,105	1,211	203	39,519

 

Amortised cost	2021 (Restated)¹
	One year or less $million	One to five years $million	Over five years $million	Total $million
Corporate, Commercial & Institutional Banking	95,454	36,953	11,299	143,706
Consumer, Private & Business Banking	35,900	16,783	85,093	137,776
Ventures	91	-	-	91
Central & other items	22,318	224	7	22,549
Gross loans and advances to customers	153,763	53,960	96,399	304,122
Impairment provisions	(5,057)	(462)	(135)	(5,654)
Net loans and advances to customers	148,706	53,498	96,264	298,468
Net loans and advances to banks	43,274	955	154	44,383

1 Following the increased strategic importance and reporting of Ventures to management, this has been established as a separate operating segment from 1 January 2022. Prior period has been restated

Credit quality by industry

Loans and advances

This section provides an analysis of the Group's amortised cost portfolio by industry on a gross, total credit impairment and net basis.

From an industry perspective, gross loans and advances increased by $12.0 billion to $316 billion (31 December 2021: $304 billion), of which $16.8 billion was from Central and other items segments, offset by $5.5 billion in CPBB. CCIB was stable at $144 billion with increase in stage 1 loans offset by a decrease in stage 2 loans.

Stage 1 loans increased by $16.0 billion to $295.2 billion (31 December 2021: $279.2 billion), due to an increase in Lending to Governments notably Hong Kong, Singapore and Korea. In CPBB, loans decreased by $4.5 billion to $129.8 billion (31 December 2021: $134.4 billion), mainly driven by a decrease in Private Bank exposure (largely from UK, Hong Kong and Singapore in all classes), and a decrease in exposure of the Residential Mortgage segment in Korea (due to tightened Debt Service Ratio following new government guidelines).  This is offset by an increase in credit card portfolio of $1 billion. In CCIB, loans were broadly stable due to $10.5 billion increase in exposures in Financing, insurance and non-banking from a few notable clients, $1.5 billion increase in Transport, telecom and utilities from upgrades offset by $2.8 billion decrease in Manufacturing and $5.3 billion decrease in Commercial real estate sector from repayments.

Stage 2 loans decreased by $3.8 billion to $13 billion (31 December 2021: $16.8 billion) largely due to CCIB, $2.6 billion reductions in Transport, telecom and utilities from upgrades to Stage 1 and repayments, $1.2 billion decrease in Energy. This was offset by an increase in Commercial real estate sector from accounts being placed on Early Alert Non Purely Precautionary and higher risk categories.

Page 29

 

Stage 3 loans reduced by $0.3 billion to $7.8 billion (31 December 2021: $8.1 billion) of which CCIB and Central and other items are broadly flat as the effects of the sovereign downgrades of Ghana and Sri Lanka are largely offset by repayments and upgrades. CPBB stage 3 loans reduced in Secured wealth and Mortgages portfolios.

Amortised cost	2022
	Stage 1				Stage 2				Stage 3				Total
	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million		Gross balance $million	Total credit impair-ment $million	Net carrying amount $million		Gross balance $million	Total credit impair-ment $million	Net carrying amount $million		Gross balance $million	Total credit impair-ment $million	Net carrying amount $million
Industry:
Energy	10,959	(8)	10,951		818	(7)	811		1,324	(620)	704		13,101	(635)	12,466
Manufacturing	20,990	(23)	20,967		1,089	(27)	1,062		777	(518)	259		22,856	(568)	22,288
Financing, insurance and non-banking	34,915	(9)	34,906		774	(3)	771		195	(175)	20		35,884	(187)	35,697
Transport, telecom and utilities	14,273	(22)	14,251		2,347	(36)	2,311		669	(224)	445		17,289	(282)	17,007
Food and household products	7,841	(21)	7,820		695	(20)	675		418	(259)	159		8,954	(300)	8,654
Commercial real estate	12,393	(43)	12,350		3,217	(195)	3,022		1,305	(761)	544		16,915	(999)	15,916
Mining and quarrying	5,482	(4)	5,478		537	(5)	532		248	(174)	74		6,267	(183)	6,084
Consumer durables	6,403	(4)	6,399		420	(17)	403		358	(307)	51		7,181	(328)	6,853
Construction	2,424	(2)	2,422		407	(5)	402		495	(410)	85		3,326	(417)	2,909
Trading companies & distributors	2,205	(1)	2,204		170	(2)	168		122	(80)	42		2,497	(83)	2,414
Government	42,825	(2)	42,823		603	(1)	602		168	(15)	153		43,596	(18)	43,578
Other	4,684	(4)	4,680		278	(5)	273		312	(137)	175		5,274	(146)	5,128
Retail Products:
Mortgage	85,859	(12)	85,847		996	(7)	989		556	(180)	376		87,411	(199)	87,212
Credit Cards	6,912	(103)	6,809		155	(46)	109		59	(44)	15		7,126	(193)	6,933
Personal loans and other unsecured lending	10,652	(253)	10,399		215	(57)	158		296	(156)	140		11,163	(466)	10,697
Auto	501	-	501		1	-	1		-	-	-		502	-	502
Secured wealth products	19,269	(45)	19,224		235	(10)	225		407	(305)	102		19,911	(360)	19,551
Other	6,632	(3)	6,629		86	(1)	85		136	(92)	44		6,854	(96)	6,758
Net carrying value (customers)¹	295,219	(559)	294,660		13,043	(444)	12,599		7,845	(4,457)	3,388		316,107	(5,460)	310,647

1 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $24,498 million

Page 30

 

 

Amortised cost	2021
	Stage 1				Stage 2				Stage 3				Total
	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million		Gross balance $million	Total credit impair-ment $million	Net carrying amount $million		Gross balance $million	Total credit impair-ment $million	Net carrying amount $million		Gross balance $million	Total credit impair-ment $million	Net carrying amount $million
Industry:
Energy	10,454	(19)	10,435		2,067	(76)	1,991		998	(719)	279		13,519	(814)	12,705
Manufacturing	23,792	(9)	23,783		1,181	(30)	1,151		852	(562)	290		25,825	(601)	25,224
Financing, insurance and non-banking	24,380	(9)	24,371		1,257	(12)	1,245		268	(207)	61		25,905	(228)	25,677
Transport, telecom and utilities	12,778	(5)	12,773		4,926	(51)	4,875		966	(289)	677		18,670	(345)	18,325
Food and household products	8,093	(2)	8,091		721	(26)	695		380	(276)	104		9,194	(304)	8,890
Commercial real estate	17,680	(43)	17,637		1,787	(75)	1,712		833	(335)	498		20,300	(453)	19,847
Mining and quarrying	4,793	(3)	4,790		480	(20)	460		272	(167)	105		5,545	(190)	5,355
Consumer durables	7,069	(3)	7,066		407	(9)	398		425	(346)	79		7,901	(358)	7,543
Construction	2,279	(3)	2,276		506	(19)	487		914	(624)	290		3,699	(646)	3,053
Trading companies & distributors	1,144	(1)	1,143		117	(8)	109		143	(135)	8		1,404	(144)	1,260
Government	26,588	(2)	26,586		678	(1)	677		154	(8)	146		27,420	(11)	27,409
Other	5,757	(4)	5,753		801	(14)	787		316	(194)	122		6,874	(212)	6,662
Retail Products:
Mortgage	87,987	(22)	87,965		862	(20)	842		599	(184)	415		89,448	(226)	89,222
Credit Cards2	5,899	(90)	5,809		388	(74)	314		61	(44)	17		6,348	(208)	6,140
Personal loans and other unsecured lending2	10,981	(188)	10,793		182	(58)	124		334	(210)	124		11,497	(456)	11,041
Auto	541	(1)	540		2	-	2		-	-	-		543	(1)	542
Secured wealth products	21,067	(61)	21,006		307	(10)	297		483	(291)	192		21,857	(362)	21,495
Other	7,896	(8)	7,888		180	(21)	159		97	(66)	31		8,173	(95)	8,078
Net carrying value (customers)¹	279,178	(473)	278,705		16,849	(524)	16,325		8,095	(4,657)	3,438		304,122	(5,654)	298,468

1 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $7,331 million.

2 Prior year has been re-presented to provide product granularity

Industry analysis of loans and advances by geographic region

This section provides an analysis of the Group's amortised cost loan portfolio, net of provisions, by industry and region.

In the CCIB and Central and other items segment, our largest industry exposures are to Government, Financing, insurance and non-banking and Manufacturing with each constituting at least 10 per cent of CCIB and Central and other items loans and advances to customers.

Financing, insurance and non-banking industry clients are mostly investment-grade institutions and this lending forms part of the liquidity management of the Group. The Manufacturing sector group is spread across a diverse range of industries, including automobiles and components, capital goods, pharmaceuticals, biotech and life sciences, technology hardware and equipment, chemicals, paper products and packaging, with lending spread over 3,330 clients.

The Group provides loans to Commercial real estate counterparties of $16.9 billion, which represents 9 per cent of total customer loans and advances. In total, $9.1 billion of this lending is to counterparties where the source of repayment is substantially derived from rental or sale of real estate and is secured by real estate collateral. The remaining Commercial real estate loans comprise working capital loans to real estate corporates, loans with non-property collateral, unsecured loans and loans to real estate entities of diversified conglomerates. The average LTV ratio of the performing book Commercial real estate portfolio has decreased to 49 per cent, compared with 50 per cent in 2021. The proportion of loans with an LTV greater than 80 per cent has decreased to 1 per cent, compared with 2 per cent in 2021. The China commercial real estate portfolio is being closely monitored and is being separately disclosed below.

 

Page 31