TIDMSTAN

RNS Number : 1887U

Standard Chartered PLC

29 July 2022

Standard Chartered PLC - Half Year Results 2022 - Part 2

Table of contents

 
Risk review                       2 
--------------------------------  --- 
Capital review                    58 
--------------------------------  --- 
Financial statements              65 
--------------------------------  --- 
Other supplementary information   122 
--------------------------------  --- 
Glossary                          133 
--------------------------------  --- 
 

Unless another currency is specified, the word 'dollar' or symbol '$' in this document means US dollar and the word 'cent' or symbol 'c' means one-hundredth of one US dollar.

The information within this report is unaudited.

Unless the context requires, within this document, 'China' refers to the People's Republic of China and, for the purposes of this document only, excludes Hong Kong Special Administrative Region (Hong Kong), Macau Special Administrative Region (Macau) and Taiwan. 'Korea' or 'South Korea' refers to the Republic of Korea. Asia includes Australia, Bangladesh, Brunei, Cambodia, Mainland China, Hong Kong, India, Indonesia, Japan, Korea, Laos, Macau, Malaysia, Myanmar, Nepal, Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam; Africa & Middle East (AME) includes Angola, Bahrain, Botswana, Cameroon, Cote d'Ivoire, Egypt, The Gambia, Ghana, Iraq, Jordan, Kenya, Lebanon, Mauritius, Nigeria, Oman, Pakistan, Qatar, Saudi Arabia, Sierra Leone, South Africa, Tanzania, the United Arab Emirates (UAE), Uganda, Zambia and Zimbabwe; and Europe & Americas (EA) includes Argentina, Brazil, Colombia, Falkland Islands, France, Germany, Ireland, Jersey, Poland, Sweden, Turkey, the UK and the US.

Within the tables in this report, blank spaces indicate that the number is not disclosed, dashes indicate that the number is zero and nm stands for not meaningful.

Standard Chartered PLC is incorporated in England and Wales with limited liability. Standard Chartered PLC is headquartered in London. The Group's head office provides guidance on governance and regulatory standards. Standard Chartered PLC stock codes are: HKSE 02888 and LSE STAN.LN.

Page 1

Risk review and Capital review

 
Risk Index 
------------  ------------------------------------------------------------ 
              Credit Risk 
------------  ------------------------------------------------------------ 
              Basis of preparation 
              ------------------------------------------------------------ 
              Credit Risk overview 
              ------------------------------------------------------------ 
              Impairment model 
              ------------------------------------------------------------ 
              Staging of financial instruments 
              ------------------------------------------------------------ 
              IFRS 9 principles and approaches 
              Maximum exposure to Credit Risk 
              Analysis of financial instrument by stage 
              ------------------------------------------------------------ 
              Credit quality analysis 
 
                *    Credit quality by client segment 
 
                *    Credit quality by geographic region 
              ------------------------------------------------------------ 
              Movement in gross exposures and credit impairment for 
               loans and advances, debt securities, undrawn commitments 
               and financial guarantees 
              Movement of debt securities, alternative Tier 1 and other 
               eligible bills 
              ------------------------------------------------------------ 
              Analysis of stage 2 balances 
              Credit impairment charge 
              COVID-19 relief measures 
              Problem credit management and provisioning 
 
                *    Forborne and other modified loans by client segment 
 
                *    Forborne and other modified loans by region 
 
                *    Credit-impaired (stage 3) loans and advances by 
                     client segment 
 
                *    Credit-impaired (stage 3) loans and advances by 
                     geographic region 
              ------------------------------------------------------------ 
              Credit risk mitigation 
 
                *    Collateral 
 
                *    Collateral held on loans and advances 
 
                *    Collateral - Corporate, Commercial & Institutional 
                     Banking 
 
                *    Collateral - Consumer, Private & Business Banking 
 
                *    Mortgage loan-to-value ratios by geography 
 
                *    Collateral and other credit enhancements possessed or 
                     called upon 
 
                *    Other Credit Risk mitigation 
              ------------------------------------------------------------ 
              Other portfolio analysis 
 
                *    Credit quality by industry 
 
                *    Industry and Retail Products analysis of loans and 
                     advances by geographic region 
 
                *    Vulnerable and cyclical sector tables 
              IFRS 9 expected credit loss methodology 
              ------------------------------------------------------------ 
              Traded Risk 
              Market Risk movements 
              Counterparty Credit Risk 
              Derivative financial instruments Credit Risk mitigation 
              ------------------------------------------------------------ 
              Liquidity and funding Risk 
              Liquidity & Funding Risk metrics 
              Encumbrance 
              Liquidity analysis of the Group's balance sheet 
              Interest Rate Risk in the Banking Book 
              ------------------------------------------------------------ 
              Operational and Technology Risk 
              Operational and Technology Risk profile 
Risk profile  Other principal risks 
------------  ------------------------------------------------------------ 
 

Page 2

 
Risk Index 
----------  -------------------------------- 
Capital     Capital summary 
 
              *    Capital ratios 
 
              *    CRD Capital base 
 
              *    Movement in total capital 
            -------------------------------- 
            Risk-weighted asset 
            -------------------------------- 
            Group leverage ratio 
----------  -------------------------------- 
 

The following parts of the Risk review and Capital review form part of these condensed interim financial statements and are reviewed by the external auditors:

a) Risk review: Disclosures marked as 'reviewed' from the start of Credit risk section to the end of other principal risks in the same section; and

b) Capital review: Tables marked as 'reviewed' from the start of 'CRD capital base' to the end of 'Movement in total capital', excluding 'Total risk-weighted assets'.

Page 3

Credit Risk (reviewed)

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 14 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 obligations to pay the Group. Credit exposures arise from both the banking and trading books

Impairment model

IFRS 9 requires 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 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 ECL

-- Performing but has exhibited Significant Increase in Credit Risk (SICR)

Stage 3

-- Credit-impaired

-- Non-performing

Page 4

IFRS 9 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 to          For material loan portfolios, the               IFRS 9 expected credit 
 determining          Group has adopted a statistical modelling       loss methodology 
 expected credit      approach for determining expected               Post model adjustments 
 losses               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. 
-------------------  ----------------------------------------------  --------------------------------- 
Incorporation        The determination of expected credit            Incorporation of forward-looking 
 of forward-looking   loss includes various assumptions               information and impact 
 information          and judgements in respect of forward-looking    of non-linearity 
                      macroeconomic information. Refer to             Forecast of key macroeconomic 
                      for incorporation of forward-looking            variables underlying the 
                      information, forecast of key macroeconomic      expected credit loss calculation 
                      variables underlying the expected               Management overlay and 
                      credit loss calculation and the impact          sensitivity to macroeconomic 
                      on non-linearity and sensitivity of             variables 
                      expected credit loss calculation to 
                      macroeconomic variables. Management 
                      overlays may also be used to capture 
                      risks not identified in the models. 
-------------------  ----------------------------------------------  --------------------------------- 
Significant          Expected credit loss for financial              IFRS 9 expected credit 
 increase in          assets will transfer from a 12-month            loss methodology 
 Credit Risk          basis (stage 1) to a lifetime basis 
 (SICR)               (stage 2) when there is a significant 
                      increase in Credit Risk 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. 
-------------------  ----------------------------------------------  --------------------------------- 
Assessment           Credit-impaired (stage 3) financial             Consumer, Private and 
 of credit-impaired   assets comprise those assets that               Business Banking clients 
 financial assets     have experienced an observed credit             Corporate, Commercial 
                      event and are in default. Default               and Institutional Banking 
                      represents those assets that are at             clients 
                      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 cash flows 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 
                      earned while the asset was in stage 
                      3 is recognised within the credit 
                      impairment line. 
-------------------  ----------------------------------------------  --------------------------------- 
Transfers between    Assets will transfer from stage 3               Movement in loan exposures 
 stages               to stage 2 when they are no longer              and expected credit losses 
                      considered to be credit-impaired. 
                      Assets will not be considered credit-impaired 
                      only if the customer makes payments 
                      such that they are paid to 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 
                      (PD) 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). 
-------------------  ----------------------------------------------  --------------------------------- 
 

Page 5

 
Modified financial  Where the contractual terms of a financial     COVID-19 relief measures 
 assets              instrument have been modified, and             Forbearance and other 
                     this does not result in the instrument         modified loans 
                     being derecognised, a modification 
                     gain or loss is recognised in the 
                     income statement representing the 
                     difference between the original cashflows 
                     and the modified cash flows, 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 to the 
                     remaining lifetime PD based on the 
                     original contractual terms. 
------------------  ---------------------------------------------  ------------------------ 
Governance          The models used in determining ECL 
 and application     are reviewed and approved by the Group 
 of expert credit    Credit Model Assessment Committee 
 judgement in        and have been validated by Group model 
 respect of          validation, which is independent of 
 expected credit     the business. 
 losses              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. 
------------------  ---------------------------------------------  ------------------------ 
 

Maximum exposure to Credit risk (reviewed)

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 30 June 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 increased by $10.7 billion to $806 billion (2021: $796 billion).

Derivative exposures increased by $24.2 billion and other assets increased by $11.1 billion from additional cash collateral and settlement trades. This is offset by a decrease in $5.7 billion of cash and balances at central banks, $8.2 billion in loans and advances to banks, $5.0 billion in loans and advances to customers and $7.4 billion in Fair Value through profit or loss mainly from a reduction in reverse repo positions.

Of the $5.0 billion decrease in loans and advances to customers, Corporate, Commercial and Institutional Banking decreased by $5.7 billion from reductions in Stage 2 exposures and in Stage 3 assets due to loan sales, repayments and upgrades and Consumer, Private and Business Banking decreased by $4.3 billion from reductions in Mortgages and Secured wealth products. This is offset by an increase in Government sector of $4.9 billion in Central and other items segment.

Off-balance sheet instruments increased by $4.2 billion to $221 billion, driven by higher undrawn commitments.

Page 6

 
                                     30.06.22                                            31.12.21 
--------------  --------------------------------------------------  -------------------------------------------------- 
                                  Credit risk                                         Credit risk 
                                   management                                          management 
                ----------  ------------------------  ------------  ----------  ------------------------  ------------ 
                                              Master                                              Master 
                   Maximum                   netting                   Maximum                   netting 
                  exposure  Collateral8   agreements  Net Exposure    exposure  Collateral8   agreements  Net exposure 
                  $million     $million     $million      $million    $million     $million     $million      $million 
--------------  ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
On-balance 
sheet 
Cash and 
 balances at 
 central banks      67,005                                  67,005      72,663                                  72,663 
Loans and 
 advances to 
 banks1             36,201          795                     35,406      44,383        1,079                     43,304 
                ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
  of which - 
   reverse 
   repurchase 
   agreements 
   and other 
   similar 
   secured 
   lending7            795          795                          -       1,079        1,079                          - 
                ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
Loans and 
 advances to 
 customers1        293,508      125,385                    168,123     298,468      131,397                    167,071 
                ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
  of which - 
   reverse 
   repurchase 
   agreements 
   and other 
   similar 
   secured 
   lending7          7,894        7,894                          -       7,331        7,331                          - 
                ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
Investment 
 securities 
 - Debt 
 securities 
 and other 
 eligible 
 bills2            164,137                                 164,137     162,700                                 162,700 
Fair value 
 through 
 profit 
 or loss3, 7       115,791       74,398            -        41,393     123,234       80,009            -        43,225 
                ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
  Loans and 
   advances to 
   banks             4,562                                   4,562       3,847                                   3,847 
  Loans and 
   advances to 
   customers         8,445                                   8,445       9,953                                   9,953 
  Reverse 
   repurchase 
   agreements 
   and 
   other 
   similar 
   lending7         74,398       74,398                          -      80,009       80,009                          - 
  Investment 
   securities 
   - Debt 
   securities 
   and other 
   eligible 
   bills2           28,386                                  28,386      29,425                                  29,425 
                ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
Derivative 
 financial 
 instruments4, 
 7                  76,676       14,559       47,911        14,206      52,445        8,092       39,502         4,851 
Accrued income       1,853                                   1,853       1,674                                   1,674 
Assets held 
 for sale               60                                      60          52                                      52 
Other assets5       51,135                                  51,135      40,068                                  40,068 
--------------  ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
Total balance 
 sheet             806,366      215,137       47,911       543,318     795,687      220,577       39,502       535,608 
--------------  ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
Off-balance 
sheet6 
Undrawn 
 Commitments       162,841        4,201                    158,640     158,523        3,848                    154,675 
Financial 
 Guarantees 
 and other 
 equivalents        58,415        2,529                     55,886      58,535        2,240                     56,295 
--------------  ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
Total 
 off-balance 
 sheet             221,256        6,730            -       214,526     217,058        6,088            -       210,970 
--------------  ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
Total            1,027,622      221,867       47,911       757,844   1,012,745      226,665       39,502       746,578 
--------------  ----------  -----------  -----------  ------------  ----------  -----------  -----------  ------------ 
 

1 Net of credit impairment. 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 $755 million (31 December 2021: $737 million). Further details are set out in Note 13 Financial instruments

3 Excludes equity and other investments of $2,325 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 transaction

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

Analysis of financial instrument by stage (reviewed)

This table shows financial instruments and off-balance sheet commitments by stage, along with the total credit impairment loss provision against each class of financial instrument.

The proportion of financial instruments held within stage 1 improved by 1 per cent to 96 per cent (2021: 95 per cent). Total stage 1 balances increased by $6.8 billion, of which around $8.1 billion was in undrawn commitments, $11 billion in other assets from additional cash collateral and settlement trades and $1.9 billion in debt securities. This is offset by decrease of $6.5 billion in cash and balances at central bank, $8 billion in loans and advances to banks. Loans and advances to customers remained stable as Consumer, Private and Business Banking decrease of $4 billion was offset by increase in Central and other items of $4 billion.

Stage 2 financial instruments reduced by 94 basis points to 3.2 per cent (2021: 4.1 per cent) due to exposure reductions in Energy, Transport, telecom and utilities sectors in Corporate, Commercial and Institutional Banking. As a result, the proportion of loans and advances to customers classified in stage 2 also reduced to 4 per cent (2021: 6 per cent).

Stage 3 financial instruments were stable at 1 per cent of the Group total.

Off-balance sheet instruments increased by a net $4 billion, driven by higher undrawn commitments.

Page 7

 
                                                                                  30.06.22 
-------------  ---------------------------------------------------------------------------------------------------------------------------------------------- 
                            Stage 1                             Stage 2                             Stage 3                              Total 
               ----------------------------------  ----------------------------------  ----------------------------------  ---------------------------------- 
                                Total         Net                   Total         Net                   Total         Net                   Total         Net 
                    Gross      credit    carrying       Gross      credit    carrying       Gross      credit    carrying       Gross      credit    carrying 
                 balance1  impairment       value    balance1  impairment       value    balance1  impairment       value    balance1  impairment       value 
                 $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Cash and 
 balances 
 at central 
 banks             66,145           -      66,145         864         (4)         860           -           -           -      67,009         (4)      67,005 
Loans and 
 advances 
 to banks 
 (amortised 
 cost)             35,779         (7)      35,772         371         (5)         366          78        (15)          63      36,228        (27)      36,201 
Loans and 
 advances 
 to customers 
 (amortised 
 cost)            279,136       (502)     278,634      12,539       (385)      12,154       7,053     (4,333)       2,720     298,728     (5,220)     293,508 
Debt 
 securities 
 and other 
 eligible 
 bills5           159,265        (61)                   4,853        (34)                     106        (70)                 164,224       (165) 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Amortised 
 cost              51,527        (16)      51,511         320         (1)         319         106        (70)          36      51,953        (87)      51,866 
FVOCI2            107,738        (45)                   4,533        (33)                       -           -                 112,271        (78)           - 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Accrued 
 income 
 (amortised 
 cost)4             1,853           -       1,853           -           -           -           -           -           -       1,853           -       1,853 
Assets held 
 for sale4             60           -          60           -           -           -           -           -           -          60           -          60 
Other assets       51,134           -      51,134           -           -           -           4         (3)           1      51,138         (3)      51,135 
Undrawn 
 commitments3     157,596        (37)                   5,245        (42)                       -           -                 162,841        (79) 
Financial 
 guarantees, 
 trade 
 credits 
 and 
 irrevocable 
 letter of 
 credits3          54,991        (16)                   2,781        (16)                     643       (190)                  58,415       (222) 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Total             805,959       (623)                  26,653       (486)                   7,884     (4,611)                 840,496     (5,720) 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 

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 includes gross of $28 million and ECL $6 million originated credit-impaired debt securities.

Page 8

 
                                                                                  31.12.21 
-------------  ---------------------------------------------------------------------------------------------------------------------------------------------- 
                            Stage 1                             Stage 2                             Stage 3                              Total 
               ----------------------------------  ----------------------------------  ----------------------------------  ---------------------------------- 
                                Total         Net                   Total         Net                   Total         Net                   Total         Net 
                    Gross      credit    carrying       Gross      credit    carrying       Gross      credit    carrying       Gross      credit    carrying 
                 balance1  impairment       value    balance1  impairment       value    balance1  impairment       value    balance1  impairment       value 
                 $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $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 
 letter of 
 credits3          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

Credit quality analysis (reviewed)

Credit quality by client segment

For the Corporate, Commercial and Institutional Banking portfolio, 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 (defaulted) clients. The mapping of credit quality is as follows.

Mapping of credit quality

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

 
               Corporate, Commercial & Institutional                              Consumer & Business 
                Banking                                         Private Banking1   Banking3 
               -----------------------------------------------  ----------------  ---------------------- 
Credit                                              Regulatory 
 quality       Internal        S&P external          PD range                     Number of days past 
 description    grade mapping   ratings equivalent   (%)        Internal ratings   due 
-------------  --------------  -------------------  ----------  ----------------  ---------------------- 
                               AAA/AA+ to                       Class I and       Current loans (no past 
Strong         1A to 5B         BBB-/BB+            0 to 0.425   Class IV          dues nor impaired) 
-------------  --------------  -------------------  ----------  ----------------  ---------------------- 
Satisfactory   6A to 11C       BB+/BB to B-/CCC+    0.426 to    Class II and      Loans past due till 
                                2                    15.75       Class III         29 days 
-------------  --------------  -------------------  ----------  ----------------  ---------------------- 
Higher          Grade          CCC to C             15.751 to   Stressed Assets   Past due loans 30 days 
 risk            12                                  99.999      Risk managed      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 Medium enterprise clients within Business Banking are managed using the same internal credit grades as Corporate, Commercial and Institutional Banking

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.

Page 9

Stage 1

Stage 1 gross loans and advances to customers remained flat compared with 31 December 2021 and represent an increase of 1.6 per cent at 93 per cent of loans and advances to customers (2021: 92 per cent). The stage 1 coverage ratio remained at 0.2 per cent compared with 31 December 2021.

In Corporate, Commercial and Institutional Banking, the proportion of stage 1 loans has increased to 88 per cent (2021: 85 per cent), and the percentage of stage 1 loans rated as strong is higher at 65 per cent (2021: 64 per cent) as the Group continues to focus on the origination of investment grade lending. Stage 1 loans remained stable at $122 billion which was primarily driven by decreases in Commercial real estate, Financing and Insurance sectors, and offset by increases in the Government, Transport, Telecom and Energy sectors.

Consumer, Private and Business Banking stage 1 loans decreased by $4 billion mainly due to currency depreciation in Korea and private banking portfolio decrease in Hong Kong driven by client de-leveraging and market fluctuation. The proportion rated as strong remained stable at 96 per cent.

Ventures had an increase of $258 million during the period from new lending in Mox.

Central and other items segment increased by $4 billion.

Stage 2

Stage 2 loans and advances to customers decreased by $4.3 billion to $12.5 billion (2021: $16.8 billion), primarily in Corporate, Commercial and Institutional Banking due to exposure reductions in Energy, Transport, telecom and utilities sectors, and the proportion of stage 2 loans also reduced to 4 per cent (2021: 5.5 per cent).

Consumer, Private and Business Banking stage 2 loans remained stable at $1.9 billion.

Stage 2 loans to customers classified as 'Higher risk' decreased by $0.6 billion, which was driven by lower exposures, upgrades out of 'higher risk' as well as downgrades to stage 3 primarily as a result of the downgrade of foreign currency sovereign grading of Sri Lanka in the first half of 2022.

The overall stage 2 cover ratio remained stable at 3.1 per cent. Consumer, Private and Business Banking stage 2 cover ratio decreased to 6.9 per cent (2021: 9.5 per cent), primarily driven by the release of $37 million of COVID-19 management overlays arising from the reassessment of residual risk after manifestation of such risk through individual impairments.

Stage 3

Gross stage 3 loans decreased by $1 billion to $7.1 billion (2021: $8.1 billion) as a result of loan sales, upgrades and repayments in Corporate, Commercial and Institutional Banking offset by the downgrade of foreign currency sovereign grading of Sri Lanka. Stage 3 cover ratio (excluding collateral) increased by 3 percentage points to 61 per cent.

Consumer, Private and Business Banking stage 3 loans remain stable.

Page 10

Loans and advances by client segment (reviewed)

 
                                                                30.06.22 
----------------  ---------------------------------------------------------------------------------------------------- 
                                                       Customers 
                  ---------  --------------------------------------------------------------  ------------  ----------- 
                                   Corporate,    Consumer, 
                                   Commercial      Private               Central 
                              & Institutional   & Business               & other   Customer       Undrawn    Financial 
                      Banks           Banking      Banking   Ventures      items      Total   commitments   Guarantees 
Amortised cost     $million          $million     $million   $million   $million   $million      $million     $million 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Stage 1              35,779           121,965      130,104        340     26,727    279,136       157,596       54,991 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
  - Strong           24,145            79,442      125,633        339     26,628    232,042       140,232       40,220 
  - Satisfactory     11,634            42,523        4,471          1         99     47,094        17,364       14,771 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Stage 2                 371            10,488        1,894          5        152     12,539         5,245        2,781 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
  - Strong               34             1,614        1,299          3          -      2,916         1,475          347 
  - Satisfactory        337             8,191          278          1          -      8,470         3,213        2,146 
  - Higher risk           -               683          317          1        152      1,153           557          288 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Of which (stage 
2): 
  - Less than 30 
   days past 
   due                    -                54          278          1          -        333             -            - 
  - More than 30 
   days past 
   due                    -                 8          317          1          -        326             -            - 
Stage 3, 
 credit-impaired 
 financial 
 assets                  78             5,552        1,500          1          -      7,053             -          643 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Gross balance(1)     36,228           138,005      133,498        346     26,879    298,728       162,841       58,415 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Stage 1                 (7)             (141)        (359)        (2)          -      (502)          (37)         (16) 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
  - Strong              (4)              (49)        (272)        (2)          -      (323)          (22)          (8) 
  - Satisfactory        (3)              (92)         (87)          -          -      (179)          (15)          (8) 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Stage 2                 (5)             (253)        (130)          -        (2)      (385)          (42)         (16) 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
  - Strong                -              (13)         (53)          -          -       (66)           (6)          (1) 
  - Satisfactory        (5)             (201)         (37)          -          -      (238)          (32)          (9) 
  - Higher risk           -              (39)         (40)          -        (2)       (81)           (4)          (6) 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Of which (stage 
2): 
  - Less than 30 
   days past 
   due                    -                 -         (37)          -          -       (37)             -            - 
  - More than 30 
   days past 
   due                    -                 -         (40)          -          -       (40)             -            - 
Stage 3, 
 credit-impaired 
 financial 
 assets                (15)           (3,575)        (758)          -          -    (4,333)             -        (190) 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Total credit 
 impairment            (27)           (3,969)      (1,247)        (2)        (2)    (5,220)          (79)        (222) 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Net carrying 
 value               36,201           134,036      132,251        344     26,877    293,508 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Stage 1                0.0%              0.1%         0.3%       0.6%       0.0%       0.2%          0.0%         0.0% 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
  - Strong             0.0%              0.1%         0.2%       0.6%       0.0%       0.1%          0.0%         0.0% 
  - Satisfactory       0.0%              0.2%         1.9%       0.0%       0.0%       0.4%          0.1%         0.1% 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Stage 2                1.3%              2.4%         6.9%       0.0%       1.3%       3.1%          0.8%         0.6% 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
  - Strong             0.0%              0.8%         4.1%       0.0%       0.0%       2.3%          0.4%         0.3% 
  - Satisfactory       1.5%              2.5%        13.3%       0.0%       0.0%       2.8%          1.0%         0.4% 
  - Higher risk        0.0%              5.7%        12.6%       0.0%       1.3%       7.0%          0.7%         2.1% 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Of which (stage 
2): 
  - Less than 30 
   days past 
   due                 0.0%              0.0%        13.3%       0.0%       0.0%      11.1%          0.0%         0.0% 
  - More than 30 
   days past 
   due                 0.0%              0.0%        12.6%       0.0%       0.0%      12.3%          0.0%         0.0% 
Stage 3, 
 credit-impaired 
 financial 
 assets (S3)          19.2%             64.4%        50.5%       0.0%       0.0%      61.4%          0.0%        29.5% 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Cover ratio            0.1%              2.9%         0.9%       0.6%       0.0%       1.7%          0.0%         0.4% 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Fair value 
through profit 
or loss 
Performing           26,439            58,280           42          -      2,639     60,961             -            - 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
  - Strong           22,848            51,561           42          -      2,638     54,241             -            - 
  - Satisfactory      3,591             6,655            -          -          1      6,656             -            - 
  - Higher risk           -                64            -          -          -         64             -            - 
                  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Defaulted 
 (CG13-14)                -                 5            -          -          -          5             -            - 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Gross balance 
 (FVTPL)2            26,439            58,285           42          -      2,639     60,966             -            - 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
Net carrying 
 value (incl 
 FVTPL)              62,640           192,321      132,293        344     29,516    354,474             -            - 
----------------  ---------  ----------------  -----------  ---------  ---------  ---------  ------------  ----------- 
 

1 Loans and advances includes reverse repurchase agreements and other similar secured lending of $7,894 million under Customers and of $795 million under Banks,

held at amortised cost

2 Loans and advances includes reverse repurchase agreements and other similar secured lending of $52,521 million under Customers and of $21,877 million under Banks, held at fair value through profit or loss

Page 11

 
                                                          31.12.21 (Restated)1 
----------------  ----------------------------------------------------------------------------------------------------- 
                                                         Customers 
                  ----------  ---------------------------------------------------------------  -----------  ----------- 
                                   Corporate,   Consumer, 
                                   Commercial     Private                 Central 
                              & Institutional  & Business                 & other    Customer      Undrawn    Financial 
                       Banks          Banking    Banking1   Ventures1       items       Total  commitments   Guarantees 
Amortised cost      $million         $million    $million    $million    $million    $million     $million     $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%       13.1%        0.0%        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 1 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 12

Loans and advances by client segment credit quality analysis

 
                                                            Corporate, Commercial & Institutional Banking 
------------  -------------  ----------------  ----------------------------------------------------------------------- 
                                                                              30.06.22 
                                               ----------------------------------------------------------------------- 
                                                              Gross                         Credit impairment 
                                               -----------------------------------  ---------------------------------- 
              Regulatory 
               1 year        S&P external 
Credit         PD range      ratings              Stage    Stage   Stage             Stage   Stage     Stage 
 grade         (%)           equivalent               1        2       3     Total       1       2         3     Total 
------------  -------------  ----------------  --------  -------  ------  --------  ------  ------  --------  -------- 
Strong                                           74,992    1,614       -    81,056    (49)    (13)         -        62 
  1A-2B       0 - 0.045      AA- and above       10,107      166       -    10,273     (1)       -         -       (1) 
  3A-4A       0.046 - 0.110  A+ to A-            27,589      383       -    27,972     (5)     (1)         -       (6) 
  4B-5B       0.111 - 0.425  BBB+ to BBB-/BB+    41,746    1,065       -    42,811    (43)    (12)         -      (55) 
Satisfactory                                     42,523    8,191       -    50,714    (92)   (201)         -     (293) 
  6A-7B       0.426 - 1.350  BB+/BB to BB-       24,525    2,077       -    26,602    (71)    (64)         -     (135) 
  8A-9B       1.351 - 4.000  BB-/B+ to B+/B      12,998    3,425       -    16,423    (13)    (75)         -      (88) 
  10A-11C     4.001 - 15.75  B to B-/CCC          5,000    2,689       -     7,689     (8)    (62)         -      (70) 
Higher 
 risk                                                 -      683       -       683       -    (39)         -      (39) 
              15.751 - 
  12           99.999        CCC/C                    -      683       -       683       -    (39)         -      (39) 
Defaulted                                             -        -   5,552     5,552       -       -   (3,575)   (3,575) 
  13-14       100            Defaulted                -        -   5,552     5,552       -       -   (3,575)   (3,575) 
------------  -------------  ----------------  --------  -------  ------  --------  ------  ------  --------  -------- 
Total                                           121,965   10,488   5,552   138,005   (141)   (253)   (3,575)   (3,969) 
------------  -------------  ----------------  --------  -------  ------  --------  ------  ------  --------  -------- 
 
 
                                                                             31.12.21 
------------  -------------  -------------------  --------------------------------------------------------------- 
                                                               Gross                     Credit impairment 
                                                  -------------------------------  ------------------------------ 
              Regulatory 
               1 year 
Credit         PD range      S&P external           Stage   Stage  Stage           Stage  Stage    Stage 
 grade         (%)            ratings equivalent        1       2      3    Total      1      2        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) 
              15.751 - 
  12           99.999        CCC/C                      -   1,272      -    1,272      -  (100)        -    (100) 
Defaulted                                               -       -  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) 
------------  -------------  -------------------  -------  ------  -----  -------  -----  -----  -------  ------- 
 

Page 13

 
                           Consumer, Private & Business Banking 
-------------  ------------------------------------------------------------ 
                                         30.06.22 
               ------------------------------------------------------------ 
                           Gross                    Credit impairment 
               ------------------------------  ---------------------------- 
                 Stage  Stage  Stage           Stage  Stage  Stage 
Credit grade         1      2      3    Total      1      2      3    Total 
-------------  -------  -----  -----  -------  -----  -----  -----  ------- 
Strong         125,633  1,299      -  126,932  (272)   (53)      -    (325) 
  Secured      108,782    966      -  109,748   (54)    (8)      -     (62) 
  Unsecured     16,851    333      -   17,184  (218)   (45)      -    (263) 
Satisfactory     4,471    278      -    4,749   (87)   (37)      -    (124) 
  Secured        4,152    160      -    4,312   (26)    (1)      -     (27) 
  Unsecured        319    118      -      437   (61)   (36)      -     (97) 
Higher risk          -    317      -      317      -   (40)      -     (40) 
  Secured            -    210      -      210      -    (4)      -      (4) 
  Unsecured          -    107      -      107      -   (36)      -     (36) 
Defaulted            -      -  1,500    1,500      -      -  (758)    (758) 
  Secured                      1,040    1,040                (539)    (539) 
  Unsecured          -      -    460      460      -      -  (219)    (219) 
-------------  -------  -----  -----  -------  -----  -----  -----  ------- 
Total          130,104  1,894  1,500  133,498  (359)  (130)  (758)  (1,247) 
-------------  -------  -----  -----  -------  -----  -----  -----  ------- 
 
 
                                   31.12.21 (Restated1) 
-------------  ------------------------------------------------------------ 
                           Gross                    Credit impairment 
               ------------------------------  ---------------------------- 
                 Stage  Stage  Stage           Stage  Stage  Stage 
Credit grade         1      2      3    Total      1      2      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) 
Defaulted            -      -  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

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

 
                                        30.06.22                                      31.12.21 
--------------------  --------------------------------------------  -------------------------------------------- 
                                    Africa                                        Africa 
                                  & Middle       Europe                         & Middle       Europe 
                           Asia       East   & Americas      Total       Asia       East   & Americas      Total 
Amortised cost         $million   $million     $million   $million   $million   $million     $million   $million 
--------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Gross (stage 1)         234,063     20,969       24,104    279,136    235,123     19,990       24,065    279,178 
Provision (stage 1)       (400)       (74)         (28)      (502)      (371)       (86)         (16)      (473) 
Gross (stage 2)           8,108      2,733        1,698     12,539      8,779      4,077        3,993     16,849 
Provision (stage 2)       (261)       (73)         (51)      (385)      (318)      (137)         (69)      (524) 
Gross (stage 3)2          3,961      2,758          334      7,053      4,448      2,918          729      8,095 
Provision (stage 3)     (2,236)    (1,844)        (253)    (4,333)    (2,400)    (1,970)        (287)    (4,657) 
--------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Net loans1              243,235     24,469       25,804    293,508    245,261     24,792       28,415    298,468 
--------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
 

1 Includes reverse repurchase agreements and other similar secured lending

2 Amounts do not include those purchased or originated credit-impaired financial assets

Page 14

Loans and advances to banks

 
                                        30.06.22                                      31.12.21 
--------------------  --------------------------------------------  -------------------------------------------- 
                                    Africa                                        Africa 
                                  & Middle       Europe                         & Middle       Europe 
                           Asia       East   & Americas      Total       Asia       East   & Americas      Total 
Amortised cost         $million   $million     $million   $million   $million   $million     $million   $million 
--------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Gross (stage 1)          22,556      4,905        8,318     35,779     29,916      5,828        8,032     43,776 
Provision (stage 1)         (3)        (2)          (2)        (7)        (3)        (5)          (4)       (12) 
Gross (stage 2)              85        139          147        371        346        144           90        580 
Provision (stage 2)         (2)          -          (3)        (5)        (1)        (1)          (2)        (4) 
Gross (stage 3)              67          1           10         78         54          -            -         54 
Provision (stage 3)        (15)          -            -       (15)       (11)          -            -       (11) 
--------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Gross loans1             22,688      5,043        8,470     36,201     30,301      5,966        8,116     44,383 
--------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
 

1 Includes reverse repurchase agreements and other similar secured lending

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

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 Corporate , Commercial and Institutional Banking) 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 credit grade 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 and movements in judgemental overlays. 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 incorporates changes to model approaches and methodologies, is not reported as a separate line item as it has an impact over a number of lines and stages.

Page 15

Movements during the period

Stage 1 gross exposures increased by $2 billion to $687 billion when compared with 31 December 2021. This was largely due to an increase in debt securities of $1.9 billion which was offset by reductions in Corporate, Commercial and Institutional Banking and Consumer, Private and Business Banking. In Corporate, Commercial and Institutional Banking, loans and advances to customers remained stable but loans and advances to banks reduced by $8 billion offset by an increase of $3.4 billion in undrawn commitments. In Consumer, Private and Business Banking, loans and advances reduced by $4.3 billion due to reductions in secured portfolio from Mortgages and Secured Wealth products offset by an increase in undrawn commitments.

Total stage 1 provisions increased by $14 million, of which $31 million increase was in Corporate, Commercial and Institutional Banking from additional China Commercial real estate overlay of $33 million offset by releases. Consumer, Private and Business Banking was a net release of $10 million due to $31 million release in management overlay for the impact of COVID-19 in unsecured portfolio as the risk has manifested, offset by $14 million charge due to post model adjustment for multiple economic scenarios and delinquencies across a few markets.

Stage 2 gross exposures decreased by $8.8 billion, of which $6.7 billion is from Corporate, Commercial and Institutional Banking as clients as loans and advances reduced by $4 billion in Energy, Transport, telecom and utilities sectors and undrawn commitments reduced by $2 billion. In Consumer, Private and Business Banking, gross balances reduced by $1.7 billion largely in secured portfolio due to reduction in undrawn commitments.

Stage 2 provisions reduced by $170 million compared to 31 December 2021, $111 million of which was in Corporate, Commercial and Institutional Banking as a result of $42 million release in management overlay as non-purely precautionary early alert portfolio has reduced due to exits and exposure downgrades, with the remainder mainly from upgrades in stage 2. Consumer, Private and Business Banking stage 2 provisions also reduced by $56 million from releases in management overlay after reassessment of residual risk in certain markets, offset by delinquencies in some Asia markets due to fresh COVID-19 related lockdowns and $8 million charge from post model adjustment for multiple economic scenarios.

Across both stage 1 and 2 for all segments, the significant deterioration in macroeconomic forecasts across all markets increased provisions by $19 million.

There was a net nil impact from model changes in the first half of 2022.

Stage 3 exposures decreased by $1.2 billion to $7.9 billion (2021: $9.1 billion) primarily driven by Corporate, Commercial and Institutional Banking clients from loan sales, repayments and upgrades. Stage 3 provisions decreased by $333 million to $4.6 billion (2021: $4.9 billion)mainly in Corporate, Commercial and Institutional Banking due to exposure reductions offset by an increase in provisions on China Commercial real estate portfolio.

Page 16

All segments (reviewed)

 
                                  Stage 1                              Stage 2                             Stage 35                               Total 
------------------  -----------------------------------  -----------------------------------  -----------------------------------  ----------------------------------- 
                                      Total                                Total                                Total                                Total 
                         Gross       credit                   Gross       credit                   Gross       credit                   Gross       credit 
                      balance3  impair-ment         Net    balance3  impair-ment         Net    balance3  impair-ment         Net    balance3  impair-ment         Net 
Amortised cost 
 and FVOCI            $million     $million    $million    $million     $million    $million    $million     $million    $million    $million     $million    $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 
 movements(1)         (14,258)          459    (13,799)       (275)        (429)       (704)         152        (184)        (32)    (14,381)        (154)    (14,535) 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
As at 31 December 
 2021(2)               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                15,825        (285)      15,540    (15,797)          285    (15,512)        (28)            -        (28)           -            -           - 
Transfers to 
 stage 2              (23,623)          109    (23,514)      24,047        (120)      23,927       (424)           11       (413)           -            -           - 
Transfers to 
 stage 3                  (88)            -        (88)     (1,232)          101     (1,131)       1,320        (101)       1,219           -            -           - 
                                -----------                          -----------                          -----------                          ----------- 
Net change in 
 exposures              33,424         (47)      33,377    (14,431)           31    (14,400)       (868)          214       (654)      18,125          198      18,323 
Net remeasurement 
 from stage 
 changes                     -           31          31           -         (93)        (93)           -        (148)       (148)           -        (210)       (210) 
Changes in risk 
 parameters                  -           33          33           -           59          59           -        (474)       (474)           -        (382)       (382) 
                                -----------                          -----------                          -----------                          ----------- 
Write-offs                   -            -           -           -            -           -       (581)          581           -       (581)          581           - 
Interest due 
 but unpaid                  -            -           -           -            -           -       (189)          189           -       (189)          189           - 
Discount unwind              -            -           -           -            -           -           -           65          65           -           65          65 
Exchange 
 translation 
 differences and 
 other 
 movements(1)         (23,530)          145    (23,385)     (1,348)         (93)     (1,441)       (411)          (4)       (415)    (25,289)           48    (25,241) 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
As at 30 June 
 2022(2)               686,767        (623)     686,144      25,789        (482)      25,307       7,880      (4,608)       3,272     720,436      (5,713)     714,723 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Income statement 
 ECL 
 (charge)/release                        17                                  (3)                                (408)                                (394) 
Recoveries of 
 amounts 
 previously 
 written off                              -                                    -                                  131                                  131 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Total credit 
 impairment 
 (charge)/release4                       17                                  (3)                                (277)                                (263) 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
 

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 $120,060 million (2021: $114,464 million) and

Total credit impairment of $7 million (2021: $7 million)

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

4 Statutory basis

5 Stage 3 includes gross of $28 million (2021: $33 million) and ECL $6 million (2021: Nil) originated credit-impaired debt securities

Page 17

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

 
                                  Stage 1                              Stage 2                              Stage 3                               Total 
------------------  -----------------------------------  -----------------------------------  -----------------------------------  ----------------------------------- 
                                      Total                                Total                                Total                                Total 
                         Gross       credit                   Gross       credit                   Gross       credit                   Gross       credit 
                       balance  impair-ment         Net     balance  impair-ment         Net     balance  impair-ment         Net     balance  impair-ment        Net3 
Amortised cost 
 and FVOCI            $million     $million    $million    $million     $million    $million    $million     $million    $million    $million     $million    $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 
 exposures2             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)/release1                      (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                 1,410         (17)       1,393     (1,410)           17     (1,393)           -            -           -           -            -           - 
Transfers to 
 stage 2               (1,470)            6     (1,464)       1,470          (6)       1,464           -            -           -           -            -           - 
Transfers to 
 stage 3                     -            -           -           -            -           -           -            -           -           -            -           - 
                                -----------                          -----------                          -----------                          ----------- 
Net change in 
 exposures2             10,054         (19)      10,035       (135)          (7)       (142)           -            1           1       9,919         (25)       9,894 
Net remeasurement 
 from stage 
 changes                     -            9           9           -          (2)         (2)           -            -           -           -            7           7 
Changes in risk 
 parameters                  -           15          15           -            4           4           -            -           -           -           19          19 
                                -----------                          -----------                          -----------                          ----------- 
Write-offs                   -            -           -           -            -           -           -            -           -           -            -           - 
Interest due 
 but unpaid                  -            -           -           -            -           -           -            -           -           -            -           - 
Exchange 
 translation 
 differences and 
 other movements1      (8,081)           12     (8,069)       (387)            2       (385)         (7)          (5)        (12)     (8,475)            9     (8,466) 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
As at 30 June 
 2022                  159,265         (61)     159,204       4,853         (34)       4,819         106         (70)          36     164,224        (165)     164,059 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Income statement 
 ECL 
 (charge)/release                         5                                  (5)                                    1                                    1 
Recoveries of 
amounts previously 
written off                               -                                    -                                    -                                    - 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Total credit 
 impairment 
 (charge)/release                         5                                  (5)                                    1                                    1 
------------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
 

1 Includes fair value adjustments and amortisation on debt securities

2 Stage 3 includes gross of $28 million (2021: $33 million) and ECL $6 million (2021: Nil) originated credit-impaired debt securities

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 $164,137 million (31 December 2021: $162,700 million. Refer to the Analysis of financial instrument by stage table

Page 18

Corporate, Commercial & Institutional Banking (reviewed)

 
                                 Stage 1                              Stage 2                              Stage 3                               Total 
-----------------  -----------------------------------  -----------------------------------  -----------------------------------  ----------------------------------- 
                                     Total                                Total                                Total                                Total 
                        Gross       credit                   Gross       credit                   Gross       credit                   Gross       credit 
                     balance1  impair-ment         Net    balance1  impair-ment         Net    balance1  impair-ment         Net    balance1  impair-ment         Net 
Amortised cost 
 and FVOCI           $million     $million    $million    $million     $million    $million    $million     $million    $million    $million     $million    $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)/release                     (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               11,236        (102)      11,134    (11,236)          102    (11,134)           -            -           -           -            -           - 
Transfers to 
 stage 2             (19,360)           59    (19,301)      19,745         (71)      19,674       (385)           12       (373)           -            -           - 
Transfers to 
 stage 3                    -            -           -       (936)           28       (908)         936         (28)         908           -            -           - 
                               -----------                          -----------                          -----------                          ----------- 
Net change in 
 exposures             10,908         (22)      10,886    (13,454)           31    (13,423)       (748)          213       (535)     (3,294)          222     (3,072) 
Net remeasurement 
 from stage 
 changes                    -            2           2           -         (45)        (45)           -        (135)       (135)           -        (178)       (178) 
Changes in risk 
 parameters                 -          (8)         (8)           -          102         102           -        (324)       (324)           -        (230)       (230) 
                               -----------                          -----------                          -----------                          ----------- 
Write-offs                  -            -           -           -            -           -       (318)          318           -       (318)          318           - 
Interest due 
 but unpaid                 -            -           -           -            -           -       (195)          195           -       (195)          195           - 
Discount unwind             -            -           -           -            -           -           -           52          52           -           52          52 
Exchange 
 translation 
 differences and 
 other movements      (7,498)           40     (7,458)       (806)         (36)       (842)       (390)          (4)       (394)     (8,694)            -     (8,694) 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
As at 30 June 
 2022                 308,418        (194)     308,224      18,750        (314)      18,436       6,272      (3,780)       2,492     333,440      (4,288)     329,152 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Income statement 
 ECL 
 (charge)/release                     (28)                                   88                                (246)                                (186) 
Recoveries of 
 amounts 
 previously 
 written off                             -                                    -                                    5                                    5 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Total credit 
 impairment 
 (charge)/release                     (28)                                   88                                (241)                                (181) 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
 

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

Page 19

Consumer, Private and Business Banking (restated1) (reviewed)

 
                                 Stage 1                              Stage 2                              Stage 3                               Total 
-----------------  -----------------------------------  -----------------------------------  -----------------------------------  ----------------------------------- 
                                     Total                                Total                                Total                                Total 
                        Gross       credit                   Gross       credit                   Gross       credit                   Gross       credit 
                     balance2  impair-ment         Net    balance2  impair-ment         Net    balance2  impair-ment         Net    balance2  impair-ment         Net 
Amortised cost 
 and FVOCI           $million     $million    $million    $million     $million    $million    $million     $million    $million    $million     $million    $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                3,175        (165)       3,010     (3,147)          165     (2,982)        (28)            -        (28)           -            -           - 
Transfers to 
 stage 2              (2,792)           43     (2,749)       2,831         (43)       2,788        (39)            -        (39)           -            -           - 
Transfers to 
 stage 3                 (88)            -        (88)       (296)           73       (223)         384         (73)         311           -            -           - 
                               -----------                          -----------                          -----------                          ----------- 
Net change in 
 exposures              5,638          (6)       5,632       (944)            7       (937)       (121)            -       (121)       4,573            1       4,574 
Net remeasurement 
 from stage 
 changes                    -           20          20           -         (46)        (46)           -         (12)        (12)           -         (38)        (38) 
Changes in risk 
 parameters                 -           29          29           -         (47)        (47)           -        (150)       (150)           -        (168)       (168) 
                               -----------                          -----------                          -----------                          ----------- 
Write-offs                  -            -           -           -            -           -       (262)          262           -       (262)          262           - 
Interest due 
 but unpaid                 -            -           -           -            -           -           3          (3)           -           3          (3)           - 
Discount unwind             -            -           -           -            -           -           -           13          13           -           13          13 
Exchange 
 translation 
 differences and 
 other movements      (7,396)           89     (7,307)       (101)         (53)       (154)        (12)            4         (8)     (7,509)           40     (7,469) 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
As at 30 June 
 2022                 189,397        (367)     189,030       2,018        (129)       1,889       1,503        (756)         747     192,918      (1,252)     191,666 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Income statement 
 ECL 
 (charge)/release                       43                                 (86)                                (162)                                (205) 
Recoveries of 
 amounts 
 previously 
 written off                             -                                    -                                  126                                  126 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Total credit 
 impairment 
 (charge)/release                       43                                 (86)                                 (36)                                 (79) 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
 

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

Consumer, Private and Business Banking - Secured (restated1) (reviewed)

 
                                 Stage 1                              Stage 2                              Stage 3                               Total 
-----------------  -----------------------------------  -----------------------------------  -----------------------------------  ----------------------------------- 
                                     Total                                Total                                Total                                Total 
                        Gross       credit                   Gross       credit                   Gross       credit                   Gross       credit 
                     balance2  impair-ment         Net    balance2  impair-ment         Net    balance2  impair-ment         Net    balance2  impair-ment         Net 
Amortised cost 
 and FVOCI           $million     $million    $million    $million     $million    $million    $million     $million    $million    $million     $million    $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                2,212         (21)       2,191     (2,192)           21     (2,171)        (20)            -        (20)           -            -           - 
Transfers to 
 stage 2              (1,622)           13     (1,609)       1,655         (13)       1,642        (33)            -        (33)           -            -           - 
Transfers to 
 stage 3                 (70)            -        (70)       (147)            -       (147)         217            -         217           -            -           - 
                               -----------                          -----------                          -----------                          ----------- 
Net change in 
 exposures              2,392          (4)       2,388       (530)            -       (530)        (84)            -        (84)       1,778          (4)       1,774 
Net remeasurement 
 from stage 
 changes                    -            -           -           -          (1)         (1)           -          (2)         (2)           -          (3)         (3) 
Changes in risk 
 parameters                 -          (2)         (2)           -           42          42           -         (44)        (44)           -          (4)         (4) 
                               -----------                          -----------                          -----------                          ----------- 
Write-offs                  -            -           -           -            -           -        (52)           52           -        (52)           52           - 
Interest due 
 but unpaid                 -            -           -           -            -           -           5          (5)           -           5          (5)           - 
Discount unwind             -            -           -           -            -           -           -            6           6           -            6           6 
Exchange 
 translation 
 differences and 
 other movements      (5,457)           25     (5,432)        (67)         (30)        (97)       (100)         (26)       (126)     (5,624)         (31)     (5,655) 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
As at 30 June 
 2022                 134,055         (85)     133,970       1,404         (13)       1,391       1,036        (536)         500     136,495        (634)     135,861 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Income statement 
 ECL 
 (charge)/release                      (6)                                   41                                 (46)                                 (11) 
Recoveries of 
 amounts 
 previously 
 written off                             -                                    -                                   35                                   35 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Total credit 
 impairment 
 (charge)/release                      (6)                                   41                                 (11)                                   24 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
 

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 21

Consumer, Private and Business Banking - Unsecured (restated1) (reviewed)

 
                                 Stage 1                              Stage 2                              Stage 3                               Total 
-----------------  -----------------------------------  -----------------------------------  -----------------------------------  ----------------------------------- 
                                     Total                                Total                                Total                                Total 
                        Gross       credit                   Gross       credit                   Gross       credit                   Gross       credit 
                     balance2  impair-ment         Net    balance2  impair-ment         Net    balance2  impair-ment         Net    balance2  impair-ment         Net 
Amortised cost 
 and FVOCI           $million     $million    $million    $million     $million    $million    $million     $million    $million    $million     $million    $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                  963        (144)         819       (955)          144       (811)         (8)            -         (8)           -            -           - 
Transfers to 
 stage 2              (1,170)           30     (1,140)       1,176         (30)       1,146         (6)            -         (6)           -            -           - 
Transfers to 
 stage 3                 (18)            -        (18)       (149)           73        (76)         167         (73)          94           -            -           - 
                               -----------                          -----------                          -----------                          ----------- 
Net change in 
 exposures              3,246          (2)       3,244       (414)            7       (407)        (37)            -        (37)       2,795            5       2,800 
Net remeasurement 
 from stage 
 changes                    -           20          20           -         (45)        (45)           -         (10)        (10)           -         (35)        (35) 
Changes in risk 
 parameters                 -           31          31           -         (89)        (89)           -        (106)       (106)           -        (164)       (164) 
                               -----------                          -----------                          -----------                          ----------- 
Write-offs                  -            -           -           -            -           -       (210)          210           -       (210)          210           - 
Interest due 
 but unpaid                 -            -           -           -            -           -         (2)            2           -         (2)            2           - 
Discount unwind             -            -           -           -            -           -           -            7           7           -            7           7 
Exchange 
 translation 
 differences and 
 other movements      (1,939)           64     (1,875)        (34)         (23)        (57)          88           30         118     (1,885)           71     (1,814) 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
As at 30 June 
 2022                  55,342        (282)      55,060         614        (116)         498         467        (220)         247      56,423        (618)      55,805 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Income statement 
 ECL 
 (charge)/release                       49                                (127)                                (116)                                (194) 
Recoveries of 
 amounts 
 previously 
 written off                             -                                    -                                   91                                   91 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
Total credit 
 impairment 
 (charge)/release                       49                                (127)                                 (25)                                (103) 
-----------------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  ----------  -----------  ---------- 
 

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 22

Analysis of stage 2 balances

The table below analyses the proportion of stage 2 gross 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 30 June 2022 for each segment. This may not be the same driver that caused the initial transfer into stage 2.

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'.

 
                                                                                            30.06.22 
------------------  --------------------------------------------------------------------------------------------------------------------------------------------------------- 
                             Corporate, 
                              Commercial                 Consumer, Private 
                           & Institutional                       &                                                      Central & other 
                               banking                    Business Banking                  Ventures                         items                          Total 
                    -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
                       Gross       ECL  Cove-rage     Gross       ECL  Cove-rage     Gross       ECL  Cove-rage     Gross       ECL  Cove-rage     Gross       ECL  Cove-rage 
                    $million  $million          %  $million  $million          %  $million  $million          %  $million  $million          %  $million  $million          % 
------------------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  --------- 
Increase in PD        11,363       174       1.5%     1,137       105       9.2%                                    3,415        20       0.6%    15,915       299       1.9% 
Non-purely 
 precautionary 
 early alert           3,496        11       0.3%        72         -       0.5%                                    1,621         1       0.1%     5,189        12       0.2% 
Higher risk (CG12)       474        27       5.8%        16         1       4.5%                                      679        19       2.8%     1,169        47       4.1% 
Sub-investment 
 grade                   205         -       0.1%         -         -       0.0%                                        -         -       0.0%       205         -       0.1% 
Top up/Sell down 
 (Private Banking)                           0.0%       422         -       0.1%                                        -                 0.0%       422         -       0.1% 
Others                 3,212        11       0.4%       210         1       0.6%         4                 0.0%       166         3       1.6%     3,592        15       0.4% 
30 days past 
 due                                 -       0.0%       160        17      10.5%         1                 0.0%         -         -       0.0%       161        17      10.5% 
Management overlay                  91       0.0%                   5       0.0%                                                                       -        96 
------------------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  --------- 
Total stage 2         18,750       314       1.7%     2,017       129       6.4%         5         -       0.0%     5,881        43       0.7%    26,653       486       1.8% 
------------------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  --------- 
 
 
                                                                                      31.12.21 (Restated)1 
------------------  --------------------------------------------------------------------------------------------------------------------------------------------------------- 
                             Corporate, 
                              Commercial                 Consumer, Private 
                           & Institutional                       &                                                      Central & other 
                               banking                    Business Banking                  Ventures                         items                          Total 
                    -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
                       Gross       ECL  Cove-rage     Gross       ECL  Cove-rage     Gross       ECL  Cove-rage     Gross       ECL  Cove-rage     Gross       ECL  Cove-rage 
                    $million  $million          %  $million  $million          %  $million  $million          %  $million  $million          %  $million  $million          % 
------------------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  --------- 
Increase in PD        14,737       187       1.3%     2,704       123       4.5%                                    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%     5,083        26       0.5% 
Higher risk (CG12)     1,075        37       3.4%        27         1       3.2%                                      631        20       3.1%     1,733        58       3.3% 
Sub-investment 
 grade                   235         1       0.3%         -         -       0.0%                                        -         -       0.0%       235         1       0.3% 
Top up/Sell down 
 (Private Banking)         -         -       0.0%       493         1       0.2%                                        -         -       0.0%       493         1       0.2% 
Others                 4,390         8       0.2%       178         2       1.2%                                      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                             42                                                                                  -       208 
------------------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  ---------  --------  --------  --------- 
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. Overall stage 2 balances have reduced by $8.0 billion to $26.7 billion (2021: $34.6 billion) through repayments and transfers into stage 1 in Corporate, Commercial and Institutional Banking and lower undrawn commitments in Consumer, Private and Business Banking. Overall expected credit loss coverage has reduced to 1.8 per cent.

Although the amount of exposures in Corporate, Commercial and Institutional Banking placed on non-purely precautionary early alert increased compared to 31 December 2021, the proportion of stage 2 exposures driven by this category reduced as more clients were captured through the "Increase in PD" driver.

13 per cent (2021: 9 per cent) of the provisions held against stage 2 Consumer, Private and Business Banking exposures arise from the application of the 30 days past due backstop, although this represents only 8 per cent (2021: 5 per cent) of exposures.

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

Page 23

Credit impairment charge (restated1) (reviewed)

Ongoing credit impairment was a net charge of $267 million.

Stage 3 was a charge of $277 million (H1 2021: charge of $58 million).

There was a charge of $240 million in Corporate, Commercial and Institutional Banking, compared to $59 million release in the same period last year due to significant repayments from a few clients. The $240 million charge included additional impairment on China Commercial real estate exposures of $237 million, offset by releases across a number of clients. There was also a net charge of $69 million from the downgrade of foreign currency sovereign grading of Sri Lanka in the first half of 2022, including an overlay of $42 million for recent political and economic events.

Consumer, Private and Business Banking stage 3 charge of $36 million decreased from $118 million in H1 2021, as charge-offs normalised from elevated levels following the end of moratoria relief programmes in a number of markets. The first half of 2022 also benefitted from a $14 million release of the COVID-19 management overlay.

Central and other items was a net charge of $1 million (H1 2021: release of $1 million) from the downgrade of foreign currency sovereign grading of Sri Lanka.

Stage 1 and 2 impairments was a net release of $10 million (H1 2021: release of $105 million).

Corporate, Commercial and Institutional Banking was a net release of $44 million due to upgrades and a release of $73 million from the COVID-19 element of the management overlay as clients moved out of non-purely precautionary early alert or have repaid. This was offset by an increase of $32 million in the overlay relating to China Commercial real estate exposures and $13 million increase in the post model adjustment charge for multiple economic scenarios. The same period last year was a net release of $77 million due to a number of repayments and additional collateral on a few high-risk accounts, and release of $27 million in the COVID-19 overlay.

Consumer, Private and Business Banking was a net charge of $43 million, compared to $25 million release in the same period last year due to relative improvements in macroeconomic variables. The $43 million charge was driven by revised macroeconomic outlook, relatively higher delinquencies in Hong Kong and China following COVID-19 lockdowns and a $21 million increase in the post model adjustment for multiple economic scenarios. This was offset by a release of $68 million from COVID-19 management overlay.

Ventures was a net charge of $3 million from new deals in Mox.

Central and other items was a net release of $12 million (H1 2021: release of $3 million), primarily due to upgrades.

 
                                            30.06.22                      30.06.21 (Restated)1 
-----------------------------  ----------------------------------  ---------------------------------- 
                                  Stage 1                             Stage 1 
                                      & 2     Stage 3       Total         & 2     Stage 3       Total 
                                 $million    $million    $million    $million    $million    $million 
-----------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Ongoing business portfolio 
Corporate, Commercial 
 & Institutional Banking             (44)         240         196        (77)        (59)       (136) 
Consumer, Private & Business 
 Banking1                              43          36          79        (25)         118          93 
Ventures1                               3           -           3           -           -           - 
Central & other items                (12)           1        (11)         (3)         (1)         (4) 
-----------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Credit impairment charge             (10)         277         267       (105)          58        (47) 
Restructuring business 
 portfolio 
Others                                (4)           -         (4)         (4)           -         (4) 
-----------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Credit impairment charge              (4)           -         (4)         (4)           -         (4) 
-----------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Total credit impairment 
 charge                              (14)         277         263       (109)          58        (51) 
-----------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
 

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

COVID-19 relief measures

The table below sets out the extent to which payment reliefs are in place across the Group's Consumer, Private and Business Banking loan portfolio based on the amount outstanding at 30 June 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 Consumer, Private and Business Banking loans under payment relief schemes reduced to $280 million 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 Consumer, Private and Business Banking's gross loans and advances to customers, mainly in Hong Kong, China and India.

 
                                                                                  Africa & Middle 
                                   Total                      Asia                      East 
------------------------  ------------------------  ------------------------  ------------------------ 
                          Outstanding         % of  Outstanding         % of  Outstanding         % of 
Segment(1)                   $million   portfolio2     $million   portfolio2     $million   portfolio2 
------------------------  -----------  -----------  -----------  -----------  -----------  ----------- 
Credit card & Personal 
 loans                             18         0.1%           18         0.1%            -            - 
Mortgages & Auto                   90         0.1%           90         0.1%            -            - 
Business Banking                  172         1.7%          172         1.7%            -            - 
------------------------  -----------  -----------  -----------  -----------  -----------  ----------- 
Total Consumer, Private 
 & Business Banking 
 at 30 June 2022                  280         0.2%          280         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) at 30 June 2022 and $nil (31 December 2021: $nil) for Ventures(3)

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 (reviewed)

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 $226 million to $1.3 billion (2021: $1.5 billion) primarily driven by stage 3 loans in Corporate, Commercial and Institutional Banking in Europe and the Americas region. The table below presents loans with forbearance measures by segment.

 
                                      30.06.22                                      31.12.21 (Restated)(1) 
---------------  ---------------------------------------------------  --------------------------------------------------- 
                      Corporate,   Consumer,                               Corporate,   Consumer, 
                      Commercial     Private                               Commercial     Private 
                 & Institutional  & Business                          & Institutional  & Business 
                         Banking     Banking    Ventures       Total          Banking     Banking   Ventures1       Total 
Amortised cost          $million    $million    $million    $million         $million    $million    $million    $million 
---------------  ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
All loans with 
 forbearance 
 measures                  2,440         395           -       2,835            2,526         406           -       2,932 
Credit 
 impairment 
 (stage 
 1 and 2)                      -           -           -           -              (4)           -           -         (4) 
Credit 
 impairment 
 (stage 
 3)                      (1,392)       (140)           -     (1,532)          (1,237)       (162)           -     (1,399) 
---------------  ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Net carrying 
 value                     1,048         255           -       1,303            1,285         244           -       1,529 
---------------  ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Included within 
the above 
table 
Gross 
 performing 
 forborne 
 loans                       304          72           -         376              272          59           -         331 
                 ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Modification of 
 terms 
 and 
 conditions2                 246          72           -         318              257          59           -         316 
Refinancing3                  58           -           -          58               15           -           -          15 
                 ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Impairment 
 provisions                    -           -           -           -              (4)           -           -         (4) 
                 ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Modification of 
 terms 
 and 
 conditions2                   -           -           -           -              (4)           -           -         (4) 
Refinancing3                   -           -           -           -                -           -           -           - 
                 ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Net performing 
 forborne 
 loans                       304          72           -         376              268          59           -         327 
Collateral                   134          70           -         204               65          56           -         121 
---------------  ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Gross 
 non-performing 
 forborne 
 loans                     2,136         323           -       2,459            2,253         348           -       2,601 
                 ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Modification of 
 terms 
 and 
 conditions2               2,028         323           -       2,351            2,095         348           -       2,443 
Refinancing3                 108           -           -         108              158           -           -         158 
                 ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Impairment 
 provisions              (1,392)       (140)           -     (1,532)          (1,237)       (162)           -     (1,399) 
                 ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Modification of 
 terms 
 and 
 conditions2             (1,290)       (140)           -     (1,430)          (1,106)       (162)           -     (1,268) 
Refinancing3               (102)           -           -       (102)            (131)           -           -       (131) 
                 ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Net 
 non-performing 
 forborne 
 loans                       744         183           -         927            1,016         186           -       1,202 
Collateral                   269          64           -         333              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 25

Forborne and other modified loans by region

 
                                              30.06.22                                      31.12.21 
--------------------------  --------------------------------------------  -------------------------------------------- 
                                          Africa                                        Africa 
                                        & Middle       Europe                         & Middle       Europe 
                                 Asia       East   & Americas      Total       Asia       East   & Americas      Total 
Amortised cost               $million   $million     $million   $million   $million   $million     $million   $million 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Performing forborne loans         190        127           59        376        205         76           46        327 
Non-performing forborne 
 loans                            575        240          112        927        572        137          493      1,202 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Net forborne loans                765        367          171      1,303        777        213          539      1,529 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
 

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

Gross stage 3 loans for the Group have reduced by $1 billion to $7.1 billion (2021: $8.1 billion). This is mainly driven by $1 billion from loan sales, upgrades and repayments in Corporate, Commercial and institutional Banking, offset by the downgrade of foreign currency sovereign grading of Sri Lanka.

Gross stage 3 loans in Consumer, Private and Business Banking decreased by $75 million primarily in Secured wealth products, Mortgages and Personal Loans portfolio.

Stage 3 cover ratio (reviewed)

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 Corporate, Commercial and Institutional Banking cover ratio increased by 5 per cent before collateral and 6 per cent post collateral. The increase was due to a few material accounts that were upgraded or sold during the year and additional impairment on the Commercial real estate portfolio.

Consumer, Private and Business Banking stage 3 cover ratio before and after collateral remain stable at 51 per cent and 91 per cent, respectively.

 
                                          30.06.22                                       31.12.21 (Restated)1 
-------------------  ---------------------------------------------------  --------------------------------------------------- 
                          Corporate,   Consumer,                               Corporate,   Consumer, 
                          Commercial     Private                               Commercial     Private 
                     & Institutional  & Business                          & Institutional  & Business 
                             Banking     Banking    Ventures       Total          Banking    Banking1    Ventures       Total 
                            $million    $million    $million    $million         $million    $million    $million    $million 
-------------------  ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Gross 
 credit-impaired               5,552       1,500           1       7,053            6,520       1,575           -       8,095 
Credit impairment 
 provisions                  (3,575)       (758)           -     (4,333)          (3,861)       (796)           -     (4,657) 
-------------------  ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Net credit-impaired            1,977         742           1       2,720            2,659         779           -       3,438 
-------------------  ---------------  ----------  ----------  ----------  ---------------  ----------  ----------  ---------- 
Cover ratio                      64%         51%          0%         61%              59%         51%          0%         58% 
Collateral ($ 
 million)                        738         601           -       1,339              805         641           -       1,446 
Cover ratio (after 
 collateral)                     78%         91%          0%         80%              72%         91%          0%         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

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

Stage 3 gross loans decreased by $1 billion compared with 31 December 2021. The decrease was primarily driven by loan sales, repayments and upgrades in Asia and Africa and the Middle East of $647 million and a decrease in Europe and the Americas of $395 million.

 
                                              30.06.22                                      31.12.21 
--------------------------  --------------------------------------------  -------------------------------------------- 
                                          Africa                                        Africa 
                                        & Middle       Europe                         & Middle       Europe 
                                 Asia       East   & Americas      Total       Asia       East   & Americas      Total 
Amortised cost               $million   $million     $million   $million   $million   $million     $million   $million 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Gross credit-impaired           3,961      2,758          334      7,053      4,448      2,918          729      8,095 
Credit impairment 
 provisions                   (2,236)    (1,844)        (253)    (4,333)    (2,401)    (1,970)        (286)    (4,657) 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Net credit-impaired             1,725        914           81      2,720      2,047        948          443      3,438 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Cover ratio                       56%        67%          76%        61%        54%        68%          39%        58% 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
 

Page 26

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.

Collateral (reviewed)

The requirement for collateral is not a substitute for the ability to repay, which is the primary consideration for any

lending decisions. The unadjusted market value of collateral across all asset types, in respect of Corporate, Commercial and Institutional Banking, without adjusting for over-collateralisation, was $315 billion (2021: $346 billion).

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 over-collateralisation 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. In the Consumer, Private and Business Banking segment, 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.

Total collateral has reduced by $5.7 billion to $133 billion (2021: $139 billion), of which $3.3 billion is in Consumer, Private and Business Banking due to decrease in Mortgages and Secured wealth products exposures. Corporate, Commercial and Institutional Banking decreased by $2.8 billion to $26.6 billion, driven by reduction in collateral against stage 2 clients as stage 2 exposure balances decreased.

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.

 
                                                                           30.06.22 
---------------  ---------------------------------------------------------------------------------------------------------------------------- 
                          Net amount outstanding                          Collateral                               Net exposure 
                 ----------------------------------------  ----------------------------------------  ---------------------------------------- 
                                   Stage  Credit-impaired                    Stage  Credit-impaired                    Stage  Credit-impaired 
                             2 financial        financial              2 financial        financial              2 financial        financial 
                                                   assets                                    assets                                    assets 
                      Total       assets             (S3)      Total2       assets             (S3)       Total       assets             (S3) 
Amortised cost     $million     $million         $million    $million     $million         $million    $million     $million         $million 
---------------  ----------  -----------  ---------------  ----------  -----------  ---------------  ----------  -----------  --------------- 
Corporate, 
 Commercial 
 & 
 Institutional 
 Banking1           170,237       10,601            2,040      26,596        3,363              738     143,641        7,238            1,302 
Consumer, 
 Private 
 & 
 Business 
 Banking            132,251        1,764              742      99,428        1,091              601      32,823          673              141 
Ventures                344            5                -           -            -                -         344            5                - 
Central & other 
 items               26,877          150                -       6,886            -                -      19,991          150                - 
---------------  ----------  -----------  ---------------  ----------  -----------  ---------------  ----------  -----------  --------------- 
Total               329,709       12,520            2,782     132,910        4,454            1,339     196,799        8,066            1,443 
---------------  ----------  -----------  ---------------  ----------  -----------  ---------------  ----------  -----------  --------------- 
 
 
                                                                     31.12.21 (Restated)3 
---------------  ---------------------------------------------------------------------------------------------------------------------------- 
                          Net amount outstanding                          Collateral                               Net exposure 
                 ----------------------------------------  ----------------------------------------  ---------------------------------------- 
                                   Stage  Credit-impaired                    Stage  Credit-impaired                    Stage  Credit-impaired 
                             2 financial        financial              2 financial        financial              2 financial        financial 
                                                   assets                                    assets                                    assets 
                      Total       assets             (S3)      Total2       assets             (S3)       Total       assets             (S3) 
Amortised cost     $million     $million         $million    $million     $million         $million    $million     $million         $million 
---------------  ----------  -----------  ---------------  ----------  -----------  ---------------  ----------  -----------  --------------- 
Corporate, 
 Commercial 
 & 
 Institutional 
 Banking1           183,784       15,053            2,702      29,414        5,077              805     154,370         9976            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

Page 27

Collateral - Corporate, Commercial & Institutional Banking (reviewed)

Collateral held against Corporate, Commercial and Institutional Banking exposures amounted to $27 billion.

Collateral taken for longer-term and sub-investment grade corporate loans remains high at 47 per cent (2021: 49 per cent). Our underwriting standards encourage taking specific charges on assets and we consistently seek high-quality, investment-grade collateral.

78 per cent of tangible collateral held comprises physical assets or is property based, with the remainder largely in cash and investment securities.

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

 
                                       30.06.22    31.12.21 
Amortised cost                         $million    $million 
-----------------------------------  ----------  ---------- 
Maximum exposure                        170,237     183,784 
-----------------------------------  ----------  ---------- 
Property                                 10,202      10,589 
Plant, machinery and other stock          1,423       1,411 
Cash                                      3,323       3,549 
Reverse repos                             1,378       2,042 
                                     ----------  ---------- 
  A- to AA+                                 163         122 
  BBB- to BBB+                              121         483 
  Unrated                                 1,094       1,437 
                                     ----------  ---------- 
Financial guarantees and insurance        5,664       6,616 
Commodities                                  89         198 
Ships and aircraft                        4,517       5,009 
-----------------------------------  ----------  ---------- 
Total value of collateral1               26,596      29,414 
-----------------------------------  ----------  ---------- 
Net exposure                            143,641     154,370 
-----------------------------------  ----------  ---------- 
 

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

Collateral - Consumer, Private & Business Banking (reviewed)

In Consumer, Private and Business Banking, 86 per cent of the portfolio is fully secured (2021: 86 per cent). The secured portfolio decreased by $3.8 billion from Mortgages and Secured wealth portfolio in Asia. Collateral also reduced by $3.3 billion in line with secured portfolio exposure reduction.

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

 
                                           30.06.22                                  31.12.21 (Restated)3 
----------------------  ----------------------------------------------  ---------------------------------------------- 
                             Fully   Partially                               Fully   Partially 
                           secured     secured   Unsecured    Total(1)     secured     secured   Unsecured    Total(2) 
Amortised cost            $million    $million    $million    $million    $million    $million    $million    $million 
----------------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Maximum exposure           113,458       1,213      17,580     132,251     117,129       1,329      17,972     136,430 
Loans to individuals 
  Mortgages                 86,967           -           -      86,967      89,222           -           -      89,222 
  CCPL                         200           -      16,232      16,432         150           -      16,943      17,093 
  Auto                         530           -           -         530         542           -           -         542 
Secured wealth 
 products                   20,195           -           -      20,195      21,495           -           -      21,495 
Other                        5,566       1,213       1,348       8,127       5,720       1,329       1,029       8,078 
----------------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Total collateral1                                               99,428                                         102,769 
----------------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Net exposure2                                                   32,823                                          33,661 
----------------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Percentage of total 
 loans                         86%          1%         13%                     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

Page 28

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

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 the value of mortgage loans. The average LTV of the overall mortgage portfolio is low at 41.6 per cent and remains consistent compared to 31 December 2021. Hong Kong, which represents 39 per cent of the mortgage portfolio, has an average LTV of 45.4 per cent. All of our other key markets continue to have low portfolio LTVs (Korea, Singapore and Taiwan at 35.2 per cent, 43.4 per cent and 46.1 per cent respectively).

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

 
                                                           30.06.22 
--------------------------------------------  ---------------------------------- 
                                                       Africa 
                                                            &     Europe 
                                                       Middle          & 
                                                Asia     East   Americas   Total 
                                                   %        %          %       % 
Amortised cost                                 Gross    Gross      Gross   Gross 
--------------------------------------------  ------  -------  ---------  ------ 
Less than 50 per cent                           67.5     38.9       20.9    66.1 
50 per cent to 59 per cent                      12.0     20.3       23.6    12.4 
60 per cent to 69 per cent                       8.2     17.1       33.3     8.8 
70 per cent to 79 per cent                       8.5     12.9       20.2     8.8 
80 per cent to 89 per cent                       2.9      6.2        1.8     3.0 
90 per cent to 99 per cent                       0.8      2.6        0.2     0.8 
100 per cent and greater                         0.1      2.0          -     0.1 
--------------------------------------------  ------  -------  ---------  ------ 
Average portfolio loan-to-value                 41.1     56.0       58.6    41.6 
--------------------------------------------  ------  -------  ---------  ------ 
Loans to individuals - mortgages ($million)   83,753    1,542      1,671  86,966 
--------------------------------------------  ------  -------  ---------  ------ 
 
 
                                                           31.12.21 
--------------------------------------------  ---------------------------------- 
                                                       Africa 
                                                            &     Europe 
                                                       Middle          & 
                                                Asia     East   Americas   Total 
                                                   %        %          %       % 
Amortised cost                                 Gross    Gross      Gross   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 (reviewed)

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 as at 30 June 2022 is $7.0 million (2021: $11.8 million).

 
                                  30.06.22    31.12.21 
                                  $million    $million 
------------------------------  ----------  ---------- 
Property, plant and equipment          5.4         5.8 
Guarantees                             1.6         6.0 
Other                                    -           - 
------------------------------  ----------  ---------- 
Total                                  7.0        11.8 
------------------------------  ----------  ---------- 
 

Page 29

Other Credit Risk mitigation (reviewed)

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 (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 and Foreign Exchange 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 $12.5 billion (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. These are set out in more detail under Derivative financial instruments Credit Risk mitigation.

Off-balance sheet exposures

For certain types of exposures, 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.

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, loans and advances decreased by $5 billion to $298.7 billion (2021: $304.1 billion), of which $1 billion is in Corporate, Commercial and Institutional Banking and Central and other items segments ("Wholesale"), and $4 billion in Consumer, Private and Business Banking.

Stage 1 loans remained stable at $279 billion. Corporate, Commercial, and Institutional Banking and Central and other items stage 1 loans increased by $3.9 billion to $148.7 billion. Increases were in the Transport, telecom and utilities sector ($1.7 billion) and Energy sector ($1.4 billion) due to new deals, which were offset by reduction in exposures in Commercial real estate and Financing and Insurance sectors. Exposure to Government sector increased by $5 billion. Consumer, Private and Business Banking stage 1 loans decreased by $4 billion from lower mortgage and secured wealth portfolio largely in Asia.

Stage 2 loans decreased by $4 billion to $12.5 billion (2021: $16.8 billion) driven by Corporate, Commercial and Institutional Banking, due to exposure reductions in Energy, Transport, telecom and utilities sectors.

Stage 3 loans decreased by $1 billion to $7.1 billion (2021: $8.1 billion) mainly from loan sales, repayments and upgrades in Corporate, Commercial and Institutional Banking.

Page 30

 
                                                                              30.06.22 
---------------  ---------------------------------------------------------------------------------------------------------------------------------- 
                             Stage 1                          Stage 2                          Stage 3                           Total 
                 -------------------------------  -------------------------------  -------------------------------  ------------------------------- 
                                 Total       Net                  Total       Net                  Total       Net                  Total       Net 
                    Gross       credit  carrying     Gross       credit  carrying     Gross       credit  carrying     Gross       credit  carrying 
                  balance  impair-ment    amount   balance  impair-ment    amount   balance  impair-ment    amount   balance  impair-ment    amount 
Amortised cost   $million     $million  $million  $million     $million  $million  $million     $million  $million  $million     $million  $million 
---------------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Industry: 
Energy             11,809         (29)    11,780       828         (40)       788       952        (661)       291    13,589        (730)    12,859 
Manufacturing      22,991         (10)    22,981     1,021         (14)     1,007       756        (524)       232    24,768        (548)    24,220 
Financing, 
 insurance 
 and 
 non-banking       22,445          (7)    22,438       997         (13)       984       255        (208)        47    23,697        (228)    23,469 
Transport, 
 telecom 
 and utilities     14,512          (8)    14,504     2,597         (47)     2,550       565        (278)       287    17,674        (333)    17,341 
Food and 
 household 
 products           8,873          (6)     8,867       472         (14)       458       374        (225)       149     9,719        (245)     9,474 
Commercial real 
 estate            14,195         (63)    14,132     2,212         (82)     2,130       841        (503)       338    17,248        (648)    16,600 
Mining and 
 quarrying          4,955          (2)     4,953       452         (15)       437       227        (140)        87     5,634        (157)     5,477 
Consumer 
 durables           8,176          (3)     8,173       292         (15)       277       421        (342)        79     8,889        (360)     8,529 
Construction        2,541          (2)     2,539       425          (6)       419       537        (394)       143     3,503        (402)     3,101 
Trading 
 companies 
 & distributors       957          (1)       956       112          (2)       110       145        (132)        13     1,214        (135)     1,079 
Government         31,564          (2)    31,562       650          (5)       645       141          (8)       133    32,355         (15)    32,340 
Other               5,672          (7)     5,665       583          (7)       576       343        (160)       183     6,598        (174)     6,424 
Retail 
Products: 
Mortgage           85,630         (16)    85,614       975          (6)       969       569        (186)       383    87,174        (208)    86,966 
Credit Cards        5,988         (82)     5,906       335         (60)       275        69         (43)        26     6,392        (185)     6,207 
Personal loans 
 and other 
 unsecured 
 lending           10,470        (205)    10,265       194         (52)       142       308        (145)       163    10,972        (402)    10,570 
Auto                  529          (1)       528         1            -         1         -            -         -       530          (1)       529 
Secured wealth 
 products          19,867         (53)    19,814       239          (6)       233       443        (295)       148    20,549        (354)    20,195 
Other               7,962          (5)     7,957       154          (1)       153       107         (89)        18     8,223         (95)     8,128 
---------------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Net carrying 
 value 
 (customers)(1)   279,136        (502)   278,634    12,539        (385)    12,154     7,053      (4,333)     2,720   298,728      (5,220)   293,508 
---------------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
 

1 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $7,894 million

Page 31

 
                                                                              31.12.21 
---------------  ---------------------------------------------------------------------------------------------------------------------------------- 
                             Stage 1                          Stage 2                          Stage 3                           Total 
                 -------------------------------  -------------------------------  -------------------------------  ------------------------------- 
                                 Total       Net                  Total       Net                  Total       Net                  Total       Net 
                    Gross       credit  carrying     Gross       credit  carrying     Gross       credit  carrying     Gross       credit  carrying 
                  balance  impair-ment    amount   balance  impair-ment    amount   balance  impair-ment    amount   balance  impair-ment    amount 
Amortised cost   $million     $million  $million  $million     $million  $million  $million     $million  $million  $million     $million  $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 
Equipment 
Leased 
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 and Retail Products 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 Corporate, Commercial and Institutional Banking segment, our largest industry exposures are to Government, Manufacturing, Financing, insurance and non-banking sectors for wholesale exposures.

Net loans and advances to customers decreased by $5.0 billion to $293.5 billion (2021: $298.5 billion) of which Asia decreased by $2 billion and Europe and the Americas reduced by $2.6 billion.

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 3,416 clients.

Loans and advances to the Energy sector in Corporate, Commercial and Institutional Banking was $13.6 billion and broadly stable from 2021. The Energy sector lending is spread across five sub-sectors and over 181 clients.

The Group provides loans to Commercial real estate counterparties of $17 billion. In total, $8.5 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 Commercial real estate portfolio has decreased to 48 per cent, compared with 50 per cent in 2021 (51 per cent in 2020). 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 (4 per cent in 2020).

Consumer, Private and Business Banking net loans decreased by $3.9 billion to $132.6 billion (2021: $136.5 billion) driven by a decrease in secured products in Asia.

Page 32

 
                                              30.06.22                                      31.12.21 
--------------------------  --------------------------------------------  -------------------------------------------- 
                                          Africa                                        Africa 
                                        & Middle       Europe                         & Middle       Europe 
                                 ASIA       East   & Americas      Total       ASIA       East   & Americas      Total 
Amortised cost               $million   $million     $million   $million   $million   $million     $million   $million 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Industry: 
Energy                          9,709      1,332        1,818     12,859      6,265      2,721        3,719     12,705 
Manufacturing                  19,447      1,578        3,195     24,220     20,771      1,751        2,702     25,224 
Financing, insurance and 
 non-banking                   12,920        796        9,753     23,469     14,184        905       10,588     25,677 
Transport, telecom and 
 utilities                     11,396      4,112        1,833     17,341     11,661      4,218        2,446     18,325 
Food and household 
 products                       5,836      2,482        1,156      9,474      5,497      2,360        1,033      8,890 
Commercial real estate         13,971        833        1,796     16,600     17,150      1,048        1,649     19,847 
Mining and quarrying            3,894        489        1,094      5,477      3,833        572          950      5,355 
Consumer durables               7,498        474          557      8,529      6,742        398          403      7,543 
Construction                    1,873        731          497      3,101      1,839        814          400      3,053 
Trading companies and 
 distributors                     869        173           37      1,079      1,047        176           37      1,260 
Government                     26,545      5,664          131     32,340     22,987      4,117          305     27,409 
Other                           4,093        920        1,411      6,424      4,681        670        1,311      6,662 
Retail Products: 
Mortgages                      83,753      1,542        1,671     86,966     85,765      1,651        1,806     89,222 
Credit Cards(1)                 5,904        303            -      6,207      5,849        291            -      6,140 
Personal loans and other 
 unsecured lending1             8,817      1,652          101     10,570      9,241      1,700          100     11,041 
Auto                              490         39            -        529        500         42            -        542 
Secured wealth products        18,842        599          754     20,195     19,984        545          966     21,495 
Other                           7,378        750            -      8,128      7,265        813            -      8,078 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Net loans and advances 
 to customers                 243,235     24,469       25,804    293,508    245,261     24,792       28,415    298,468 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Net loans and advances 
 to banks                      22,688      5,043        8,470     36,201     30,301      5,966        8,116     44,383 
--------------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
 

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

Vulnerable and Cyclical Sector tables

Vulnerable and cyclical sectors are those that the Group considers to be most at risk from current economic stresses, including volatile energy and commodity prices, and we continue to monitor exposures to these sectors particularly carefully.

Total net on-balance sheet exposure to vulnerable sectors decreased by $2.4 billion to $31 billion compared to 31 December 2021, although the total net on and off-balance sheet exposure was unchanged at 28 per cent (2021: 28 per cent) of the total net exposure in Corporate, Commercial and Institutional Banking. The decrease is largely due to lower levels of drawn balances particularly in the Commercial real estate sector.

Stage 2 vulnerable sector loans decreased by $2.2 billion compared to 31 December 2021. This was primarily driven by a decrease in the Aviation and Oil & Gas sectors as exposure migrated to stage 1 partly offset by an increase in Commercial Real Estate.

Stage 3 vulnerable sector loans increased by $0.2 billion compared to 31 December 2021, mainly in the Commodity Traders sector from new downgrades.

The Group has net exposure of $3.7 billion (2021: $4.0 billion) to China Commercial real estate counterparties which are primarily booked in Hong Kong and China. Of this exposure, $1.6 billion (2021: $1.8 billion) is to property developers (whose cashflows have been particularly impacted by policy changes to deleverage the sector) that have been placed on purely precautionary and non-purely precautionary early alert. As a result of ongoing uncertainties affecting this sector, the Group has taken a $126 million (2021: $95 million) management overlay on credit impairment for the exposures on early alert at 30 June 2022. The Group is further indirectly exposed to China Commercial real estate through its associate investment in China Bohai Bank. Refer to Note 19 Investments in subsidiary undertakings, joint ventures and associates.

Page 33

Maximum exposure

 
                                                                     30.06.22 
---------------------------  ----------------------------------------------------------------------------------------- 
                                  Maximum 
                               on Balance 
                                    Sheet                              Undrawn     Financial                     Total 
                                 Exposure                 Net On   Commitments    Guarantees    Net Off           On & 
                                     (net                Balance          (net          (net    Balance    Off Balance 
                                of credit                  Sheet     of credit     of credit      Sheet          Sheet 
                              impairment)  Collateral   Exposure   impairment)   impairment)   Exposure   Net Exposure 
Amortised Cost                   $million    $million   $million      $million      $million   $million       $million 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
Industry: 
Aviation1                           3,114       1,648      1,466         1,445           735      2,180          3,646 
Commodity Traders                   8,575         332      8,243         3,094         8,745     11,839         20,082 
Metals & Mining                     4,061         385      3,676         3,271           729      4,000          7,676 
Commercial Real Estate             16,601       7,118      9,483         6,618           249      6,867         16,350 
Hotels & Tourism                    2,087         812      1,275         1,564           137      1,701          2,976 
Oil & Gas                           7,379         902      6,477         8,214         7,321     15,535         22,012 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
Total                              41,817      11,197     30,620        24,206        17,916     42,122         72,742 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
Total Corporate, Commercial 
 & Institutional Banking          134,036      24,522    109,514        97,559        51,066    148,625        258,139 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
Total Group                       329,709     132,910    196,799       162,762        58,193    220,955        417,754 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
 
 
                                                                     31.12.21 
---------------------------  ----------------------------------------------------------------------------------------- 
                                  Maximum 
                               On Balance 
                                    Sheet                              Undrawn     Financial                     Total 
                                 Exposure                 Net On   Commitments    Guarantees    Net Off           On & 
                                     (net                Balance          (net          (net    Balance    Off Balance 
                                of credit                  Sheet     of credit     of credit      Sheet          Sheet 
                              impairment)  Collateral   Exposure   impairment)   impairment)   Exposure   Net Exposure 
Amortised Cost                   $million    $million   $million      $million      $million   $million       $million 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
Industry: 
Aviation(1)                         3,458       2,033      1,425         1,914           431      2,345          3,770 
Commodity Traders                   8,732         262      8,470         2,434         6,832      9,266         17,736 
Metals & Mining                     3,616         450      3,166         3,387           637      4,024          7,190 
Commercial Real Estate             19,847       7,290     12,557         7,192           291      7,483         20,040 
Hotels & Tourism                    2,390         789      1,601         1,363           121      1,484          3,085 
Oil & Gas                           6,826       1,029      5,797         8,842         6,013     14,855         20,652 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
Total                              44,869      11,853     33,016        25,132        14,325     39,457         72,473 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
Total Corporate, Commercial 
 & Institutional Banking          139,401      26,294    113,107        96,406        49,666    146,072        259,179 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
Total Group                       342,851     138,564    204,287       158,421        58,291    216,712        420,999 
---------------------------  ------------  ----------  ---------  ------------  ------------  ---------  ------------- 
 

1 In addition to the aviation sector loan exposures, the Group owns $3.4 billion (31 December 2021: $3.1 billion) of aircraft under operating leases. Refer to Operating lease assets

Page 34

Loans and advances by stage

 
                                                                          30.06.22 
-----------  ---------------------------------------------------------------------------------------------------------------------------------- 
                         Stage 1                          Stage 2                          Stage 3                           Total 
             -------------------------------  -------------------------------  -------------------------------  ------------------------------- 
                             Total       Net                  Total       Net                  Total       Net                  Total       Net 
                Gross       credit  carrying     Gross       credit  carrying     Gross       credit  carrying     Gross       credit  carrying 
Amortised     balance  impair-ment    amount   balance  impair-ment    amount   balance  impair-ment    amount   balance  impair-ment    amount 
Cost         $million     $million  $million  $million     $million  $million  $million     $million  $million  $million     $million  $million 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Industry: 
Aviation1       2,193          (2)     2,191       758          (1)       757       213         (47)       166     3,164         (50)     3,114 
Commodity 
 Traders        8,012          (6)     8,006       254          (3)       251       866        (548)       318     9,132        (557)     8,575 
Metals & 
 Mining         3,624          (2)     3,622       353         (11)       342       212        (115)        97     4,189        (128)     4,061 
Commercial 
 Real 
 Estate        14,196         (63)    14,133     2,212         (82)     2,130       841        (503)       338    17,249        (648)    16,601 
Hotels & 
 Tourism        1,463          (2)     1,461       430          (5)       425       262         (61)       201     2,155         (68)     2,087 
Oil & Gas       6,413          (6)     6,407       718         (12)       706       506        (240)       266     7,637        (258)     7,379 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Total          35,901         (81)    35,820     4,725        (114)     4,611     2,900      (1,514)     1,386    43,526      (1,709)    41,817 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Total CCIB    121,965        (141)   121,824    10,488        (253)    10,235     5,552      (3,575)     1,977   138,005      (3,969)   134,036 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Total Group   314,916        (511)   314,405    12,910        (387)    12,523     7,131      (4,348)     2,783   334,957      (5,246)   329,711 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
 
 
                                                                          31.12.21 
-----------  ---------------------------------------------------------------------------------------------------------------------------------- 
                         Stage 1                          Stage 2                          Stage 3                           Total 
             -------------------------------  -------------------------------  -------------------------------  ------------------------------- 
                             Total       Net                  Total       Net                  Total       Net                  Total       Net 
                Gross       credit  carrying     Gross       credit  carrying     Gross       credit  carrying     Gross       credit  carrying 
Amortised     balance  impair-ment    amount   balance  impair-ment    amount   balance  impair-ment    amount   balance  impair-ment    amount 
cost         $million     $million  $million  $million     $million  $million  $million     $million  $million  $million     $million  $million 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Industry: 
Aviation1       1,120            -     1,120     2,174         (11)     2,163       239         (64)       175     3,533         (75)     3,458 
Commodity 
 Traders        8,482          (4)     8,478       195          (5)       190       713        (649)        64     9,390        (658)     8,732 
Metals & 
 Mining         3,083          (1)     3,082       450         (17)       433       219        (118)       101     3,752        (136)     3,616 
Commercial 
 Real 
 Estate        17,680         (43)    17,637     1,787         (75)     1,712       833        (335)       498    20,300        (453)    19,847 
Hotels & 
 Tourism        1,562          (1)     1,561       722          (9)       713       182         (66)       116     2,466         (76)     2,390 
Oil & Gas       4,999          (5)     4,994     1,595         (34)     1,561       486        (215)       271     7,080        (254)     6,826 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Total          36,926         (54)    36,872     6,923        (151)     6,772     2,672      (1,447)     1,225    46,521      (1,652)    44,869 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Total CCIB    122,368        (103)   122,265    14,818        (341)    14,477     6,520      (3,861)     2,659   143,706      (4,305)   139,401 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
Total Group   322,954        (485)   322,469    17,429        (528)    16,901     8,149      (4,668)     3,481   348,532      (5,681)   342,851 
-----------  --------  -----------  --------  --------  -----------  --------  --------  -----------  --------  --------  -----------  -------- 
 

Loans and advances by region (net of credit impairment)

 
                                           30.06.22                                      31.12.21 
-----------------------  --------------------------------------------  -------------------------------------------- 
                                       Africa                                        Africa 
                                     & Middle       Europe                         & Middle       Europe 
                              Asia       East   & Americas      Total       Asia       East   & Americas      Total 
                          $million   $million     $million   $million   $million   $million     $million   $million 
-----------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Industry: 
Aviation1                    1,298      1,050          766      3,114      1,356      1,214          888      3,458 
Commodity traders            5,005        774        2,796      8,575      4,352        660        3,720      8,732 
Metals & mining              2,904        440          717      4,061      2,736        492          388      3,616 
Commercial real estate      13,972        833        1,796     16,601     17,150      1,048        1,649     19,847 
Hotel & tourism              1,204        647          236      2,087      1,464        397          529      2,390 
Oil & gas                    3,839      2,051        1,489      7,379      2,770      2,248        1,808      6,826 
-----------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
Total                       28,222      5,795        7,800     41,817     29,828      6,059        8,982     44,869 
-----------------------  ---------  ---------  -----------  ---------  ---------  ---------  -----------  --------- 
 

1 In addition to the aviation sector loan exposures, the Group owns $3.4 billion (31 December 2021: $3.1 billion) of aircraft under operating leases. Refer to Operating lease assets

Page 35

Credit quality - loans and advances

 
                                                            30.06.22 
------------------------  ----------------------------------------------------------------------------- 
                                                           Commercial 
                                     Commodity     Metals        real       Hotel      Oil & 
Amortised Cost             Aviation    traders   & mining      estate   & tourism        gas      Total 
                              Gross      Gross      Gross       Gross       Gross      Gross      Gross 
 Credit Grade              $million   $million   $million    $million    $million   $million   $million 
------------------------  ---------  ---------  ---------  ----------  ----------  ---------  --------- 
Strong                        1,043      5,170      2,582       7,470         756      4,517     21,538 
Satisfactory                  1,750      3,084      1,392       8,878       1,073      2,605     18,782 
Higher risk                     158         12          3          60          64          9        306 
Defaulted                       213        866        212         841         262        506      2,900 
------------------------  ---------  ---------  ---------  ----------  ----------  ---------  --------- 
Total Gross Balance           3,164      9,132      4,189      17,249       2,155      7,637     43,526 
------------------------  ---------  ---------  ---------  ----------  ----------  ---------  --------- 
Strong                          (1)        (3)        (3)        (11)         (1)        (1)       (20) 
Satisfactory                    (2)        (5)       (10)       (130)         (4)       (17)      (168) 
Higher risk                       -        (1)          -         (4)         (2)          -        (7) 
Defaulted                      (47)      (548)      (115)       (503)        (61)      (240)    (1,514) 
------------------------  ---------  ---------  ---------  ----------  ----------  ---------  --------- 
Total Credit Impairment        (50)      (557)      (128)       (648)        (68)      (258)    (1,709) 
------------------------  ---------  ---------  ---------  ----------  ----------  ---------  --------- 
Strong                         0.1%       0.1%       0.1%        0.1%        0.1%       0.0%       0.1% 
Satisfactory                   0.1%       0.2%       0.7%        1.5%        0.4%       0.7%       0.9% 
Higher risk                    0.0%       8.3%       0.0%        6.7%        3.1%       0.0%       2.3% 
Defaulted                     22.1%      63.3%      54.2%       59.8%       23.3%      47.4%      52.2% 
------------------------  ---------  ---------  ---------  ----------  ----------  ---------  --------- 
Cover Ratio                    1.6%       6.1%       3.1%        3.8%        3.2%       3.4%       3.9% 
------------------------  ---------  ---------  ---------  ----------  ----------  ---------  --------- 
 
 
                                                             31.12.21 
------------------------  ------------------------------------------------------------------------------ 
                                                             Commercial      Hotel 
                                       Commodity     Metals        real          &      Oil & 
                          Aviation(1)    traders   & mining      estate    tourism        gas      Total 
                                Gross      Gross      Gross       Gross      Gross      Gross      Gross 
Credit Grade                 $million   $million   $million    $million   $million   $million   $million 
------------------------  -----------  ---------  ---------  ----------  ---------  ---------  --------- 
Strong                            896      5,878      1,730       9,581        731      3,594     22,410 
Satisfactory                    2,257      2,788      1,781       9,735      1,353      2,892     20,806 
Higher risk                       141         11         22         151        200        108        633 
Defaulted                         239        713        219         833        182        486      2,672 
------------------------  -----------  ---------  ---------  ----------  ---------  ---------  --------- 
Total Gross Balance             3,533      9,390      3,752      20,300      2,466      7,080     46,521 
------------------------  -----------  ---------  ---------  ----------  ---------  ---------  --------- 
Strong                              -        (1)          -        (92)          -          -       (93) 
Satisfactory                      (8)        (5)       (14)        (21)        (4)       (24)       (76) 
Higher risk                       (3)        (3)        (4)         (5)        (6)       (15)       (36) 
Defaulted                        (64)      (649)      (118)       (335)       (66)      (215)    (1,447) 
------------------------  -----------  ---------  ---------  ----------  ---------  ---------  --------- 
Total Credit Impairment          (75)      (658)      (136)       (453)       (76)      (254)    (1,652) 
------------------------  -----------  ---------  ---------  ----------  ---------  ---------  --------- 
Strong                           0.0%       0.0%       0.0%        1.0%       0.0%       0.0%       0.4% 
Satisfactory                     0.4%       0.2%       0.8%        0.2%       0.3%       0.8%       0.4% 
Higher risk                      2.1%      27.3%      18.2%        3.3%       3.0%      13.9%       5.7% 
Defaulted                       26.8%      91.0%      53.9%       40.2%      36.3%      44.2%      54.2% 
------------------------  -----------  ---------  ---------  ----------  ---------  ---------  --------- 
Cover Ratio                      2.1%       7.0%       3.6%        2.2%       3.1%       3.6%       3.6% 
------------------------  -----------  ---------  ---------  ----------  ---------  ---------  --------- 
 

Page 36

IFRS 9 expected credit loss methodology (reviewed)

Refer to pages 233 to 234 in the 2021 Annual Report for the 'Approach for determining expected credit losses', 'Application of lifetime', and pages 242 to 244 for 'Significant increase in credit risk (SICR)', 'Assessment of credit-impaired financial assets' and 'Governance and application of expert credit judgement in respect of expected credit losses'. There have been no changes to the Group's approach in determining SICR compared to 31 December 2021.

Composition of credit impairment provisions (reviewed)

The table below summarises the key components of the Group's credit impairment provision balances at 30 June 2022 and 31 December 2021.

Modelled ECL provisions, which includes post model adjustments, management overlays and the impact of multiple economic scenarios, reduced to 22 per cent (31 December 2021: 23 per cent) of total credit impairment provisions at

30 June 2022. 18 per cent of the modelled ECL provisions at 30 June 2022 related to judgemental adjustments compared with 25 per cent at 31 December 2021 primarily due to releases of the COVID-19 overlay.

 
                                                                                         Central 
                                                                                               & 
                                               Corporate,    Consumer, 
                                               Commercial      Private 
                                          & Institutional   & Business                     other 
                                                  Banking      Banking     Ventures    items (3)        Total 
30 June 2022                                    $ million    $ million    $ million    $ million    $ million 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Modelled ECL provisions (base 
 forecast)                                            371          494            2           82          949 
Impact of multiple economic scenarios1                 39           36            -           21           96 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Total ECL provisions before management 
 judgements                                           410          530            2          103        1,045 
Judgemental post model adjustments                      -           17            -            -           17 
Management overlays2 
- COVID-19                                             29           61            -            -           90 
- China Commercial Real Estate                        126            -            -            -          126 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Total modelled provisions                             565          608            2          103        1,278 
                                         ----------------  -----------  -----------  -----------  ----------- 
Of which: Stage 1                                     194          367            2           61          624 
                     Stage 2                          314          129            -           42          485 
                     Stage 3                           57          112            -            -          169 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Stage 3 non-modelled provisions3                    3,723          645            -           74        4,442 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Total credit impairment provisions                  4,288        1,253            2          177        5,720 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
 
 
                                                                                         Central 
                                                                                               & 
                                               Corporate,    Consumer, 
                                               Commercial      Private 
                                          & Institutional   & Business                     other 
                                                  Banking     Banking3    Ventures4       items3        Total 
31 December 2021                                $ million    $ million    $ million    $ million    $ million 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Modelled ECL provisions (base 
 forecast)                                            365          529            3          103        1,000 
Impact of multiple economic scenarios1                 32           14            -            9           55 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Total ECL provisions before management 
 judgements                                           397          543            3          112        1,055 
Judgemental post model adjustments                      -            7            -            -            7 
Management overlays2 
- COVID-19                                            102          147            -            -          249 
- China Commercial Real Estate                         95            -            -            -           95 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Total modelled provisions                             594          697            3          112        1,406 
                                         ----------------  -----------  -----------  -----------  ----------- 
Of which: Stage 1                                     163          377            1           68          609 
                     Stage 2                          425          185            2           44          656 
                     Stage 3                            6          135            -            -          141 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Stage 3 non-modelled provisions                     4,073          662            -           68        4,803 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
Total credit impairment provisions                  4,667        1,359            3          180        6,209 
---------------------------------------  ----------------  -----------  -----------  -----------  ----------- 
 

1 Includes a post model adjustment (PMA) of $89 million (2021: $51 million)

2 $117 million (2021: $115 million) is in stage 1, $96 million (2021: $208 million) in stage 2 and $3million (2021: $21 million) in stage 3

3 Includes $42 million (2021: nil) overlay

4 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 37

Post model adjustments

Where a model's performance breaches the monitoring thresholds or validation standards, an assessment is completed to determine whether an ECL PMA is required to correct for the identified model issue. PMAs will be removed when the models are updated to correct for the identified model issue or the estimates return to being within the monitoring thresholds.

As at 30 June 2022, PMAs have been applied for 9 models out of the total of 172 models. In aggregate, the PMAs increase the Group's impairment provisions by $54 million (0.5 per cent of modelled provisions) compared with a $17 million increase at 31 December 2021, and primarily relate to a post model adjustment for multiple economic scenarios (see below for the basis of determining this PMA under 'impact of multiple economic scenarios') and unsecured Consumer lending models. The PMAs range between a $89 million increase (the post model adjustment for multiple economic scenarios) to a $24 million decrease in ECL (for Malaysia Business Clients).

As set out below, a separate judgemental management adjustments that covers risk not captured by the models has been applied after taking into account these PMAs.

 
                                                   30.06.22     31.12.21 
                                                  $ million    $ million 
----------------------------------------------  -----------  ----------- 
Model performance PMAs 
Corporate, Commercial & Institutional Banking            45           24 
Consumer, Private & Business Banking                    (1)         (15) 
Central & other items                                    10            8 
----------------------------------------------  -----------  ----------- 
Total model performance PMAs                             54           17 
----------------------------------------------  -----------  ----------- 
 

Key assumptions and judgements in determining expected credit loss

Incorporation of forward-looking information

The evolving economic environment is a key determinant of the ability of a bank's clients to meet their obligations as they fall due. It is a fundamental principle of IFRS 9 that the provisions banks hold against potential future Credit Risk losses should depend, not just on the health of the economy today, but should also take into account potential changes to the economic environment. For example, if a bank were to anticipate a sharp slowdown in the world economy over the coming year, it should hold more provisions today to absorb the credit losses likely to occur in the near future.

To capture the effect of changes to the economic environment, the PDs and LGDs used to calculate ECL incorporate forward-looking information in the form of forecasts of the values of economic variables and asset prices that are likely to have an effect on the repayment ability of the Group's clients.

The 'base forecast' of the economic variables and asset prices is based on management's view of the five-year outlook, supported by projections from the Group's in-house research team and outputs from a third-party model that project specific economic variables and asset prices. The research team takes consensus views into consideration, and senior management review projections for some core country variables against consensus when forming their view of the outlook. For the period beyond five years, management utilises the in-house research view and third-party model outputs, which allow for a reversion to long-term growth rates or norms. All projections are updated on a quarterly basis.

Page 38

Forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact on non-linearity

In the Base Forecast - management's view of the most likely outcome - the world economy is expected to grow by around 3 per cent in 2022, easing from an almost 6 per cent expansion in 2021 and compares to a 30-year average of 3.5 per cent. The impact of the Russia/Ukraine war through elevated commodity prices and cost pressures, higher inflation and lower sentiment along with tightening monetary conditions are creating headwinds for many economies. Some key markets for the Group such as China and Hong Kong are also easing out of lockdown measures that were introduced to contain new waves of COVID-19 infections.

While the quarterly Base Forecasts inform the Group's strategic plan, one key requirement of IFRS 9 is that the assessment of provisions should consider multiple future economic environments. For example, the global economy may grow more quickly or more slowly than the Base Forecast, and these variations would have different implications for the provisions that the Group should hold today. As the negative impact of an economic downturn on credit losses tends to be greater than the positive impact of an economic upturn, if the Group sets provisions only on the ECL under the Base Forecast it might maintain a level of provisions that does not appropriately capture the range of potential outcomes. To address this property of skewness (or non-linearity), IFRS 9 requires reported ECL to be a probability-weighted ECL, calculated over a range of possible outcomes.

To assess the range of possible outcomes the Group simulates a set of 50 scenarios around the Base Forecast, calculates the ECL under each of them and assigns an equal weight of 2 per cent to each scenario outcome. These scenarios are generated by a Monte Carlo simulation, which addresses the challenges of crafting many realistic alternative scenarios in the many countries in which the Group operates by means of a model, which produces these alternative scenarios while considering the degree of historical uncertainty (or volatility) observed from Q1 1990 to Q3 2020 around economic outcomes and how these outcomes have tended to move in relation to one another (or correlation). This naturally means that each of the 50 scenarios do not have a specific narrative, although collectively they explore a range of hypothetical alternative outcomes for the global economy, including scenarios that turn out better than expected and scenarios that amplify anticipated stresses.

The table below provides a summary of the Group's Base Forecast for key footprint markets, alongside the corresponding range seen across the multiple scenarios. The peak/trough amounts in the table show the highest and lowest points within the Base Forecast. The GDP graphs illustrate the shape of the Base Forecast in relation to prior periods' actuals and the long-term growth rates which is based on the pace of economic expansion expected for 2030.

China's growth is expected to ease from over 8 per cent in 2021 to 4.1 per cent in 2022. Economic activity in the first half of the year was severely limited by reimposed lockdown measures in several major cities to stem the surge in new COVID-19 cases. However, the economy is likely to regain momentum in the second half of the year as business normalises and front-loaded government stimulus takes effect. Similarly for Hong Kong, measures to contain the cities' fifth COVID-19 wave led to a sharp contraction in activity in early 2022. In the near term the recovery will continue to be supported by the unwinding of social distancing measures and travel bans. Growth is expected to slow to 0.2 per cent in 2022 from over 6 per cent in 2021. Headwinds to Singapore's growth have been rising recently including the impact from China's slowdown and the Russia/Ukraine war, persistent global supply disruptions, and tighter monetary conditions. The economy is expected to expand by 3.8 per cent this year from 7.6 percent in 2021. External factors are also likely to play a key part in limiting Korea's prospects in the near term with GDP growth expected to ease to 2.7 per cent in 2022 from 4 per cent last year. Without the government's fiscal expansion, growth would be even lower. India's uncomfortably high inflation is adversely impacting activity, but growth is expected to be relatively firm at nearly 8 per cent in 2022.

Commodity prices have remained elevated mainly from the impact of the Russia/Ukraine war. Brent crude oil is expected to average around $105 in 2022. Prices are expected to fall over the next 18 months as production rises and demand eases; that said, the ongoing need to rebuild stocks is likely to keep prices relatively high.

Page 39

 
                                                        30.06.22 
----------------  ------------------------------------------------------------------------------------ 
                                    China                                    Hong Kong 
                  -----------------------------------------  ----------------------------------------- 
                                           3-month    House      GDP                  3-month    House 
                      GDP                 interest   prices   growth                 interest   prices 
                   growth  Unemployment      rates     (YoY     (YoY  Unemployment      rates     (YoY 
                   (YoY%)             %          %       %)       %)             %          %       %) 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Base forecast1 
  2022                4.1           4.0        1.8      0.8      0.2           4.6        1.3      2.5 
  2023                5.8           4.0        1.9      2.1      4.5           3.9        2.1      6.8 
  2024                5.4           4.0        2.3      4.3      2.5           3.9        2.5      3.1 
  2025                5.1           4.0        2.6      4.4      2.2           3.9        2.4      2.8 
  2026                4.7           3.9        2.8      4.4      2.6           3.9        2.4      2.7 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
5-year average2       5.1           4.0        2.4      3.5      2.8           3.9        2.3      3.8 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Peak                  6.2           4.0        2.9      4.4      6.9           4.2        2.5      8.9 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Trough                3.6           3.9        1.8    (0.3)      1.4           3.9        1.6      2.7 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Monte Carlo 
Low3                 2.69          3.85       1.23   (1.69)   (1.03)          2.93       0.52   (7.55) 
High4                8.01          4.09       3.82     9.55     8.75          5.11       4.54    18.93 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
 
 
                                                        30.06.22 
----------------  ------------------------------------------------------------------------------------ 
                                  Singapore                                    Korea 
                  -----------------------------------------  ----------------------------------------- 
                                           3-month                                    3-month    House 
                      GDP                 interest    House      GDP                 interest   prices 
                   growth  Unemployment      rates   prices   growth  Unemployment      rates     (YoY 
                   (YoY%)             %          %   (YoY%)   (YoY%)             %          %       %) 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Base forecast1 
  2022                3.8           3.2        1.5      5.6      2.7           3.2        1.7      7.1 
  2023                2.8           3.1        2.1      1.8      2.5           3.4        2.2      0.0 
  2024                2.5           3.0        2.1      3.0      2.5           3.2        2.4      2.2 
  2025                2.1           3.0        2.3      3.5      2.2           3.1        2.5      2.8 
  2026                1.9           3.0        2.3      3.8      1.9           3.1        2.5      2.8 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
5-year average2       2.4           3.0        2.1      3.2      2.2           3.2        2.3      2.2 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Peak                  4.3           3.1        2.3      6.1      3.1           3.4        2.5      5.1 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Trough                1.8           3.0        1.7      1.2      1.7           3.0        1.9    (0.3) 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Monte Carlo 
Low3               (2.31)          2.15       1.31   (4.37)   (0.56)          2.63       1.22   (2.80) 
High4                7.01          4.15       3.25    10.70     5.89          3.85       3.76     9.31 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
 
 
                                             30.06.22 
----------------  -------------------------------------------------------------- 
                                        India 
                  -------------------------------------------------  ----------- 
                                               3month 
                                             interest 
                  GDP growth  Unemployment      rates  House prices  Brent Crude 
                      (YoY%)             %          %        (YoY%)         $ pb 
----------------  ----------  ------------  ---------  ------------  ----------- 
Base forecast1 
  2022                   7.7           N/A        4.6           7.1        104.6 
  2023                   5.5           N/A        5.1           7.2         90.7 
  2024                   6.0           N/A        5.6           7.2         83.3 
  2025                   5.8           N/A        6.0           7.2         89.3 
  2026                   5.6           N/A        6.1           7.1        108.0 
----------------  ----------  ------------  ---------  ------------  ----------- 
5-year average2          5.6           N/A        5.6           7.2         94.3 
----------------  ----------  ------------  ---------  ------------  ----------- 
Peak                     7.3           N/A        6.1           7.2        110.3 
----------------  ----------  ------------  ---------  ------------  ----------- 
Trough                   3.3           N/A        4.5           6.9         79.0 
----------------  ----------  ------------  ---------  ------------  ----------- 
Monte Carlo 
Low3                    1.80           N/A       3.49          0.14        30.25 
High4                  16.80           N/A       7.40         16.80       206.49 
----------------  ----------  ------------  ---------  ------------  ----------- 
 

Page 40

 
                                                        31.12.21 
----------------  ------------------------------------------------------------------------------------ 
                                    China                                    Hong Kong 
                  -----------------------------------------  ----------------------------------------- 
                                           3-month                                    3-month 
                      GDP                 interest    House      GDP                 interest    House 
                   growth  Unemployment      rates   prices   growth  Unemployment      rates   prices 
                   (YoY%)             %          %   (YoY%)   (YoY%)             %          %   (YoY%) 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
5-year average2       5.4           3.4        2.8      4.0      2.6           3.8        1.5      3.1 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Peak                  6.1           3.4        3.1      4.5      3.5           4.4        2.3      5.3 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Trough                4.7           3.4        2.1      1.8      1.8           3.7        0.3      2.7 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Monte Carlo 
Low3                  2.6           3.3        1.3    (2.8)    (1.7)           2.4      (0.3)   (12.4) 
High4                 8.3           3.5        4.6     11.1      6.9           5.8        5.0     22.8 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
 
 
                                                        31.12.21 
----------------  ------------------------------------------------------------------------------------ 
                                  Singapore                                    Korea 
                  -----------------------------------------  ----------------------------------------- 
                                           3-month                                    3-month 
                      GDP                 interest    House      GDP                 interest    House 
                   growth  Unemployment      rates   prices   growth  Unemployment      rates   prices 
                   (YoY%)             %          %   (YoY%)   (YoY%)             %          %   (YoY%) 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
5-year average2       2.5           3.1        1.4      3.6      2.5           3.3        1.6      2.7 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Peak                  4.8           3.4        2.2      4.2      2.8           3.7        2.2     10.9 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Trough                1.8           3.0        0.5      3.3      2.4           3.1        1.2    (0.3) 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
Monte Carlo 
Low3                (4.0)           2.1        0.1    (4.1)    (3.1)           2.7        0.5    (5.2) 
High4                 9.4           4.5        4.2     15.4      7.1           4.5        4.3      9.5 
----------------  -------  ------------  ---------  -------  -------  ------------  ---------  ------- 
 
 
                                           31.12.21 
----------------  ----------------------------------------------------------- 
                                      India 
                  ----------------------------------------------  ----------- 
                                           3-month 
                      GDP                 interest 
                   growth  Unemployment      rates  House prices  Brent crude 
                   (YoY%)             %          %        (YoY%)         $ pb 
----------------  -------  ------------  ---------  ------------  ----------- 
5-year average2       6.4           N/A        5.4           7.1         63.7 
----------------  -------  ------------  ---------  ------------  ----------- 
Peak                 16.6           N/A        6.2           7.2         73.5 
----------------  -------  ------------  ---------  ------------  ----------- 
Trough                4.2           N/A        4.0           5.8         60.0 
----------------  -------  ------------  ---------  ------------  ----------- 
Monte Carlo 
Low3                  2.0           N/A        3.2         (1.9)          8.9 
High4                10.5           N/A        8.8          24.9        211.4 
----------------  -------  ------------  ---------  ------------  ----------- 
 

1 Annual numbers are for calendar year except for India where it covers fiscal year ending Q1 of each year. For example 2022 is Q2 2022 to Q1 2023

2 5 year averages reported for 30.06.22 cover Q3 2022 to Q2 2027. % year averages reported for 31.12.21 cover Q1 2022 to Q4 2026

3 Represents the 10th percentile in the range of economic scenarios used to determine non-linearity

4 Represents the 90th percentile in the range of economic scenarios used to determine non-linearity

Impact of multiple economic scenarios

The final probability-weighted ECL reported by the Group is a simple average of the ECL for each of the 50 scenarios simulated using a Monte Carlo model. The Monte Carlo approach has the advantage that it generates many plausible alternative scenarios that cover our global footprint; however, a recognised challenge with the Monte Carlo approach is that the range of scenarios it forecasts can be narrow.

The Monte Carlo model is being redeveloped to widen the range of the scenarios; however, prior to this new model being implemented a $89 million post model adjustment for multiple economic scenarios has been applied. The total amount of non-linearity has been estimated by assigning probability weights of 57 per cent, 22 per cent, 12 per cent and 9 per cent respectively to the ECL from the Base Forecast, Central Bank Over Reaction, Stagflation and New COVID-19 Variant scenarios which are presented and comparing this to the unweighted base forecast ECL. The post model adjustment for multiple economic scenarios represents the difference between the probability weighted ECL calculated using the three scenarios and the probability weighted ECL calculated by the Monte Carlo model.

Page 41

The impact of multiple economic scenarios (which includes the post model adjustment for multiple economic scenarios) on stage 1, stage 2 and stage 3 modelled ECL is set out in the table below together with the management overlay.

 
                                                              Multiple 
                                                              economic  Management 
                                            Base forecast1   scenarios    overlays       Total 
                                                  $million    $million    $million    $million 
------------------------------------------  --------------  ----------  ----------  ---------- 
Total expected credit loss at 30 June 
 20222                                                 966          96         216       1,278 
------------------------------------------  --------------  ----------  ----------  ---------- 
Total expected credit loss at 31 December 
 20212                                               1,007          55         344       1,406 
------------------------------------------  --------------  ----------  ----------  ---------- 
 

1 Includes judgemental post model adjustments

2 Total modelled ECL comprises stage 1 and stage 2 balances of $1,109 million (31 December 2021: $1,265 million) and $169 million (31 December 2021: $141 million) of modelled ECL on stage 3 loans

The average expected credit loss under multiple scenarios is 10 per cent higher than the expected credit loss calculated using only the most likely scenario (the Base Forecast). Portfolios that are more sensitive to non-linearity include those with greater leverage and/or a longer tenor, such as Project and Shipping Finance and Credit Card portfolios. Other portfolios display minimal non-linearity owing to limited responsiveness to macroeconomic impacts for structural reasons such as significant collateralisation as with the Consumer, Private and Business Banking mortgage portfolios.

Judgemental adjustments

Post model adjustments

As at 30 June 2022, judgemental post model adjustments of $17 million (31 December 2021: $7 million) have been applied to certain Consumer, Private and Business Banking models primarily to hold back releases of ECL identified from model monitoring breaches because moratoria and other support schemes have suppressed observed defaults. These will be released when the observed defaults normalise.

Management overlays

As at 30 June 2022, the Group held:

-- A $90 million (31 December 2021: $249 million) management overlay relating to uncertainties as a result of the COVID-19 pandemic, $29 million (31 December 2021: $102 million) of which relates to Corporate, Commercial and Institutional Banking and $61 million (31 December 2021: $147 million) to Consumer, Private and Business Banking. $53 million (31 December 2021: $84 million) of the overlay is held in stage 1, $34 million (31 December 2021: $144 million) in stage 2 and $3 million (31 December 2021: $21 million) in stage 3.

-- A $126 million (31 December 2021: $95 million) management overlay relating to uncertainties around exposures to China Commercial Real Estate, all of which relates to Corporate, Commercial and Institutional Banking. $64 million (31 December 2021: $31 million) is held in stage 1 and $62 million (31 December 2021: $64 million) in stage 2.

-- A $42 million management overlay relating to uncertainties around stage 3 exposures in Sri Lanka all of which relates to Corporate, Commercial and Institutional Banking. The $42 million is held in stage 3.

The overlays have been determined after taking account of the PMAs reported and they are reassessed quarterly. They are reviewed and approved by the IFRS 9 Impairment Committee.

COVID-19 overlay

Corporate, Commercial and Institutional Banking

Although the amount of loans placed on non-purely precautionary early alert has decreased compared with 31 December 2021, balances remain higher than before the pandemic. The impact of the rapid deterioration in the economic environment in 2020 has not yet been fully observed in customers' financial performance, in part due to ongoing government support measures across the Group's markets. Accordingly, we have not yet seen a significant increase in the level of stage 3 loans relating to COVID-19 up to 30 June 2022. To take account of the heightened Credit Risk and the continuing uncertainties in the pace and timing of economic recovery, a judgemental overlay has been taken by estimating the impact of further deterioration to the non-purely precautionary early alert portfolio. The overlay is held in stage 2. The basis of determining the overlay remained unchanged compared to 2021, although the assumed level of further deterioration was reduced in 2021 in line with our experience. The overlay has steadily reduced from $102 million in 2021 to $29 million at 30 June 2022 as the level of COVID-19 related non-purely precautionary early alerts has reduced.

Page 42

Consumer, Private and Business Banking

COVID-19 continues to affect our markets in the first half of 2022, though many of our major markets have started opening their borders and returning to a normal way of life. In Asia, markets such as China, Hong Kong, Korea and Taiwan have experienced relatively higher COVID-19 infection rates between March and June, with some countries placed under lockdowns, causing continued disruption in some sectors. While industry wide government relief measure has ended for most markets, there has been a few markets which has only ended recently while some are available for specific segments. Accordingly, we continue to hold overlay against these exposure for potential masking of underlying risk, although the overall quantum has reduced.

China Commercial Real Estate overlay

Chinese property developers are experiencing liquidity issues, triggered by government policy changes aimed at deleveraging the property sector and ensuring property developers have the financial ability to complete residential properties under construction. The government's 'three red lines' matrix was introduced in August 2020 to tighten the funding conditions for property developers by limiting the growth rate in external debt. With additional controls on sales of properties to end buyers (e.g. mortgage lending control, pricing control, eligibility control) and on restricting developers' ability to access cash from 'escrow accounts' with cash paid by retail residential buyers, the cashflow of developers has been significantly squeezed. Also, with capital markets reacting negatively to the tightening policies, we have seen greater volatility in bond pricing and reduced access to capital markets liquidity for developers. As such, some developers have faced/are facing difficulties in servicing and repaying financing obligations.

The Group's banking book net exposure to China Commercial real estate was $3.7 billion at 30 June 2022. Client level analysis continues to be done, with the high-risk clients being placed on purely precautionary or non-purely precautionary early alert. Given the evolving nature of the risks in the China Commercial Real Estate sector, a management overlay of $126 million has been taken by estimating the impact of further deterioration to those clients placed on early alert.

Stage 3 assets

Credit-impaired assets managed by Stressed Asset Risk incorporate forward-looking economic assumptions in respect of the recovery outcomes identified, and are assigned individual probability weightings. These assumptions are not based on a Monte Carlo simulation but are informed by the Base Forecast.

Sensitivity of expected credit loss calculation to macroeconomic variables

The ECL calculation relies on multiple variables and is inherently non-linear and portfolio-dependent, which implies that no single analysis can fully demonstrate the sensitivity of the ECL to changes in the macroeconomic variables. The Group has conducted a series of analyses with the aim of identifying the macroeconomic variables which might have the greatest impact on the overall ECL. These encompassed single variable and multi-variable exercises, using simple up/down variation and extracts from actual calculation data, as well as bespoke scenario design assessments.

The primary conclusion of these exercises is that no individual macroeconomic variable is materially influential. The Group believes this is plausible as the number of variables used in the ECL calculation is large. This does not mean that macroeconomic variables are uninfluential; rather, that the Group believes that consideration of macroeconomics should involve whole scenarios, as this aligns with the multi-variable nature of the calculation.

The Group faces downside risks in the operating environment related to the uncertainties surrounding the macroeconomic outlook. To explore this, a sensitivity analysis of ECL was undertaken to explore the effect of slower economic recoveries across the Group's footprint markets. Three downside scenarios were considered. In the Central Bank Over Reaction scenario a faster monetary tightening by central banks leads to financial market volatility and a modestly weaker world growth relative to baseline. In the Stagflation scenario the intensification of the conflict between Russia and the West leads to further material spikes in commodity prices, persistently higher inflation and interest rates, lower consumer and business confidence and a material slowdown in the world economy. In the new COVID-19 virus variant scenario a new infection wave in emerging markets and developing economies, results in the re-introduction of severe lockdown measures and deep contractions in many economies. Travel restrictions significantly impact the Aviation and Hotels and tourism sectors.

Page 43

 
                                                     Central Bank                                    New COVID-19 
                               Baseline              over Reaction           Stagflation                Variant 
----------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
                        Five year               Five year               Five year               Five year 
                          average  Peak/Trough    average  Peak/Trough    average  Peak/Trough    average  Peak/Trough 
----------------------  ---------  -----------  ---------  -----------  ---------  -----------  ---------  ----------- 
China GDP                     5.1      6.2/3.6        4.8      5.9/2.9        4.5      7.2/0.7        5.2   13.4/(5.4) 
China unemployment            4.0      4.0/3.9        4.1      4.2/3.9        5.3      6.4/3.9        4.0      5.9/3.3 
China property prices         3.5    4.4/(0.3)        2.5    4.4/(3.9)        3.3  15.9/(23.1)        4.1    6.6/(1.6) 
----------------------  ---------  -----------  ---------  -----------  ---------  -----------  ---------  ----------- 
Hong Kong GDP                 2.8      6.9/1.4        2.6      5.6/1.1        2.0    5.8/(0.6)        3.0   11.6/(8.3) 
Hong Kong unemployment        3.9      4.2/3.9        4.0      4.2/3.9        6.0      7.9/3.9        4.5      6.8/3.8 
Hong Kong property 
 prices                       3.8      8.9/2.7        2.4    6.0/(3.2)        2.5    9.5/(1.0)        4.0  25.2/(21.2) 
----------------------  ---------  -----------  ---------  -----------  ---------  -----------  ---------  ----------- 
US GDP                        2.2      2.7/1.6        1.9      2.4/0.3        1.9    3.1/(0.2)        1.8  13.1/(11.6) 
----------------------  ---------  -----------  ---------  -----------  ---------  -----------  ---------  ----------- 
Singapore GDP                 2.4      4.3/1.8        2.2      3.7/1.6        2.2    4.1/(0.8)        1.9   11.1/(9.3) 
----------------------  ---------  -----------  ---------  -----------  ---------  -----------  ---------  ----------- 
India GDP                     5.6      7.3/3.3        5.2      6.7/2.0        4.3    6.0/(0.4)        5.9  19.3/(11.0) 
----------------------  ---------  -----------  ---------  -----------  ---------  -----------  ---------  ----------- 
Crude oil                    94.3   110.3/79.0       96.0   111.3/79.0      102.3     182.2/79       50.7    59.4/32.7 
----------------------  ---------  -----------  ---------  -----------  ---------  -----------  ---------  ----------- 
 

Period covered from Q3 2022 to Q2 2027

 
                                                Central Bank Over 
                  Base (GDP, YoY%)             Reaction (GDP, YoY%)           Difference from Base 
----------  ----------------------------  -----------------------------  ------------------------------ 
            2022  2023  2024  2025  2026   2022  2023  2024  2025  2026   2022   2023  2024  2025  2026 
----------  ----  ----  ----  ----  ----  -----  ----  ----  ----  ----  -----  -----  ----  ----  ---- 
China        4.7   5.8   5.2   5.0   4.5    3.9   5.5   5.2   5.0   4.5  (0.8)  (0.3)   0.0   0.0   0.0 
Hong Kong    4.0   3.3   1.8   2.6   2.5    3.0   3.1   1.8   2.6   2.5  (1.0)  (0.2)   0.0   0.0   0.0 
US           2.0   2.1   2.3   2.4   2.3    0.8   1.8   2.3   2.4   2.3  (1.2)  (0.3)   0.0   0.0   0.0 
Singapore    3.0   2.7   2.4   2.0   1.8    2.2   2.6   2.4   2.0   1.8  (0.8)  (0.1)   0.0   0.0   0.0 
India        5.0   5.8   6.0   5.8   5.5    3.8   4.8   6.1   5.8   5.5  (1.2)  (0.9)   0.1   0.0   0.0 
----------  ----  ----  ----  ----  ----  -----  ----  ----  ----  ----  -----  -----  ----  ----  ---- 
 

Each year is from Q3 to Q2. For example 2022 is from Q3 2022 to Q2 2023.

 
                  Base (GDP, YoY%)            Stagflation GDP, YoY%)            Difference from Base 
----------  ----------------------------  ------------------------------  -------------------------------- 
            2022  2023  2024  2025  2026   2022   2023  2024  2025  2026   2022   2023   2024  2025   2026 
----------  ----  ----  ----  ----  ----  -----  -----  ----  ----  ----  -----  -----  -----  ----  ----- 
China        4.7   5.8   5.2   5.0   4.5    1.5    2.9   5.7   6.8   5.5  (3.3)  (2.9)    0.5   1.8    1.0 
Hong Kong    4.0   3.3   1.8   2.6   2.5    0.3  (0.3)   1.9   5.2   2.8  (3.7)  (3.6)    0.1   2.6    0.3 
US           2.0   2.1   2.3   2.4   2.3    0.5    0.8   2.2   3.1   2.8  (1.5)  (1.3)    0.0   0.7    0.5 
Singapore    3.0   2.7   2.4   2.0   1.8    0.7    0.3   2.8   3.9   3.1  (2.3)  (2.4)    0.4   1.9    1.3 
India        5.0   5.8   6.0   5.8   5.5    1.7    4.1   5.2   5.9   4.6  (3.4)  (1.6)  (0.8)   0.1  (0.9) 
----------  ----  ----  ----  ----  ----  -----  -----  ----  ----  ----  -----  -----  -----  ----  ----- 
 

Each year is from Q3 to Q2. For example 2022 is from Q3 2022 to Q2 2023.

 
                                              New COVID-19 variant 
                  Base (GDP, YoY%)                 (GDP, YoY%)                 Difference from Base 
----------  ----------------------------  -----------------------------  -------------------------------- 
            2022  2023  2024  2025  2026   2022  2023  2024  2025  2026    2022  2023  2024   2025   2026 
----------  ----  ----  ----  ----  ----  -----  ----  ----  ----  ----  ------  ----  ----  -----  ----- 
China        4.7   5.8   5.2   5.0   4.5  (3.3)  12.0   6.9   5.3   5.1   (8.1)   6.2   1.7    0.3    0.6 
Hong Kong    4.0   3.3   1.8   2.6   2.5  (4.5)   9.9   4.2   2.6   2.5   (8.5)   6.6   2.4  (0.0)    0.0 
US           2.0   2.1   2.3   2.4   2.3  (9.4)  11.0   3.8   1.8   1.8  (11.4)   8.9   1.5  (0.5)  (0.5) 
Singapore    3.0   2.7   2.4   2.0   1.8  (7.5)   9.4   3.5   1.9   2.3  (10.5)   6.6   1.1  (0.0)    0.4 
India        5.0   5.8   6.0   5.8   5.5  (8.9)  16.9   8.5   6.2   6.6  (13.9)  11.1   2.5    0.4    1.0 
----------  ----  ----  ----  ----  ----  -----  ----  ----  ----  ----  ------  ----  ----  -----  ----- 
 

Each year is from Q3 to Q2. For example 2022 is from Q3 2022 to Q2 2023.

The total reported stage 1 and 2 ECL provisions (including both on and off-balance sheet instruments) would be approximately $59 million higher under the Central Bank Over Reaction scenario, $325 million higher under the global stagflation scenario and $488 million higher under the new COVID-19 variant scenario than the baseline ECL provisions (which excluded the impact of multiple economic scenarios and management overlays which may already capture some of the risks in these scenarios). The proportion of stage 2 assets would increase from 3.1 per cent to 3.3 per cent, 4.1 per cent and 7.4 per cent respectively under the three scenarios. This includes the impact of exposures transferring to stage 2 from stage 1 but does not consider an increase in stage 3 defaults.

Most of the increase under the new COVID-19 variant scenario was in Corporate, Commercial and Institutional Banking, whereas under the stagflation scenario most of the increase was in Consumer, Private and Business Banking. Under the Central Bank Over Reaction scenario the impact was more evenly split across portfolios. For Corporate, Commercial and Institutional Banking, most of the increases under all three scenarios came from the main corporate portfolios in the United Kingdom, Hong Kong and the United Arab Emirates, whereas the large unsecured retail portfolios accounted for most of the increases for Consumer, Private and Business Banking (Taiwan and Korea Personal Loans portfolios were impacted under both the Stagflation and Central Bank Over Reaction scenarios, whereas the Malaysia and Singapore Credit Card portfolios were impacted under the new COVID-19 variant scenario).

Page 44

There was no material change in modelled stage 3 provisions as these primarily relate to unsecured Consumer, Private and Business Banking exposures for which the LGD is not sensitive to changes in the macroeconomic forecasts. There is also no material change for non-modelled stage 3 exposures as these are more sensitive to client specific factors than to alternative macroeconomic scenarios.

The actual outcome of any scenario may be materially different due to, among other factors, the effect of management actions to mitigate potential increases in risk and changes in the underlying portfolio.

Modelled provisions

 
                                                            Central 
                                                          Bank over               New COVID-19 
                                          Base forecast    reaction  Stagflation       variant 
                                                    ECL         ECL          ECL           ECL 
                                                     $m          $m           $m            $m 
----------------------------------------  -------------  ----------  -----------  ------------ 
Corporate, Commercial & Institutional 
 Banking                                            314         344          420           684 
Consumer, Private & Business Banking                402         430          614           505 
Ventures2                                             2           2            2             2 
Central & other items                                82          83           89            97 
----------------------------------------  -------------  ----------  -----------  ------------ 
Total stage 1 and 2 before overlays and 
 multiple scenarios                                 800         859        1,125         1,288 
----------------------------------------  -------------  ----------  -----------  ------------ 
Stage 1 and 2 management overlays                   213 
Impact of multiple economic scenarios                96 
----------------------------------------  -------------  ----------  -----------  ------------ 
Total reported stage 1 and 2 ECL                  1,109 
Stage 3 ECL1                                      4,611 
----------------------------------------  -------------  ----------  -----------  ------------ 
Total reported ECL                                5,720 
----------------------------------------  -------------  ----------  -----------  ------------ 
 

1 Includes $45 million of management overlays

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

Proportion of assets in stage 21

 
                                                                Central 
                                                              bank over               New COVID-19 
                                              Base forecast    reaction  Stagflation       variant 
                                                   scenario    scenario     scenario      scenario 
                                                          %           %            %             % 
--------------------------------------------  -------------  ----------  -----------  ------------ 
Corporate, Consumer & Institutional Banking             5.5         5.9          7.4          15.5 
Consumer, Private & Business Banking                    1.8         1.9          2.9           2.7 
Ventures2                                               1.4         1.4          1.4           1.4 
Central & other items                                   1.3         1.3          1.4           1.5 
--------------------------------------------  -------------  ----------  -----------  ------------ 
Total                                                   3.1         3.3          4.1           7.4 
--------------------------------------------  -------------  ----------  -----------  ------------ 
 

1 Excludes cash and balances at central banks, accrued income, assets held for sale and other assets

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

Page 45

Traded Risk

Traded Risk is the potential for loss resulting from activities undertaken by the Group in financial markets. Under the Enterprise Risk Management Framework, the Traded Risk Framework brings together Market Risk, Counterparty Credit Risk and Algorithmic Trading. Traded Risk Management is the core risk management function supporting market-facing businesses, predominantly Financial Markets and Treasury Markets.

Market Risk (reviewed)

Market Risk is the potential for loss of economic value due to adverse changes in financial market rates or prices. The Group's exposure to Market Risk arises predominantly from the following sources:

-- Trading book:

- The Group provides clients access to financial markets, facilitation of which entails the Group taking moderate Market Risk positions. All trading teams support client activity. There are no proprietary trading teams. Hence, income earned from Market Risk-related activities is primarily driven by the volume of client activity rather than risk-taking

-- Non-trading book:

- The Treasury Markets desk is required to hold a liquid assets buffer, much of which is held in high-quality marketable debt securities

- The Group has capital invested and related income streams denominated in currencies other than US dollars. To the extent that these are not hedged, the Group is subject to Structural Foreign Exchange Risk which is reflected in reserves

A summary of our current policies and practices regarding Market Risk management is provided in the Principal Risks section of our 2021 Annual Report.

The primary categories of Market Risk for the Group are:

-- Interest Rate Risk: arising from changes in yield curves and implied volatilities on interest rate options

-- Foreign Exchange Rate Risk: arising from changes in currency exchange rates and implied volatilities on foreign

exchange options

-- Commodity Risk: arising from changes in commodity prices and implied volatilities on commodity options; covering energy, precious metals, base metals and agriculture as well as commodity baskets

-- Credit Spread Risk: arising from changes in the price of debt instruments and credit-linked derivatives, driven by factors other than the level of risk-free interest rates

-- Equity Risk: arising from changes in the prices of equities, equity indices, equity baskets and implied volatilities on

related options

Market Risk movements (reviewed)

Value at Risk (VaR) allows the Group to manage Market Risk across the trading book and most of the fair valued non-trading books. The scope of instruments included in the VaR was changed in 2021 to exclude instruments held at amortised cost. The 2021 VaR numbers presented reflect the revised scope.

The average level of total trading and non-trading VaR in the first half of 2022 was $50.5 million, 33.6 per cent higher than the second half of 2021 ($37.8 million) and 30.2 per cent lower than the first half of 2021 ($72.4 million). The actual level of total trading and non-trading VaR as at the end of the first half of 2022 was $59.2 million, 36.4 per cent higher than in the second half of 2021 ($43.4 million) and 76.7 per cent higher than the first half of 2021 ($33.5 million). The increase in total average VaR was driven by extreme market volatility following the Russia/Ukraine war which impacted Commodity prices and in particular, energy markets.

For the trading book, the average level of VaR in the first half of 2022 was $17.2 million, 15.4 per cent higher than in the second half of 2021 ($14.9 million) and 11.8 per cent lower than in the first half of 2021 ($19.5 million). Trading activities have remained relatively unchanged, and client driven.

Page 46

Daily value at risk (VaR at 97.5%, one day) (reviewed)

 
                          6 months ended 30.06.22                         6 months ended 31.12.21                         6 months ended 30.06.21 
-------------  ----------------------------------------------  ----------------------------------------------  ---------------------------------------------- 
                                                         Half                                            Year                                            Half 
                  Average       High3        Low3        Year     Average       High3        Low3         End     Average       High3        Low3        Year 
Trading1 and 
 non-trading2    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Interest Rate 
 Risk6               30.8        42.1        23.3        24.0        24.2        29.7        16.4        26.0        38.6        68.3        20.8        20.8 
Credit Spread 
 Risk6               32.5        45.1        20.3        44.9        19.1        29.3        14.8        21.5        49.4        97.6        17.2        21.3 
Foreign 
 Exchange 
 Risk                 6.5         8.0         5.4         5.7         6.4         8.3         4.2         7.0         8.2        19.0         4.8         5.7 
Commodity 
 Risk                 6.3        11.9         3.5         6.6         3.6         8.6         2.5         3.6         5.9        10.4         2.9         3.3 
Equity Risk           0.1         0.2           -         0.2         1.2         1.5         1.1         1.4         1.4         1.7         1.0         1.3 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Total4               50.5        61.1        40.3        59.2        37.8        46.2        30.7        43.4        72.4       140.7        33.3        33.5 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
 
                       6 months ended 30.06.22                         6 months ended 31.12.21                         6 months ended 30.06.21 
----------  ----------------------------------------------  ----------------------------------------------  ---------------------------------------------- 
                                                      Half                                            Year                                            Half 
               Average       High3        Low3        Year     Average       High3        Low3         End     Average       High3        Low3        Year 
Trading1      $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million 
----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Interest 
 Rate 
 Risk5             7.9        10.5         5.8         9.0         7.1         9.6         5.2         7.2         8.1        10.2         6.1         8.0 
Credit 
 Spread 
 Risk5             9.3        14.9         5.0        13.1         6.0         9.3         4.1         6.2        11.1        19.2         5.7         6.2 
Foreign 
 Exchange 
 Risk              6.5         8.0         5.4         5.7         6.4         8.3         4.2         7.0         8.2        19.0         4.8         5.7 
Commodity 
 Risk              6.3        11.9         3.5         6.6         3.6         8.6         2.5         3.6         5.9        10.4         2.9         3.3 
Equity 
Risk                 -           -           -           -           -           -           -           -           -           -           -           - 
----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Total4            17.2        24.4        12.6        19.2        14.9        18.1        12.3        15.3        19.5        28.4        13.5        14.0 
----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
 
                          6 months ended 30.06.22                         6 months ended 31.12.21                         6 months ended 30.06.21 
-------------  ----------------------------------------------  ----------------------------------------------  ---------------------------------------------- 
                                                         Half                                            Year                                            Half 
                  Average       High3        Low3        Year     Average       High3        Low3         End     Average       High3        Low3        Year 
Non-trading2     $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million    $million 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Interest Rate 
 Risk                30.9        44.5        22.9        22.9        24.3        29.3        18.2        24.3        40.7        68.2        21.3        22.2 
Credit Spread 
 Risk                27.5        36.8        18.7        36.4        17.3        26.1        14.4        20.2        41.5        80.0        16.8        19.2 
Equity Risk6          0.1         0.2           -         0.2         1.2         1.5         1.1         1.4         1.4         1.7         1.0         1.3 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Total4               45.9        52.5        36.3        48.1        33.0        41.0        25.3        38.3        61.7       106.3        28.4        30.3 
-------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 

1 Trading book for Market Risk is defined in accordance with the UK onshored Capital Requirements Regulation Part 3 Title I Chapter 3, which restricts the positions permitted in the trading book

2 The non-trading book VaR does not include syndicated loans

3 Highest and lowest VaR for each risk factor are independent and usually occur on different days

4 The Total VaR shown in the tables above is not equal to the sum of the component risks due to offsets between them

5 Comparative information for 2021 has been represented to reflect the split between Interest Rate Risk and Credit Spread Risk

6 Non-trading Equity Risk VaR includes only listed equities

Risks not in VaR

In the first half of 2022, the main market risks not reflected in VaR were:

-- Basis risks for which the historical market price data is limited and is therefore proxied, giving rise to potential proxy basis risk that is not captured in VaR

-- Deal contingent risk where a client is granted the right to cancel a hedging trade contingent on conditions not being met within a time window

-- Potential depeg risk from currencies currently pegged or managed, as the historical one-year VaR observation period does not reflect the possibility of a change in the currency regime such as sudden depegging

-- Volatility skew risk due to movements in options volatilities at different strikes while VaR reflects only movements in at-the-money volatilities

Additional capital is set aside to cover such 'risks not in VaR'. For further details on Market Risk capital, see the Market Risk section in the Standard Chartered PLC Pillar 3 Disclosures for 30 June 2022.

Backtesting

In the first half of 2022, there were three regulatory backtesting negative exceptions at Group level (in the second half of 2021, there were three regulatory backtesting negative exceptions at Group level). Group exceptions occurred on:

-- 9 March: When risk assets rallied on hope of a truce agreement between Russia and Ukraine

-- 29 March: When oil and base metal prices fell on the prospect of further ceasefire talks between Russia and Ukraine, and following a resurgence of COVID-19 cases in China

-- 25 April: When risk assets fell following an announcement by Chinese authorities of expanded COVID-19 testing requirements amidst rising cases

Page 47

In total, there have been six Group exceptions in the previous 250 business days which is within the 'amber zone' applied internationally to internal models by bank supervisors (Basel Committee on Banking Supervision, Supervisory framework for the use of backtesting in conjunction with the internal models approach to market risk capital requirements, January 1996).

The graph below illustrates the performance of the VaR model used in capital calculations. It compares the 99 percentile loss confidence level given by the VaR model with the hypothetical profit and loss of each day given the actual market movement without taking into account any intra-day trading activity.

Average daily income earned from Market Risk-related activities(1) (reviewed)

The average level of total trading daily income in the first half of 2022 was $15.6 million, 45.8 per cent higher than in 2021 ($10.7 million), due to higher trading income driven by an increase in interest rates, commodity prices and higher levels of market volatility.

 
                               6 months         6 months         6 months 
                         ended 30.06.22   ended 31.12.21   ended 30.06.21 
Trading2                       $million         $million         $million 
----------------------  ---------------  ---------------  --------------- 
Interest Rate Risk                  6.4              2.9              3.7 
Credit Spread Risk                  0.7              0.8              1.0 
Foreign Exchange Risk               6.8              4.4              5.0 
Commodity Risk                      1.8              0.8              1.0 
Equity Risk                           -                -                - 
----------------------  ---------------  ---------------  --------------- 
Total                              15.7              8.9             10.7 
----------------------  ---------------  ---------------  --------------- 
 
 
                            6 months         6 months         6 months 
                      ended 30.06.22   ended 31.12.21   ended 30.06.21 
Non-trading2                $million         $million         $million 
-------------------  ---------------  ---------------  --------------- 
Interest Rate Risk               0.4              0.1              0.8 
Credit Spread Risk               1.1              0.1              0.3 
Equity Risk                        -                -                - 
-------------------  ---------------  ---------------  --------------- 
Total                            1.5              0.2              1.1 
-------------------  ---------------  ---------------  --------------- 
 

1 Reflects total product income which is the sum of client income and own account income. Includes elements of trading income, interest income and other income which are generated from Market Risk-related activities. Rates, XVA and Treasury income are included under Interest Rate Risk whilst Credit Trading income is included under Credit Spread Risk

2 2021 figures have been restated to exclude income from non fair value positions

Counterparty Credit Risk

Counterparty Credit Risk is the potential for loss in the event of the default of a derivative counterparty, after taking into account the value of eligible collaterals and risk mitigation techniques. The Group's counterparty credit exposures are included in the Credit Risk section.

Derivative financial instruments Credit Risk mitigation

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.

In addition, the Group enters into credit support annexes (CSAs) with counterparties where collateral is deemed a necessary or desirable mitigant to the exposure. Cash collateral includes collateral called under a variation margin process from counterparties if total uncollateralised mark-to-market exposure exceeds the threshold and minimum transfer amount specified in the CSA. With certain counterparties, the CSA is reciprocal and requires us to post collateral if the overall mark-to-market values of positions are in the counterparty's favour and exceed an agreed threshold.

Page 48

Liquidity and Funding Risk

Liquidity and Funding Risk is the risk that we may not have sufficient stable or diverse sources of funding to meet our obligations as they fall due.

The Group's Liquidity and Funding Risk framework requires each country to ensure that it operates within predefined liquidity limits and remains in compliance with Group liquidity policies and practices, as well as local regulatory requirements.

The Group achieves this through a combination of setting Risk Appetite and associated limits, policy formation, risk measurement and monitoring, prudential and internal stress testing, governance and review.

Despite the challenging environment, the Group has been resilient and kept a strong liquidity position. The Group continues to focus on improving the quality of its funding mix and remains committed to supporting its clients.

Liquidity and Funding Risk metrics

We monitor key liquidity metrics regularly, both on a country basis and in aggregate across the Group.

The following liquidity and funding Board Risk Appetite metrics define the maximum amount and type of risk that the Group is willing to assume in pursuit of its strategy: liquidity coverage ratio (LCR), liquidity stress survival horizons, external wholesale borrowing, and advances-to-deposits ratio. The Net Stable Funding Ratio was also included within Board Risk Appetite in January 2022.

Liquidity coverage ratio (LCR)

The LCR is a regulatory requirement set to ensure that the Group has sufficient unencumbered high-quality liquid assets to meet its liquidity needs in a 30-calendar-day liquidity stress scenario.

The Group monitors and reports its liquidity positions under UK onshored Commission Delegated Regulation 2015/61 and has maintained its LCR above the prudential requirement. The Group maintained strong liquidity ratios despite the continued impacts of the COVID-19 stress. For further detail see the Liquidity section in the Standard Chartered PLC Pillar 3 Disclosures for HY 2022.

At the reporting date, the Group LCR was 142 per cent (2021: 143 per cent), with a surplus to both Board-approved Risk Appetite and regulatory requirements.

Adequate liquidity was held across our footprint to meet all local prudential LCR requirements where applicable.

 
                             30.06.22    31.12.21 
                             $million    $million 
-------------------------  ----------  ---------- 
Liquidity buffer              180,348     172,178 
Total net cash outflows       127,205     120,788 
Liquidity coverage ratio         142%        143% 
-------------------------  ----------  ---------- 
 

Stressed coverage

The Group intends to maintain a prudent and sustainable funding and liquidity position, in all countries and currencies, such that it can withstand a severe but plausible liquidity stress.

Our approach to managing liquidity and funding is reflected in the Board-level Risk Appetite Statement which includes the following:

"The Group should have sufficient stable or diverse sources of funding to meet its contractual and contingent obligations as they fall due."

Page 49

The Group's internal liquidity stress testing framework covers the following stress scenarios:

Standard Chartered-specific - Captures the liquidity impact from an idiosyncratic event affecting Standard Chartered only with the rest of the market assumed to be operating normally.

Market wide - Captures the liquidity impact from a market-wide crisis affecting all participants in a country, region or globally.

Combined - Assumes both Standard Chartered-specific and Market-wide events affecting the Group simultaneously and hence is the most severe scenario.

All scenarios include, but are not limited to, modelled outflows for retail and wholesale funding, Off-Balance Sheet

Funding Risk, Cross-currency Funding Risk, Intraday Risk, Franchise Risk and risks associated with a deterioration of a

firm's credit rating.

Stress testing results show that a positive surplus was maintained under all scenarios at 30 June 2022, and respective countries were able to survive for a period of time as defined under each scenario. The results take into account currency convertibility and portability constraints while calculating the liquidity surplus at Group level.

Standard Chartered Bank's credit ratings as at 30 June 2022 were A+ with negative outlook (Fitch), A+ with stable outlook (S&P) and A1 with stable outlook (Moody's). On 6 July 2022, Fitch revised the negative outlook to stable. As of 30 June 2022, the estimated contractual outflow of a three-notch long-term ratings downgrade is $1.3 billion.

External wholesale borrowing

The Board sets a risk limit to prevent excessive reliance on wholesale borrowing. Within the definition of Wholesale Borrowing, limits are applied to all branches and operating subsidiaries in the Group and as at the reporting date, the Group remained within Board Risk Appetite.

Advances-to-deposits ratio

This is defined as the ratio of total loans and advances to customers relative to total customer accounts. An advances-to-deposits ratio of below 100 per cent demonstrates that customer deposits exceed customer loans as a result of the emphasis placed on generating a high level of funding from customers.

The Group's advances-to-deposits ratio has increased by 0.5 per cent to 59.6 per cent, mainly driven by a reduction of

4 per cent in customer deposits and 3 per cent in customer loans and advances.

 
                                             30.06.22    31.12.21 
                                             $million    $million 
-----------------------------------------  ----------  ---------- 
Total loans and advances to customers1,2      277,141     285,922 
Total customer accounts3                      464,777     483,861 
Advances-to-deposits ratio                      59.6%       59.1% 
-----------------------------------------  ----------  ---------- 
 

1 Excludes reverse repurchase agreement and other similar secured lending of $7,894 million and includes loans and advances to customers held at fair value through profit and loss of $8,445million

2 Loans and advances to customers for the purpose of the advances-to-deposits ratio excludes $16,918 million of approved balances held with central banks, confirmed as repayable at the point of stress (31 December 2021: $15,168 million)

3 Includes customer accounts held at fair value through profit or loss of $11,035 million (31 December 2021: $9,291 million)

Net stable funding ratio (NSFR)

The NSFR is a balance sheet metric which requires institutions to maintain a stable funding profile in relation to an assumed duration of their assets and off-balance sheet activities over a one-year horizon. It is the ratio between the amount of available stable funding (ASF) and the amount of required stable funding (RSF). ASF factors are applied to balance sheet liabilities and capital, based on their perceived stability and the amount of stable funding they provide. Likewise, RSF factors are applied to assets and off-balance sheet exposures according to the amount of stable funding they require. The NSFR became a regulatory requirement in January 2022 with a minimum of 100 per cent, though the Group has maintained an average ratio of above 125%.

Page 50

Liquidity pool

The liquidity value of the Group's LCR eligible liquidity pool at the reporting date was $180 billion. The figures in the table below account for haircuts, currency convertibility and portability constraints, and therefore are not directly comparable with the consolidated balance sheet. Liquidity pool is held to offset stress outflows as defined in UK onshored Commission Delegated Regulation 2015/61.

 
                                                                    30.06.22 
-------------------------------------------------  ------------------------------------------ 
                                                                 Africa 
                                                                      &     Europe 
                                                                 Middle          & 
                                                        Asia       East   Americas      Total 
                                                    $million   $million   $million   $million 
-------------------------------------------------  ---------  ---------  ---------  --------- 
Level 1 securities 
Cash and balances at central banks                    30,307      1,685     43,140     75,132 
Central banks, governments /public sector 
 entities                                             43,756      1,952     26,038     71,746 
Multilateral development banks and international 
 organisations                                         7,013        788     12,055     19,856 
Other                                                     18         21      1,511      1,550 
-------------------------------------------------  ---------  ---------  ---------  --------- 
Total Level 1 securities                              81,094      4,446     82,744    168,284 
-------------------------------------------------  ---------  ---------  ---------  --------- 
Level 2A securities                                    5,556        173      5,481     11,210 
Level 2B securities                                       89         21        744        854 
-------------------------------------------------  ---------  ---------  ---------  --------- 
Total LCR eligible assets                             86,739      4,640     88,969    180,348 
-------------------------------------------------  ---------  ---------  ---------  --------- 
 
 
                                                                    31.12.21 
-------------------------------------------------  ------------------------------------------ 
                                                                 Africa 
                                                                      &     Europe 
                                                                 Middle          & 
                                                        Asia       East   Americas      Total 
                                                    $million   $million   $million   $million 
-------------------------------------------------  ---------  ---------  ---------  --------- 
Level 1 securities 
Cash and balances at central banks                    28,076        890     46,973     75,939 
Central banks, governments /public sector 
 entities                                             40,328      2,096     27,389     69,813 
Multilateral development banks and international 
 organisations                                         7,812        356      7,366     15,534 
Other                                                      -          -        478        478 
-------------------------------------------------  ---------  ---------  ---------  --------- 
Total Level 1 securities                              76,216      3,342     82,206    161,764 
-------------------------------------------------  ---------  ---------  ---------  --------- 
Level 2A securities                                    3,447        186      5,047      8,680 
Level 2B securities                                      114          -      1,620      1,734 
-------------------------------------------------  ---------  ---------  ---------  --------- 
Total LCR eligible assets                             79,777      3,528     88,873    172,178 
-------------------------------------------------  ---------  ---------  ---------  --------- 
 

Encumbrance

Encumbered assets

Encumbered assets represent on-balance sheet assets pledged or subject to any form of arrangement to secure, collateralise or credit enhance a transaction from which it cannot be freely withdrawn. Cash collateral pledged against derivatives and Hong Kong Government certificates of indebtedness, which secure the equivalent amount of Hong Kong currency notes in circulation, are included within Other assets.

Unencumbered - readily available for encumbrance

Unencumbered assets that are considered by the Group to be readily available in the normal course of business to secure funding, meet collateral needs, or be sold to reduce potential future funding requirements and are not subject to any restrictions on their use for these purposes.

Unencumbered - other assets capable of being encumbered

Unencumbered assets that, in their current form, are not considered by the Group to be readily realisable in the normal course of business to secure funding, meet collateral needs, or be sold to reduce potential future funding requirements and are not subject to any restrictions on their use for these purposes. Included within this category are loans and advances which could be suitable for use in secured funding structures such as securitisations.

Unencumbered - cannot be encumbered

Unencumbered assets that have not been pledged and cannot be used to secure funding, meet collateral needs, or be sold to reduce potential future funding requirements, as assessed by the Group.

Page 51

Derivatives, reverse repurchase assets and stock lending

These assets are shown separately as these on-balance sheet amounts cannot be pledged. However, these assets can give rise to off-balance sheet collateral which can be used to raise secured funding or meet additional funding requirements.

The following table provides a reconciliation of the Group's encumbered assets to total assets.

 
                                                                         30.06.22 
------------  ------------------------------------------------------------------------------------------------------------------------------- 
                                  Assets encumbered 
                                         as a 
                                result of transactions 
                                 with counterparties                             Other assets (comprising assets encumbered 
                                  other than central                                         at the central bank 
                                        banks                                             and unencumbered assets) 
              --------  -------------------------------------  ------------------------------------------------------------------------------ 
                                                                                                           Assets not positioned at 
                                                                                                                   the central bank 
                        ----------------  --------  ---------  ------------------  ------------------------------------------------  -------- 
                                                                           Assets 
                                                                       positioned                    Other 
                                                                           at the                   assets 
                                    As a                                  central      Readily    that are  Derivatives 
                                  result                                     bank    available     capable  and reverse      Cannot 
                                      of                       (ie pre-positioned          for    of being   repo/stock          be 
                Assets  securiti-sations     Other      Total    plus encumbered)  encumbrance  encumbered      lending  encumbered     Total 
              $million          $million  $million   $million            $million     $million    $million     $million    $million  $million 
------------  --------  ----------------  --------  ---------  ------------------  -----------  ----------  -----------  ----------  -------- 
Cash and 
 balances 
 at 
 central 
 banks          67,005                 -         -          -              11,269       55,736           -            -           -    67,005 
Derivative 
 financial 
 instruments    76,676                 -         -          -                   -            -           -       76,676           -    76,676 
Loans and 
 advances 
 to banks1      62,640                 -        82         82                   -       29,234       9,049       22,672       1,603    62,558 
Loans and 
 advances 
 to 
 customers1    354,474                 -     4,471      4,471                   -            -     276,556       60,415      13,032   350,003 
Investment 
 securities2   195,603                 -    16,368     16,368                 113      142,340      32,180            -       4,602   179,235 
Other assets    62,136                 -    18,691     18,691                   -            -      12,994            -      30,451    43,445 
Current tax 
 assets            586                 -         -          -                   -            -           -            -         586       586 
Prepayments 
 and 
 accrued 
 income          2,354                 -         -          -                   -            -       1,111            -       1,243     2,354 
Interests in 
 associates 
 and joint 
 ventures        2,105                 -         -          -                   -            -           -            -       2,105     2,105 
Goodwill and 
 intangible 
 assets          5,537                 -         -          -                   -            -           -            -       5,537     5,537 
Property, 
 plant 
 and 
 equipment       5,671                 -         -          -                   -            -         448            -       5,223     5,671 
Deferred tax 
 assets            909                 -         -          -                   -            -           -            -         909       909 
Assets 
 classified 
 as 
 held for 
 sale              221                 -         -          -                   -            -           -            -         221       221 
------------  --------  ----------------  --------  ---------  ------------------  -----------  ----------  -----------  ----------  -------- 
Total          835,917                 -    39,612     39,612              11,382      227,310     332,338      159,763      65,512   796,305 
------------  --------  ----------------  --------  ---------  ------------------  -----------  ----------  -----------  ----------  -------- 
 

1 Includes held at fair value through profit or loss and amortised cost balances

2 Includes held at fair value through profit or loss, fair value through other comprehensive income and amortised cost balances

Page 52

 
                                                                         31.12.21 
------------  ------------------------------------------------------------------------------------------------------------------------------- 
                                  Assets encumbered 
                                         as a 
                                result of transactions 
                               with counterpartiesother                          Other assets (comprising assets encumbered 
                                     than central                                            at the central bank 
                                        banks                                             and unencumbered assets) 
              --------  -------------------------------------  ------------------------------------------------------------------------------ 
                                                                                               Assets not positioned at 
                                                                                                   the central bank 
                        ----------------  --------  ---------  ------------------  ------------------------------------------------  -------- 
                                                                           Assets 
                                                                       positioned                    Other 
                                                                           at the                   assets 
                                    As a                                  central      Readily    that are  Derivatives 
                                  result                                     bank    available     capable  and reverse      Cannot 
                                      of                       (ie pre-positioned          for    of being   repo/stock          be 
                Assets  securiti-sations     Other      Total    plus encumbered)  encumbrance  encumbered      lending  encumbered     Total 
              $million          $million  $million   $million            $million     $million    $million     $million    $million  $million 
------------  --------  ----------------  --------  ---------  ------------------  -----------  ----------  -----------  ----------  -------- 
Cash and 
 balances 
 at 
 central 
 banks          72,663                 -         -          -               8,147       64,516           -            -           -    72,663 
Derivative 
 financial 
 instruments    52,445                 -         -          -                   -            -           -       52,445           -    52,445 
Loans and 
 advances 
 to banks1      66,957                 -        89         89                   -       34,834       9,931       19,806       2,297    66,868 
Loans and 
 advances 
 to 
 customers1    369,703                 -     4,539      4,539                   -            -     282,761       68,612      13,791   365,164 
Investment 
 securities2   198,723                 -    13,940     13,940                  96      142,965      35,637            -       6,085   184,783 
Other assets    49,958                 -    16,501     16,501                   -            -      13,140            -      20,317    33,457 
Current tax 
 assets            766                 -         -          -                   -            -           -            -         766       766 
Prepayments 
 and 
 accrued 
 income          2,176                 -         -          -                   -            -         937            -       1,239     2,176 
Interests in 
 associates 
 and joint 
 ventures        2,147                 -         -          -                   -            -           -            -       2,147     2,147 
Goodwill and 
 intangible 
 assets          5,471                 -         -          -                   -            -           -            -       5,471     5,471 
Property, 
 plant 
 and 
 equipment       5,616                 -         -          -                   -            -         448            -       5,168     5,616 
Deferred tax 
 assets            859                 -         -          -                   -            -           -            -         859       859 
Assets 
 classified 
 as 
 held for 
 sale              334                 -         -          -                   -            -           -            -         334       334 
------------  --------  ----------------  --------  ---------  ------------------  -----------  ----------  -----------  ----------  -------- 
Total          827,818                 -    35,069     35,069               8,243      242,315     342,854      140,863      58,474   792,749 
------------  --------  ----------------  --------  ---------  ------------------  -----------  ----------  -----------  ----------  -------- 
 

1 Includes held at fair value through profit or loss and amortised cost balances

2 Includes held at fair value through profit or loss, fair value through other comprehensive income and amortised cost balances

The Group received $108,816 million (31 December 2021: $117,408 million) as collateral under reverse repurchase agreements that was eligible for repledging; of this, the Group sold or repledged $48,520 million (31 December 2021: $57,879 million) under repurchase agreements.

Liquidity analysis of the Group's balance sheet (reviewed)

Contractual maturity of assets and liabilities

The following table presents assets and liabilities by maturity groupings based on the remaining period to the contractual maturity date as at the balance sheet date on a discounted basis. Contractual maturities do not necessarily reflect actual repayments or cashflows.

Within the tables below, cash and balances with central banks, interbank placements and investment securities that are fair value through other comprehensive income are used by the Group principally for liquidity management purposes.

As at the reporting date, assets remain predominantly short-dated, with 60 per cent maturing in under one year. Our less than three-month cumulative net funding gap decreased slightly from the previous year.

Page 53

 
                                                               30.06.22 
--------------  ------------------------------------------------------------------------------------------------------ 
                                         Between    Between    Between                                 More 
                              Between      three        six       nine    Between     Between          than 
                            one month     months     months     months   one year   two years          five 
                One month   and three    and six   and nine        and    and two    and five         years 
                  or less      months     months     months   one year      years       years   and undated      Total 
                 $million    $million   $million   $million   $million   $million    $million      $million   $million 
--------------  ---------  ----------  ---------  ---------  ---------  ---------  ----------  ------------  --------- 
Assets 
Cash and 
 balances 
 at 
 central banks     55,736           -          -          -          -          -           -        11,269     67,005 
Derivative 
 financial 
 instruments       14,989      15,018     12,715      8,649      4,120      6,114       9,990         5,081     76,676 
Loans and 
 advances 
 to banks1,2       24,335      14,642     12,952      3,911      2,668      2,202       1,409           521     62,640 
Loans and 
 advances 
 to 
 customers1,2      99,400      47,410     28,694     15,891     14,280     19,558      34,600        94,641    354,474 
Investment 
 securities        12,700      19,859     15,505     12,393     11,433     23,769      46,196        53,748    195,603 
Other assets       33,761      22,316      1,022        165        799         40          46        21,370     79,519 
--------------  ---------  ----------  ---------  ---------  ---------  ---------  ----------  ------------  --------- 
Total assets      240,921     119,245     70,888     41,009     33,300     51,683      92,241       186,630    835,917 
--------------  ---------  ----------  ---------  ---------  ---------  ---------  ----------  ------------  --------- 
 
Liabilities 
Deposits by 
 banks1,3          39,619       3,497      2,060        803        922        642          26             3     47,572 
Customer 
 accounts1,4      408,477      42,531     23,076     10,017     11,141      7,286       2,825         1,658    507,011 
Derivative 
 financial 
 instruments       14,947      15,427     12,062      8,515      3,920      7,102       9,205         4,919     76,097 
Senior debt5          262         655        180        545        785      5,673      17,278        12,116     37,494 
Other debt 
 securities 
 in issue1          2,981       6,881      9,103      2,863      2,075      2,048       1,145           260     27,356 
Other 
 liabilities       28,136      31,243      1,973        691      1,195        562       1,327        10,635     75,762 
Subordinated 
 liabilities 
 and 
 other 
 borrowed 
 funds                  7          72        802      2,172         40      1,359       2,382         8,099     14,933 
--------------  ---------  ----------  ---------  ---------  ---------  ---------  ----------  ------------  --------- 
Total 
 liabilities      494,429     100,306     49,256     25,606     20,078     24,672      34,188        37,690    786,225 
--------------  ---------  ----------  ---------  ---------  ---------  ---------  ----------  ------------  --------- 
Net liquidity 
 gap            (253,508)      18,939     21,632     15,403     13,222     27,011      58,033       148,940     49,692 
--------------  ---------  ----------  ---------  ---------  ---------  ---------  ----------  ------------  --------- 
 

1 Loans and advances, investment securities, deposits by banks, customer accounts and debt securities in issue include financial instruments held at fair value through profit or loss, see Note 13 Financial instruments

2 Loans and advances include reverse repurchase agreements and other similar secured lending of $83.1 billion

3 Deposits by banks include repurchase agreements and other similar secured borrowing of $14.8 billion

4 Customer accounts include repurchase agreements and other similar secured borrowing of $42.2 billion

5 Senior debt maturity profiles are based upon contractual maturity, which may be later than call options over the debt held by the Group

Page 54

 
                                                               31.12.21 
---------------  ----------------------------------------------------------------------------------------------------- 
                                          Between 
                                            three    Between    Between    Between    Between          More 
                               Between     months        six       nine        one        two          than 
                             one month        and     months     months       year      years          five 
                 One month   and three        six   and nine        and    and two   and five         years 
                   or less      months     months     months   one year      years      years   and undated      Total 
                  $million    $million   $million   $million   $million   $million   $million      $million   $million 
---------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ------------  --------- 
Assets 
Cash and 
 balances 
 at 
 central banks      64,516           -          -          -          -          -          -         8,147     72,663 
Derivative 
 financial 
 instruments        11,695      10,489      7,332      3,583      2,731      4,738      6,493         5,384     52,445 
Loans and 
 advances 
 to banks1,2        25,486      17,987     11,347      4,415      4,506      1,455      1,466           295     66,957 
Loans and 
 advances 
 to 
 customers1,2       92,181      68,361     26,276     13,255     14,992     21,391     36,299        96,948    369,703 
Investment 
 securities         11,813      13,590     12,070     13,266     13,407     26,424     53,189        54,964    198,723 
Other assets        24,283      19,776        989         67        491         35         32        21,654     67,327 
---------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ------------  --------- 
Total assets       229,974     130,203     58,014     34,586     36,127     54,043     97,479       187,392    827,818 
---------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ------------  --------- 
 
Liabilities 
Deposits by 
 banks1,3           34,858       1,134      1,244        408        477        116        206             4     38,447 
Customer 
 accounts1,4       430,071      52,051     27,436     11,738     12,023      4,857      2,152         2,127    542,455 
Derivative 
 financial 
 instruments        11,715      11,573      7,254      4,061      2,788      5,042      7,117         3,849     53,399 
Senior debt5           190         642      1,036        320        397      5,336     15,225        11,845     34,991 
Other debt 
 securities 
 in issue1           2,233      12,968      7,786      3,118      3,281        782      1,411           320     31,899 
Other 
 liabilities        14,545      22,582      2,044      1,148      1,180        797        990        14,059     57,345 
Subordinated 
 liabilities 
 and 
 other borrowed 
 funds               1,007          64         24        240        894      2,430      2,493         9,494     16,646 
---------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ------------  --------- 
Total 
 liabilities       494,619     101,014     46,824     21,033     21,040     19,360     29,594        41,698    775,182 
---------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ------------  --------- 
Net liquidity 
 gap             (264,645)      29,189     11,190     13,553     15,087     34,683     67,885       145,694     52,636 
---------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ------------  --------- 
 

1 Loans and advances, investment securities, deposits by banks, customer accounts and debt securities in issue include financial instruments held at fair value through profit or loss, see Note 13 Financial instruments

2 Loans and advances include reverse repurchase agreements and other similar secured lending of $88.4 billion

3 Deposits by banks include repurchase agreements and other similar secured borrowing of $7.1 billion

4 Customer accounts include repurchase agreements and other similar secured borrowing of $58.6 billion

5 Senior debt maturity profiles are based upon contractual maturity, which may be later than call options over the debt held by the Group

Behavioural maturity of financial assets and liabilities

The cashflows presented in the previous section reflect the cashflows that will be contractually payable over the residual maturity of the instruments. However, contractual maturities do not necessarily reflect the timing of actual repayments or cashflow. In practice, certain assets and liabilities behave differently from their contractual terms, especially for short-term customer accounts, credit card balances and overdrafts, which extend to a longer period than their contractual maturity. On the other hand, mortgage balances tend to have a shorter repayment period than their contractual maturity date. Expected customer behaviour is assessed and managed on a country basis using qualitative and quantitative techniques, including analysis of observed customer behaviour over time.

Maturity of financial liabilities on an undiscounted basis (reviewed)

The following table analyses the contractual cashflows payable for the Group's financial liabilities by remaining contractual maturities on an undiscounted basis. The financial liability balances in the table below will not agree with the balances reported in the consolidated balance sheet as the table incorporates all contractual cashflows, on an undiscounted basis, relating to both principal and interest payments. Derivatives not treated as hedging derivatives are included in the 'On demand' time bucket and not by contractual maturity.

Within the 'More than five years and undated' maturity band are undated financial liabilities, the majority of which relate to subordinated debt, on which interest payments are not included as this information would not be meaningful, given the instruments are undated. Interest payments on these instruments are included within the relevant maturities up to five years.

Page 55

 
                                                                 30.06.22 
------------------  -------------------------------------------------------------------------------------------------- 
                                                        Between                                        More 
                                  Between    Between        six    Between    Between    Between       than 
                                      one      three     months       nine        one        two       five 
                                    month     months        and     months       year      years      years 
                    One month   and three    and six       nine        and    and two   and five        and 
                      or less      months     months     months   one year      years      years    undated      Total 
                     $million    $million   $million   $million   $million   $million   $million   $million   $million 
------------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Deposits by banks      39,390       3,446      2,063        804        931        643         23          7     47,307 
Customer accounts     408,607      42,669     23,280     10,166     11,397      7,408      2,974      2,137    508,638 
Derivative 
 financial 
 instruments1          73,199           8        169        164          4        513        938      1,102     76,097 
Debt securities in 
 issue                  3,334       7,606      9,520      3,614      3,070      8,525     20,070     23,796     79,535 
Subordinated 
 liabilities 
 and 
 other borrowed 
 funds                     99         173        848      2,222         49      1,506      3,159     15,025     23,081 
Other liabilities      26,054      31,008      1,872        686      1,192        562      1,332     10,274     72,980 
------------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Total liabilities     550,683      84,910     37,752     17,656     16,643     19,157     28,496     52,341    807,638 
------------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 
                                                                 31.12.21 
------------------  -------------------------------------------------------------------------------------------------- 
                                                        Between                                        More 
                                  Between    Between        six    Between    Between    Between       than 
                                      one      three     months       nine        one        two       five 
                                    month     months        and     months       year      years      years 
                    One month   and three    and six       nine        and    and two   and five        and 
                      or less      months     months     months   one year      years      years    undated      Total 
                     $million    $million   $million   $million   $million   $million   $million   $million   $million 
------------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Deposits by banks      34,866       1,140      1,246        409        481        117        208          3     38,470 
Customer accounts     430,190      52,112     27,510     11,813     12,120      4,930      2,212      2,495    543,382 
Derivative 
 financial 
 instruments1          52,783           9         22         12        106         76        212        179     53,399 
Debt securities in 
 issue                  2,526      13,618      9,015      3,586      3,891      6,743     17,966     17,659     75,004 
Subordinated 
 liabilities 
 and 
 other borrowed 
 funds                  1,114         134         48        261        928      2,546      3,030     16,044     24,105 
Other liabilities      17,759      22,460      1,952      1,133      1,170        797        990      9,955     56,216 
------------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Total liabilities     539,238      89,473     39,793     17,214     18,696     15,209     24,618     46,335    790,576 
------------------  ---------  ----------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 

1 Derivatives are on a discounted basis

Interest Rate Risk in the Banking Book

The following table provides the estimated impact to a hypothetical base case projection of the Group's earnings under the following scenarios:

-- A 50 basis point parallel interest rate shock (up and down) to the current market-implied path of rates, across all yield curves

-- A 100 basis point parallel interest rate shock (up) to the current market-implied path of rates, across all yield curves

These interest rate shock scenarios assume all other economic variables remain constant. The sensitivities shown represent the estimated change to a hypothetical base case projected net interest income (NII), plus the change in interest rate implied income and expense from FX swaps used to manage banking book currency positions, under the different interest rate shock scenarios.

The base case projected NII is based on the current market-implied path of rates and forward rate expectations. The NII sensitivities below stress this base case by a further 50 or 100bps. Actual observed interest rate changes will lag behind market expectation. Accordingly, the shocked NII sensitivity does not represent a forecast of the Group's net interest income.

The interest rate sensitivities are indicative stress tests and based on simplified scenarios, estimating the aggregate

impact of an unanticipated, instantaneous parallel shock across all yield curves over a one-year horizon, including the

time taken to implement changes to pricing before becoming effective. The assessment assumes that the size and mix of the balance sheet remain constant and that there are no specific management actions in response to the change in rates. No assumptions are made in relation to the impact on credit spreads in a changing rate environment.

Significant modelling and behavioural assumptions are made regarding scenario simplification, market competition, pass-through rates, asset and liability re-pricing tenors, and price flooring. In particular, the assumption that interest rates of all currencies and maturities shift by the same amount concurrently, and that no actions are taken to mitigate the impacts arising from this are considered unlikely. Reported sensitivities will vary over time due to a number of factors including changes in balance sheet composition, market conditions, customer behaviour and risk management strategy. Therefore, while the NII sensitivities are a relevant measure of the Group's interest rate exposure, they should not be considered an income or profit forecast.

Page 56

 
                                                                     30.06.22 
----------------------------------  --------------------------------------------------------------------------- 
Estimated one-year impact to                                                                   Other 
 earnings from a parallel shift                                                             currency 
 in yield curves at the beginning    USD bloc   HKD bloc   SGD bloc   KRW bloc   CNY bloc       bloc      Total 
 of the period of:                   $million   $million   $million   $million   $million   $million   $million 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
+ 50 basis points                          40         40         70         40         10        190        390 
- 50 basis points                        (40)       (40)       (70)       (30)       (10)      (190)      (380) 
+ 100 basis points                         80         80        140         70         20        360        750 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 
                                                                     31.12.21 
----------------------------------  --------------------------------------------------------------------------- 
Estimated one-year impact to                                                                   Other 
 earnings from a parallel shift                                                             currency 
 in yield curves at the beginning    USD bloc   HKD bloc   SGD bloc   KRW bloc   CNY bloc       bloc      Total 
 of the period of:                   $million   $million   $million   $million   $million   $million   $million 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
+ 50 basis points                         200        150         70         50         50        140        660 
- 50 basis points                       (210)      (170)       (70)       (40)       (50)      (130)      (670) 
+ 100 basis points                        380        280        130         80         90        300      1,260 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 

As at 30 June 2022, the Group estimates the one-year impact of an instantaneous, parallel increase across all yield curves of 50 basis points to increase projected NII by $390 million. The equivalent impact from a parallel decrease of 50 basis points would result in a reduction in projected NII of $380 million. The Group estimates the one-year impact of an instantaneous, parallel increase across all yield curves of 100 basis points to increase projected NII by $750 million.

The benefit from rising interest rates is primarily from reinvesting at higher yields and from assets re-pricing faster and to a greater extent than deposits. NII sensitivity in all scenarios has decreased versus 31 December 2021. The change in NII sensitivity reflects updates to the Group's base case scenario to factor in higher interest rates as at 30 June 2022. In addition, NII sensitivities have reduced due to the migration of the HKD mortgage book from HIBOR to Prime rate, and the dampening effect of USD hedging strategies intended to provide short term income certainty and smooth longer term NII volatility.

Operational and Technology Risk

Operational and Technology Risk is defined as the "Potential for loss from inadequate or failed internal processes, technology events, human error, or from the impact of external events (including legal risks)". It is inherent in the Group carrying out business.

Operational and Technology Risk profile

Risk management practices help the business grow safely and ensures governance and management of Operational and Technology Risk through the delivery and embedding of effective frameworks and policies, together with continuous oversight and assurance.

The Group continues to ensure the operational and technology risk framework supports the business and functions in effectively managing risk and controls within risk appetite to meet their strategic objectives.

Overall, the Group's risk profile has remained stable with the quality of risk understanding and identification improving. Operational and Technology Risks remain heightened in areas such as Fraud, Data Management, and Information and Cyber Security. Other focus risk areas are Third Party Risk, Technology risk, People Risk and Change Management. We continue to enhance our operational resilience and defences against these risks, as well as continue to monitor impacts of the ongoing pandemic, through vigorous improvement programmes.

Digitalisation and wider technological improvements remain a key focus for the Group, to keep pace with new business developments whilst ensuring control frameworks and Risk Appetite evolve accordingly.

Other principal risks

Losses arising from operational failures for other principal risks are reported as operational losses. Operational losses do not include Operational Risk-related credit impairments.

Page 57

Capital review

The Capital review provides an analysis of the Group's capital and leverage position and requirements.

Capital summary

The Group's capital and leverage position is managed within the Board-approved risk appetite. The Group is well capitalised with high levels of loss-absorbing capacity.

 
                                      30.06.22  31.12.21 
------------------------------------  --------  -------- 
CET1 capital                             13.9%     14.1% 
Tier 1 capital                           15.9%     16.6% 
Total capital                            21.0%     21.3% 
Leverage ratio                            4.5%      4.9% 
MREL ratio                               31.0%     31.7% 
Risk-weighted assets (RWA) $million    255,082   271,233 
------------------------------------  --------  -------- 
 

-- The Group's CET1 capital and Tier 1 leverage position are above current requirements. For further detail see the Capital section in the Standard Chartered PLC Pillar 3 Disclosures for HY 2022

-- The Group's CET1 ratio decreased 28 basis points to 13.9 per cent as profits for the period and lower RWA driven largely by optimisation initiatives, were more than offset by regulatory changes, foreign exchange movements, FVOCI reserve movements, and distributions (including completion of the FY 21 share buy-back)

-- The PRA sets the Group's current Pillar 2A requirement as a nominal value instead of a percentage of RWA. At the half year this equated to 3.6 per cent of RWA, of which at least 2.0 per cent must be held in CET1. As the Pillar 2A requirement is a nominal value, the decrease in RWA in the period caused the CET1 requirement expressed in ratio terms to increase by 12 basis points. As a result, the Group's minimum CET1 requirement including the combined buffer (comprising the capital conservation buffer, the GSII buffer and the countercyclical buffer) was 10.2 per cent at 30 June 2022

-- The Group's minimum requirement for own funds and eligible liabilities (MREL) is set as the higher of an RWA or leverage requirement. The Group's MREL requirement including buffers was 7.8 per cent of leverage exposure at 30 June 2022, equivalent to 27.4 per cent of RWA. The Group's MREL position was 8.9 per cent of leverage exposure and 31.0 per cent of RWA at 30 June 2022

-- In the first half of the year the Group made good progress on its MREL issuance plan, successfully raising around $4 billion of MREL eligible debt from its holding company. Issuance was across the capital structure including, $0.8 billion of Tier 2 and around $3.2 billion of callable senior debt

-- The Group CET1 ratio at 30 June includes the share buy-back of $754 million completed in the first half of 2022 and an accrual for a 2022 interim dividend. The Board has recommended an interim dividend for HY 2022 of $119 million or 4 cents per share representing a third of the total 2021 dividend in line with the prior year

-- In addition, the Board has announced a further share buy-back of $500 million, which will impact the Group's CET1 position in the third quarter of 2022 by around 20bps

-- The Group is a G-SII, with a 1.0 per cent G-SII CET1 buffer. The Standard Chartered PLC G-SII disclosure is published at:

sc.com/en/investors/financial-results

Page 58

CRD Capital base1 (reviewed)

 
                                                                    30.06.22    31.12.21 
                                                                    $million    $million 
----------------------------------------------------------------  ----------  ---------- 
CET1 instruments and reserves 
Capital instruments and the related share premium accounts             5,472       5,528 
                                                                  ----------  ---------- 
Of which: share premium accounts                                       3,989       3,989 
                                                                  ----------  ---------- 
Retained earnings2                                                    26,266      24,968 
Accumulated other comprehensive income (and other reserves)            8,837      11,805 
Non-controlling interests (amount allowed in consolidated 
 CET1)                                                                   188         201 
Independently reviewed interim and year-end profits                    2,092       2,346 
Foreseeable dividends                                                  (303)       (493) 
----------------------------------------------------------------  ----------  ---------- 
CET1 capital before regulatory adjustments                            42,552      44,355 
----------------------------------------------------------------  ----------  ---------- 
CET1 regulatory adjustments 
Additional value adjustments (prudential valuation adjustments)        (766)       (665) 
Intangible assets (net of related tax liability)                     (5,468)     (4,392) 
Deferred tax assets that rely on future profitability 
 (excludes those arising from temporary differences)                   (120)       (150) 
Fair value reserves related to net losses on cash flow 
 hedges                                                                  475          34 
Deduction of amounts resulting from the calculation 
 of excess expected loss                                               (702)       (580) 
Net gains on liabilities at fair value resulting from 
 changes in own credit risk                                            (100)          15 
Defined-benefit pension fund assets                                    (184)       (159) 
Fair value gains arising from the institution's own 
 credit risk related to derivative liabilities                         (165)        (60) 
Exposure amounts which could qualify for risk weighting 
 of 1,250%                                                             (138)        (36) 
Other regulatory adjustments to CET1 capital(3)                         (11)           - 
----------------------------------------------------------------  ----------  ---------- 
Total regulatory adjustments to CET1                                 (7,179)     (5,993) 
----------------------------------------------------------------  ----------  ---------- 
CET1 capital                                                          35,373      38,362 
----------------------------------------------------------------  ----------  ---------- 
Additional Tier 1 capital (AT1) instruments                            5,264       6,811 
----------------------------------------------------------------  ----------  ---------- 
AT1 regulatory adjustments                                              (20)        (20) 
----------------------------------------------------------------  ----------  ---------- 
Tier 1 capital                                                        40,617      45,153 
----------------------------------------------------------------  ----------  ---------- 
 
Tier 2 capital instruments                                            13,050      12,521 
Tier 2 regulatory adjustments                                           (30)        (30) 
                                                                  ----------  ---------- 
Tier 2 capital                                                        13,020      12,491 
----------------------------------------------------------------  ----------  ---------- 
Total capital                                                         53,637      57,644 
----------------------------------------------------------------  ----------  ---------- 
Total risk-weighted assets (unreviewed)                              255,082     271,233 
----------------------------------------------------------------  ----------  ---------- 
 

1 CRD capital is prepared on the regulatory scope of consolidation

2 Retained earnings includes IFRS 9 capital relief (transitional) of $164 million, including dynamic relief of $58 million

3 Other regulatory adjustments to CET1 capital includes Insufficient coverage for non-performing exposures of -$11 million

Page 59

Movement in total capital (reviewed)

 
                                                                   6 months    6 months 
                                                                      ended       ended 
                                                                   30.06.22    31.12.21 
                                                                   $million    $million 
---------------------------------------------------------------  ----------  ---------- 
CET1 at 1 January/1 July                                             38,362      39,589 
Ordinary shares issued in the period and share premium                    -           - 
Share buy-back                                                        (754)       (251) 
Profit for the period                                                 2,092         422 
Foreseeable dividends net of scrip deducted from CET1                 (303)       (493) 
Difference between dividends paid and foreseeable dividends               3           9 
Movement in goodwill and other intangible assets                    (1,076)       (320) 
Foreign currency translation differences                            (1,394)       (350) 
Non-controlling interests                                              (13)          10 
Movement in eligible other comprehensive income                     (1,020)       (281) 
Deferred tax assets that rely on future profitability                    30        (41) 
Decrease/(increase) in excess expected loss                           (122)         284 
Additional value adjustments (prudential valuation adjustment)        (101)        (33) 
IFRS 9 transitional impact on regulatory reserves including 
 day one                                                               (88)        (17) 
Exposure amounts which could qualify for risk weighting               (102)           4 
Fair value gains arising from the institution's own 
 Credit Risk related to derivative liabilities                        (105)        (14) 
Other                                                                  (36)       (156) 
---------------------------------------------------------------  ----------  ---------- 
CET1 at 30 June/31 December                                          35,373      38,362 
---------------------------------------------------------------  ----------  ---------- 
 
AT1 at 1 January/1 July                                               6,791       6,293 
Net issuances (redemptions)                                           (990)         497 
Foreign currency translation difference                                   -         (5) 
Excess on AT1 grandfathered limit (ineligible)                        (557)           6 
---------------------------------------------------------------  ----------  ---------- 
AT1 at 30 June/31 December                                            5,244       6,791 
---------------------------------------------------------------  ----------  ---------- 
 
Tier 2 capital at 1 January/1 July                                   12,491      13,279 
Regulatory amortisation                                                 546       (512) 
Net issuances (redemptions)                                           (298)        (72) 
Foreign currency translation difference                               (307)       (120) 
Tier 2 ineligible minority interest                                      27        (83) 
Recognition of ineligible AT1                                           557         (6) 
Other                                                                     4           5 
---------------------------------------------------------------  ----------  ---------- 
Tier 2 capital at 30 June/31 December                                13,020      12,491 
---------------------------------------------------------------  ----------  ---------- 
Total capital at 30 June/31 December                                 53,637      57,644 
---------------------------------------------------------------  ----------  ---------- 
 

The main movements in capital in the period were:

-- CET1 decreased by $3.0 billion as retained profits of $2.0 billion were more than offset by removal of the software benefit of $1.0 billion, the completion of the FY 21 share buy-back of $0.8 billion, foreseeable dividends of $0.3 billion, foreign exchange translation losses of $1.4 billion, FVOCI movements (on higher yields and wider credit spreads) of $1.3 billion and an increase in other regulatory deductions of $0.3 billion

-- Additional Tier 1 capital decreased by $1.5 billion following the redemption of $1.0 billion of 7.5 per cent securities, and the final $0.5 billion derecognition of legacy Tier 1 securities

-- Tier 2 capital increased by $0.5 billion as issuance of $0.8 billion new Tier 2 instruments and the recognition of ineligible Additional Tier 1 as Tier 2 were partly offset by regulatory amortisation and the redemption of $1.0 billion of Tier 2 securities during the period

Page 60

Risk-weighted assets by business

 
                                                          30.06.22 
--------------------------------------  --------------------------------------------- 
                                           Credit  Operational     Market 
                                             risk         risk       risk  Total risk 
                                         $million     $million   $million    $million 
--------------------------------------  ---------  -----------  ---------  ---------- 
Corporate, Commercial & Institutional 
 Banking                                  117,789       17,038     19,350     154,177 
Consumer, Private & Business Banking       43,879        8,639          -      52,518 
Ventures                                    1,034            6          3       1,043 
Central & Other items                      42,477        1,494      3,373      47,344 
--------------------------------------  ---------  -----------  ---------  ---------- 
Total risk-weighted assets                205,179       27,177     22,726     255,082 
--------------------------------------  ---------  -----------  ---------  ---------- 
 
 
                                                          31.12.211 
--------------------------------------  --------------------------------------------- 
                                           Credit  Operational     Market 
                                             risk         risk       risk  Total risk 
                                         $million     $million   $million    $million 
--------------------------------------  ---------  -----------  ---------  ---------- 
Corporate, Commercial & Institutional 
 Banking2                                 125,813       16,595     20,789     163,197 
Consumer, Private & Business Banking2      42,731        8,501          -      51,232 
Ventures                                      756            5          -         761 
Central & Other items                      50,288        2,015      3,740      56,043 
--------------------------------------  ---------  -----------  ---------  ---------- 
Total risk-weighted assets                219,588       27,116     24,529     271,233 
--------------------------------------  ---------  -----------  ---------  ---------- 
 

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

2 Following Group's change in organisational structure in 2021, certain clients have been moved between the two new client segments, Corporate, Commercial & Institutional Banking and Consumer, Private & Business Banking. Prior period has been restated

Risk-weighted assets by geographic region

 
                               30.06.22    31.12.21 
                               $million    $million 
---------------------------  ----------  ---------- 
Asia                            160,345     170,381 
Africa & Middle East             43,613      48,852 
Europe & Americas                50,038      50,283 
Central & Other items             1,086       1,717 
---------------------------  ----------  ---------- 
Total risk-weighted assets      255,082     271,233 
---------------------------  ----------  ---------- 
 

Page 61

Movement in risk-weighted assets

 
                                           Credit Risk 
---------------  ----------------------------------------------------------------  -----------  ----------  ---------- 
                                                                                                    Market       Total 
                     Commercial,    Consumer, 
                       Corporate      Private                 Central 
                 & Institutional   & Business                 & Other              Operational 
                         Banking      Banking   Ventures1       items       Total         Risk        Risk        Risk 
                        $million     $million    $million    $million    $million     $million    $million    $million 
---------------  ---------------  -----------  ----------  ----------  ----------  -----------  ----------  ---------- 
At 31 December 
 2020                    127,663       44,755                  48,023     220,441       26,800      21,593     268,834 
At 1 January 
 2021                    127,581       44,755         289      47,816     220,441       26,800      21,593     268,834 
Assets growth & 
 mix                       5,445        3,827         224         384       9,880            -           -       9,880 
Asset quality              1,956        (292)           -       (382)       1,282            -           -       1,282 
Risk-weighted 
 assets 
 efficiencies                  -            -           -       (657)       (657)            -           -       (657) 
Model updates                  -         (27)           -           -        (27)            -           -        (27) 
Methodology and 
policy 
changes                        -            -           -           -           -            -           -           - 
Acquisitions 
and disposals                  -            -           -           -           -            -           -           - 
Foreign 
 currency 
 translation               (873)        (603)           -       (412)     (1,888)            -           -     (1,888) 
Other, 
 including 
 non-credit 
 risk movements                -            -           -         317         317          316       2,170       2,803 
---------------  ---------------  -----------  ----------  ----------  ----------  -----------  ----------  ---------- 
At 30 June 2021          134,109       47,660         513      47,066     229,348       27,116      23,763     280,227 
Assets growth & 
 mix                     (3,175)        (216)         243       3,510         362            -           -         362 
Asset quality            (3,493)        (370)           -         395     (3,468)            -           -     (3,468) 
Risk-weighted 
 assets 
 efficiencies              (415)         (30)           -           -       (445)            -           -       (445) 
Model updates                  -      (3,674)           -           -     (3,674)            -           -     (3,674) 
Methodology and 
 policy 
 changes                       -            -           -           -           -            -       2,065       2,065 
Acquisitions 
and disposals                  -            -           -           -           -            -           -           - 
Foreign 
 currency 
 translation             (1,213)        (639)           -       (694)     (2,546)            -           -     (2,546) 
Other, 
 including 
 non-credit 
 risk movements                -            -           -          11          11            -     (1,299)     (1,288) 
---------------  ---------------  -----------  ----------  ----------  ----------  -----------  ----------  ---------- 
At 31 December 
 2021                    125,813       42,731         756      50,288     219,588       27,116      24,529     271,233 
Assets growth & 
 mix                     (2,392)           58         278     (4,289)     (6,345)            -           -     (6,345) 
Asset quality            (5,648)         (32)           -       (163)     (5,843)            -           -     (5,843) 
Risk-weighted 
assets 
efficiencies                   -            -           -           -           -            -           -           - 
Model updates              2,073        2,628           -           -       4,701            -     (1,000)       3,701 
Methodology and 
 policy 
 changes                   2,024           85           -          38       2,147            -       1,100       3,247 
Acquisitions 
and disposals                  -            -           -           -           -            -           -           - 
Foreign 
 currency 
 translation             (4,081)      (1,591)           -     (2,392)     (8,064)            -           -     (8,064) 
Other, 
 including 
 non-credit 
 risk movements                -            -           -     (1,005)     (1,005)           61     (1,903)     (2,847) 
---------------  ---------------  -----------  ----------  ----------  ----------  -----------  ----------  ---------- 
At 30 June 2022          117,789       43,879       1,034      42,477     205,179       27,177      22,726     255,082 
---------------  ---------------  -----------  ----------  ----------  ----------  -----------  ----------  ---------- 
 

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

Movements in risk-weighted assets

RWA decreased by $16.2 billion, or 6.0 per cent from 31 December 2021 to $255.1 billion. This was mainly due to decreases in Credit Risk RWA of $14.4 billion and Market Risk RWA of $1.8 billion offset by marginal increase in Operational Risk RWA of $0.1 billion

Corporate, Commercial & Institutional Banking

Credit Risk RWA decreased by $8.0 billion to $117.8 billion mainly due to:

-- $6.9 billion decrease from optimisation actions including reduction in lower returning portfolios

-- $6.2 billion decrease from other business efficiency actions

-- $5.6 billion decrease mainly due to improvement in asset quality reflecting client upgrades

-- $4.1 billion decrease from foreign currency translation

-- $10.7 billion increase from asset balance growth

-- $2.1 billion increase from industry-wide regulatory changes to align IRB model performance

-- $2.0 billion increase from revised rules on capital requirements

Page 62

Consumer, Private & Business Banking

Credit Risk RWA increased by $1.1 billion to $43.9 billion mainly due to:

-- $2.6 billion increase from industry-wide regulatory changes to align IRB model performance

-- $1.5 billion decrease from foreign currency translation

Ventures

Ventures comprised of Mox Bank Limited, Trust Bank and SC Ventures. Credit Risk RWA increased by $0.2 billion to $1 billion from asset balance growth.

Central & Other items

Central & Other items mainly relate to the Treasury Markets liquidity portfolio, equity investments and current and deferred tax assets.

Credit Risk RWA decreased by $7.8 billion to $42.5 billion mainly due to:

-- $2.9 billion decrease in asset balance

-- $2.4 billion decrease from foreign currency translation

-- $1.3 billion decrease from credit protection on certain products

-- $1.0 billion decrease due to cessation of software relief

Market risk

Market Risk RWA decreased by $1.8 billion, or 7 per cent from 31 December 2021 to $22.7 billion mainly due to:

-- $1.7 billion decrease in Standardised Approach (SA) Specific Interest Rate Risk RWA due to reduced positions

-- $1.0 billion decrease with enhanced Internal Models Approach (IMA) VaR and stressed VaR methodology

-- $0.4 billion decrease in SA Structural FX risk with increased SFX hedging

-- $1.1 billion increase due to higher IMA RWA multiplier from back-testing exceptions

-- $0.2 billion increase of other individually smaller movements

Operational risk

Operational risk RWA increased by $0.1 billion mainly due to marginal increase in average income as measured over a rolling three-year time horizon for certain products.

Page 63

Leverage ratio

The Group's leverage ratio, which excludes qualifying claims on central banks, was 4.5 per cent, which is above the current minimum requirement of 3.7 per cent. The leverage ratio decreased by approximately 35 basis points in the period following a $4.0 billion decrease in Tier 1 capital due to a decrease in CET1 by $3.0 billion and the redemption of $1 billion of Additional Tier 1. This was partially offset by a reduction in leverage exposures by $17 billion primarily due to derivatives and central bank netting.

Leverage ratio

 
                                                             30.06.22    31.12.21 
                                                             $million    $million 
---------------------------------------------------------  ----------  ---------- 
Tier 1 capital (transitional)                                  40,617      45,153 
Additional Tier 1 capital subject to phase out                      -       (557) 
---------------------------------------------------------  ----------  ---------- 
Tier 1 capital (end point)                                     40,617      44,596 
---------------------------------------------------------  ----------  ---------- 
Derivative financial instruments                               76,676      52,445 
Derivative cash collateral                                     11,459       9,217 
Securities financing transactions (SFTs)                       83,087      88,418 
Loans and advances and other assets                           664,695     677,738 
---------------------------------------------------------  ----------  ---------- 
Total on-balance sheet assets                                 835,917     827,818 
Regulatory consolidation adjustments(1)                      (70,350)    (63,704) 
Derivatives adjustments 
                                                           ----------  ---------- 
Derivatives netting                                          (56,040)    (34,819) 
Adjustments to cash collateral                                (9,831)    (17,867) 
Net written credit protection                                     128       1,534 
Potential future exposure on derivatives                       41,103      50,857 
                                                           ----------  ---------- 
Total derivatives adjustments                                (24,640)       (295) 
Counterparty risk leverage exposure measure for SFTs           13,318      13,724 
Off-balance sheet items                                       146,745     139,505 
Regulatory deductions from Tier 1 capital                     (6,856)     (5,908) 
---------------------------------------------------------  ----------  ---------- 
Total exposure measure excluding claims on central banks      894,134     911,140 
Leverage ratio excluding claims on central banks (%)             4.5%        4.9% 
---------------------------------------------------------  ----------  ---------- 
Average leverage exposure measure excluding claims on 
 central banks                                                918,391     897,992 
Average leverage ratio excluding claims on central banks 
 (%)                                                             4.4%        5.0% 
---------------------------------------------------------  ----------  ---------- 
Countercyclical leverage ratio buffer                            0.1%        0.1% 
G-SII additional leverage ratio buffer                           0.4%        0.4% 
---------------------------------------------------------  ----------  ---------- 
 

1 Includes adjustment for qualifying central bank claims $70.9 billion and unsettled regular way trades $1.5 billion

Page 64

Statement of directors' responsibilities

We confirm that to the best of our knowledge:

-- The condensed consolidated interim financial statements have been prepared in accordance with UK-adopted IAS 34 Interim Financial Reporting.

-- The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the six months ended 30 June 2022 and their impact on the condensed consolidated interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the six months ended 30 June 2022 that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could have materially affected the financial position or performance of the entity during that period

By order of the Board

Andy Halford

Group Chief Financial Officer

29 July 2022

Page 65

Independent review report to Standard Chartered PLC

Conclusion

We have been engaged by Standard Chartered PLC (the 'Company' or the 'Group') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2022 which comprises the condensed consolidated interim income statement, the condensed consolidated interim statement of comprehensive income, the condensed consolidated interim balance sheet, the condensed consolidated interim statement of changes in equity, the condensed consolidated interim cash flow statement, the related notes 1 to 31 and the risk and capital disclosures marked as 'reviewed' from page 48 to 111 (together 'the condensed consolidated interim financial statements'). We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements in the half-yearly financial report for the six months ended 30 June 2022 are not prepared, in all material respects, in accordance with United Kingdom (UK) adopted International Accounting Standard 34, 'Interim Financial Reporting' (IAS 34), IAS 34 as adopted by the European Union (EU) and the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority (FCA).

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements (ISRE) 2410 (UK) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with UK adopted international accounting standards and International Financial Reporting Standards as adopted by the EU. The condensed consolidated interim financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted IAS 34 and IAS 34 as adopted by the EU.

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE 2410 (UK) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity', however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the UK's FCA.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

London

29 July 2022

Page 66

Condensed consolidated interim income statement

For the six months ended 30 June 2022

 
                                                                  6 months         6 months 
                                                            ended 30.06.22   ended 30.06.21 
                                                    Notes         $million         $million 
--------------------------------------------------  -----  ---------------  --------------- 
Interest income                                                      5,785            5,122 
Interest expense                                                   (2,147)          (1,752) 
--------------------------------------------------  -----  ---------------  --------------- 
Net interest income                                     3            3,638            3,370 
                                                           ---------------  --------------- 
Fees and commission income                                           2,023            2,300 
Fees and commission expense                                          (359)            (361) 
                                                           ---------------  --------------- 
Net fee and commission income                           4            1,664            1,939 
Net trading income                                      5            2,679            1,870 
Other operating income                                  6              244              449 
--------------------------------------------------  -----  ---------------  --------------- 
Operating income                                                     8,225            7,628 
                                                           ---------------  --------------- 
Staff costs                                                        (3,853)          (3,786) 
Premises costs                                                       (197)            (184) 
General administrative expenses                                      (686)            (655) 
Depreciation and amortisation                                        (592)            (596) 
                                                           ---------------  --------------- 
Operating expenses                                      7          (5,328)          (5,221) 
--------------------------------------------------  -----  ---------------  --------------- 
Operating profit before impairment losses and 
 taxation                                                            2,897            2,407 
Credit impairment                                       8            (263)               51 
Goodwill, property, plant and equipment and other 
 impairment                                             9             (15)             (40) 
Profit from associates and joint ventures                              153              141 
--------------------------------------------------  -----  ---------------  --------------- 
Profit before taxation                                               2,772            2,559 
Taxation                                               10            (684)            (631) 
--------------------------------------------------  -----  ---------------  --------------- 
Profit for the period                                                2,088            1,928 
--------------------------------------------------  -----  ---------------  --------------- 
 
Profit attributable to: 
Non-controlling interests                                              (1)               14 
Parent company shareholders                                          2,089            1,914 
--------------------------------------------------  -----  ---------------  --------------- 
Profit for the period                                                2,088            1,928 
--------------------------------------------------  -----  ---------------  --------------- 
 
 
                                          cents  cents 
------------------------------------      -----  ----- 
Earnings per share: 
Basic earnings per ordinary share     12   62.1   54.8 
Diluted earnings per ordinary share   12   61.0   53.9 
------------------------------------      -----  ----- 
 

The notes form an integral part of these financial statements.

Page 67

Condensed consolidated interim statement of comprehensive income

For the six months ended 30 June 2022

 
                                                                               6 months         6 months 
                                                                         ended 30.06.22   ended 30.06.21 
                                                                 Notes         $million         $million 
---------------------------------------------------------------  -----  ---------------  --------------- 
Profit for the year                                                               2,088            1,928 
Other comprehensive (loss)/income 
  Items that will not be reclassified to income statement:                          135              244 
                                                                        ---------------  --------------- 
  Own credit gains/(losses) on financial liabilities 
   designated at fair value through profit or loss                                  138              (2) 
  Equity instruments at fair value through other comprehensive 
   income                                                                          (70)              184 
  Actuarial gains on retirement benefit obligations                 26               84              107 
  Taxation relating to components of other comprehensive 
   income                                                                          (17)             (45) 
                                                                        ---------------  --------------- 
  Items that may be reclassified subsequently to income 
   statement:                                                                   (3,106)            (565) 
  Exchange differences on translation of foreign operations: 
                                                                        ---------------  --------------- 
     Net losses taken to equity                                                 (1,885)            (367) 
     Net gains on net investment hedges                                             482               64 
  Share of other comprehensive (loss)/income from associates 
   and joint ventures                                                              (82)                5 
  Debt instruments at fair value through other comprehensive 
   income: 
     Net valuation losses taken to equity                                       (1,279)            (186) 
     Reclassified to income statement                                              (12)            (153) 
     Net impact of expected credit losses                                           (9)                4 
  Cash flow hedges: 
     Net (losses)/gains taken to equity                                           (529)               10 
     Reclassified to income statement                                                 4                7 
  Taxation relating to components of other comprehensive 
   income                                                                           204               51 
                                                                        ---------------  --------------- 
Other comprehensive loss for the year, net of taxation                          (2,971)            (321) 
---------------------------------------------------------------  -----  ---------------  --------------- 
Total comprehensive (loss)/income for the period                                  (883)            1,607 
---------------------------------------------------------------  -----  ---------------  --------------- 
 
Total comprehensive income attributable to: 
Non-controlling interests                                                          (32)               16 
Parent company shareholders                                                       (851)            1,591 
---------------------------------------------------------------  -----  ---------------  --------------- 
Total comprehensive (loss)/income for the period                                  (883)            1,607 
---------------------------------------------------------------  -----  ---------------  --------------- 
 

Page 68

Condensed consolidated interim balance sheet

As at 30 June 2022

 
                                                               30.06.22    31.12.21 
                                                      Notes    $million    $million 
---------------------------------------------------  ------  ----------  ---------- 
Assets 
Cash and balances at central banks                               67,005      72,663 
Financial assets held at fair value through profit 
 or loss                                                 13     118,141     129,121 
Derivative financial instruments                     13, 14      76,676      52,445 
Loans and advances to banks                              13      36,201      44,383 
Loans and advances to customers                          13     293,508     298,468 
Investment securities                                    13     164,892     163,437 
Other assets                                             18      62,111      49,932 
Current tax assets                                                  586         766 
Prepayments and accrued income                                    2,354       2,176 
Interests in associates and joint ventures               19       2,105       2,147 
Goodwill and intangible assets                           16       5,537       5,471 
Property, plant and equipment                            17       5,671       5,616 
Deferred tax assets                                      10         909         859 
Assets classified as held for sale                       20         221         334 
---------------------------------------------------  ------  ----------  ---------- 
Total assets                                                    835,917     827,818 
---------------------------------------------------  ------  ----------  ---------- 
Liabilities 
Deposits by banks                                        13      31,173      30,041 
Customer accounts                                        13     453,742     474,570 
Repurchase agreements and other similar secured 
 borrowing                                           13, 15       1,723       3,260 
Financial liabilities held at fair value through 
 profit or loss                                          13      82,983      85,197 
Derivative financial instruments                     13, 14      76,097      53,399 
Debt securities in issue                                 13      58,043      61,293 
Other liabilities                                        21      61,515      44,314 
Current tax liabilities                                             506         348 
Accruals and deferred income                                      4,168       4,651 
Subordinated liabilities and other borrowed funds    13, 24      14,933      16,646 
Deferred tax liabilities                                 10         797         800 
Provisions for liabilities and charges                              404         453 
Retirement benefit obligations                           26         141         210 
---------------------------------------------------  ------  ----------  ---------- 
Total liabilities                                               786,225     775,182 
---------------------------------------------------  ------  ----------  ---------- 
Equity 
Share capital and share premium account                  25       6,966       7,022 
Other reserves                                                    8,837      11,805 
Retained earnings                                                28,251      27,184 
---------------------------------------------------  ------  ----------  ---------- 
Total parent company shareholders' equity                        44,054      46,011 
Other equity instruments                                 25       5,264       6,254 
---------------------------------------------------  ------  ----------  ---------- 
Total equity excluding non-controlling interests                 49,318      52,265 
Non-controlling interests                                           374         371 
---------------------------------------------------  ------  ----------  ---------- 
Total equity                                                     49,692      52,636 
---------------------------------------------------  ------  ----------  ---------- 
Total equity and liabilities                                    835,917     827,818 
---------------------------------------------------  ------  ----------  ---------- 
 

The notes form an integral part of these financial statements.

These financial statements were approved by the Board of Directors and authorised for issue on 29 July 2022 and signed on its behalf by:

Andy Halford

Group Chief Financial Officer

Page 69

Condensed consolidated interim statement of changes in equity

For the six months ended 30 June 2022

 
                                                                           Fair            Fair 
                  Ordinary  Preference                                    value           value 
                     share       share                                  through         through 
                   capital     capital                                    other           other 
                       and         and      Capital         Own  compre-hensive  compre-hensive        Cash                                   Parent 
                     share       share          and      credit          income          income        flow                                  company         Other 
                   premium     premium       merger  adjustment         reserve         reserve       hedge  Translation    Retained  share-holders'        equity  Non-controlling 
                   account     account  reserves(1)     reserve          - debt        - equity     reserve      reserve    earnings          equity  instru-ments        interests       Total 
                  $million    $million     $million    $million        $million        $million    $million     $million    $million        $million      $million         $million    $million 
--------------  ----------  ----------  -----------  ----------  --------------  --------------  ----------  -----------  ----------  --------------  ------------  ---------------  ---------- 
As at 1 
 January 2021        5,564       1,494       17,207        (52)             529             148        (52)      (5,092)      26,140          45,886         4,518              325      50,729 
Profit for the 
 period                  -           -            -           -               -               -           -            -       1,914           1,914             -               14       1,928 
Other 
 comprehensive 
 (loss)/income           -           -            -         (1)           (282)             142          14        (302)      106(2)           (323)             -                2       (321) 
Distributions            -           -            -           -               -               -           -            -           -               -             -             (12)        (12) 
Other equity 
 instruments 
 issued, 
 net of 
 expenses                -           -            -           -               -               -           -            -           -               -         1,239                -       1,239 
Treasury 
 shares net 
 movement                -           -            -           -               -               -           -            -        (80)            (80)             -                -        (80) 
Share option 
 expenses                -           -            -           -               -               -           -            -          88              88             -                -          88 
Dividends on 
 ordinary 
 shares                  -           -            -           -               -               -           -            -       (282)           (282)             -                -       (282) 
Dividends on 
 preference 
 shares and 
 AT1 
 securities              -           -            -           -               -               -           -            -       (196)           (196)             -                -       (196) 
Share 
 buy-back3            (19)           -           19           -               -               -           -            -       (255)           (255)             -                -       (255) 
--------------  ----------  ----------  -----------  ----------  --------------  --------------  ----------  -----------  ----------  --------------  ------------  ---------------  ---------- 
Other 
 movements               3           -            -           -               -               -           -            -         (3)               -             -               19          19 
--------------  ----------  ----------  -----------  ----------  --------------  --------------  ----------  -----------  ----------  --------------  ------------  ---------------  ---------- 
As at 30 June 
 2021                5,548       1,494       17,226        (53)             247             290        (38)      (5,394)      27,432          46,752         5,757              348      52,857 
Profit/(loss) 
 for 
 the period              -           -            -           -               -               -           -            -         401             401             -             (16)         385 
Other 
 comprehensive 
 income/(loss)           -           -            -          38           (144)            (41)           4        (360)       69(2)           (434)             -             (17)       (451) 
Distributions            -           -            -           -               -               -           -            -           -               -             -             (19)        (19) 
Other equity 
 instruments 
 issued, 
 net of 
 expenses                -           -            -           -               -               -           -            -           -               -         1,489                -       1,489 
Redemption of 
 other 
 equity 
 instruments             -           -            -           -               -               -           -            -        (51)            (51)         (992)                -     (1,043) 
Treasury 
 shares net 
 movement                -           -            -           -               -               -           -            -       (155)           (155)             -                -       (155) 
Share option 
 expenses                -           -            -           -               -               -           -            -          59              59             -                -          59 
Dividends on 
 ordinary 
 shares                  -           -            -           -               -               -           -            -        (92)            (92)             -                -        (92) 
Dividends on 
 preference 
 shares and 
 AT1 
 securities              -           -            -           -               -               -           -            -       (214)           (214)             -                -       (214) 
Share 
 buy-back5            (20)           -           20           -               -               -           -            -       (251)           (251)             -                -       (251) 
Other 
 movements               -           -            -           -               -               -           -           10        (14)             (4)             -               75          71 
--------------  ----------  ----------  -----------  ----------  --------------  --------------  ----------  -----------  ----------  --------------  ------------  ---------------  ---------- 
As at 31 
 December 
 2021                5,528       1,494       17,246        (15)             103             249        (34)      (5,744)      27,184          46,011         6,254              371      52,636 
Profit/(loss) 
 for 
 the period              -           -            -           -               -               -           -            -       2,089           2,089             -              (1)       2,088 
Other 
 comprehensive 
 income/(loss)           -           -            -         115         (1,261)            (43)       (441)      (1,382)       72(2)         (2,940)             -             (31)     (2,971) 
Distributions            -           -            -           -               -               -           -            -           -               -             -             (26)        (26) 
Redemption of 
 other 
 equity 
 instruments             -           -            -           -               -               -           -            -           -               -         (990)                -       (990) 
Treasury 
 shares net 
 movement                -           -            -           -               -               -           -            -          11              11             -                -          11 
Share option 
 expenses                -           -            -           -               -               -           -            -         104             104             -                -         104 
Dividends on 
 ordinary 
 shares                  -           -            -           -               -               -           -            -       (274)           (274)             -                -       (274) 
Dividends on 
 preference 
 shares and 
 AT1 
 securities              -           -            -           -               -               -           -            -       (216)           (216)             -                -       (216) 
Share 
 buy-back8            (56)           -           56           -               -               -           -            -       (754)           (754)             -                -       (754) 
Other 
 movements               -           -            -           -               -               -           -         (12)          35              23             -            61(1)          84 
--------------  ----------  ----------  -----------  ----------  --------------  --------------  ----------  -----------  ----------  --------------  ------------  ---------------  ---------- 
As at 30 June 
 2022                5,472       1,494       17,302         100         (1,158)             206       (475)      (7,138)      28,251          44,054         5,264              374      49,692 
--------------  ----------  ----------  -----------  ----------  --------------  --------------  ----------  -----------  ----------  --------------  ------------  ---------------  ---------- 
 

1 Includes capital reserve of $5 million, capital redemption reserve of $186 million and merger reserve of $17,111 million

2 Comprises actuarial gain, net of taxation on Group defined benefit scheme

3 On 25 February 2021, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases

was $19 million, and the total consideration paid was $255 million (including $2 million of fees). The total number of shares purchased was 37,148,399 representing

1.18 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account

4 Movement related to non-controlling interest from Mox Bank Limited

5 On 3 August 2021, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was

$20 million, and the total consideration paid was $251 million (including $1 million of fees and stamp duty). The total number of shares purchased was 39,914,763 representing 1.28 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption

reserve account

6 Movement related to Translation adjustment and AT1 securities charges

7 Movements related to non-controlling interest from Mox Bank Limited ($2 million), Trust Bank Singapore Limited ($70 million) and Zodia Markets Holdings Limited

($3 million)

8 On 18 February 2022, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was $56 million, and the total consideration paid was $754 million (including $4 million of fees and stamp duty), the buy-back completed on 19 May 2022. The total number of shares purchased was 111,295,408, representing 3.61 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account.

9 Movements related to $21 million NCI on Power2SME Pte Limited and $12 million translation adjustment

10 Movements related to non-controlling interest from Mox Bank Limited ($29 million), Trust Bank Singapore Limited ($23 million) and Power2SME Pte Limited ($9 million)

Note 25 includes a description of each reserve.

The notes form an integral part of these financial statements.

Page 70

Condensed consolidated interim cash flow statement

For the six months ended 30 June 2022

 
                                                                          6 months         6 months 
                                                                    ended 30.06.22   ended 30.06.21 
                                                            Notes         $million         $million 
----------------------------------------------------------  -----  ---------------  --------------- 
Cash flows from operating activities: 
Profit before taxation                                                       2,772            2,559 
Adjustments for non-cash items and other adjustments 
 included within income statement                              31              700              593 
  Change in operating assets                                   31         (24,285)          (7,031) 
  Change in operating liabilities                              31           26,042            5,403 
  Contributions to defined benefit schemes                                    (15)             (20) 
  UK and overseas taxes paid                                                 (252)            (534) 
----------------------------------------------------------  -----  ---------------  --------------- 
Net cash from /(used in) operating activities                                4,962              970 
----------------------------------------------------------  -----  ---------------  --------------- 
Cash flows from investing activities: 
  Internally generated capitalised software                    16            (486)            (416) 
  Purchase of property, plant and equipment                    17            (553)            (185) 
  Disposal of property, plant and equipment                    17              139              355 
  Disposal of held for sale property, plant and equipment      20               79              140 
  Acquisition of investment in subsidiaries, associates, 
   and joint ventures, net of cash acquired                    19              (4)              (4) 
  Dividends received from associates and joint ventures        19               58               38 
  Purchase of investment securities                                      (145,272)        (157,290) 
  Disposal and maturity of investment securities                           135,373          159,859 
----------------------------------------------------------  -----  ---------------  --------------- 
Net cash (used in)/from investing activities                              (10,666)            2,497 
----------------------------------------------------------  -----  ---------------  --------------- 
Cash flows from financing activities: 
  Exercise of share options                                                     11                5 
  Purchase of own shares                                                         -             (85) 
  Cancellation of shares including share buy-back                            (754)            (255) 
  Premises and equipment lease liability principal 
   payment                                                                   (164)            (253) 
  Issue of Additional Tier 1 capital, net of expenses          25                -            1,239 
  Redemption of Tier 1 capital                                 25            (990)                - 
  Gross proceeds from issue of subordinated liabilities        31              750            1,186 
  Interest paid on subordinated liabilities                    31            (310)            (293) 
  Repayment of subordinated liabilities                        31          (1,048)            (530) 
  Proceeds from issue of senior debts                          31            6,511            8,276 
  Repayment of senior debts                                    31          (3,618)          (4,865) 
  Interest paid on senior debts                                31            (487)            (366) 
  Net cash inflow due to non-controlling interest                               82               19 
  Dividends paid to non-controlling interests, preference 
   shareholders and AT1 securities                                           (242)            (208) 
  Dividends paid to ordinary shareholders                                    (274)            (282) 
----------------------------------------------------------  -----  ---------------  --------------- 
Net cash (used in)/from financing activities                                 (533)            3,588 
----------------------------------------------------------  -----  ---------------  --------------- 
Net (decrease) /increase in cash and cash equivalents                      (6,237)            7,055 
  Cash and cash equivalents at beginning of the period                      99,605           97,874 
  Effect of exchange rate movements on cash and cash 
   equivalents                                                             (2,553)            (769) 
----------------------------------------------------------  -----  ---------------  --------------- 
Cash and cash equivalents at end of the period(1)                           90,815          104,160 
----------------------------------------------------------  -----  ---------------  --------------- 
 

1 Comprises cash and balances at central banks $67,005 million (30 June 2021: $72,985 million), treasury bills and other eligible bills $12,826 million (30 June 2021: $11,085 million), loans and advances to banks $21,195 million (30 June 2021: $27,600 million), trading securities $1,062 million (30 June 2021: $2,265 million) less restricted balances $11,273 million (30 June 2021: $9,775 million)

Interest received was $6,043 million (30 June 2021: $5,343 million), interest paid was $1,878 million (30 June 2021: $1,762 million).

Page 71

Contents - Notes to the financial statements

 
Section                         Note  Name of Notes 
------------------------------  ----  ----------------------------------------------- 
Basis of preparation            1     Accounting policies 
------------------------------  ----  ----------------------------------------------- 
Performance/return              2     Segmental information 
                                3     Net interest income 
                                4     Net fees and commission 
                                5     Net trading income 
                                6     Other operating income 
                                7     Operating expenses 
                                8     Credit impairment 
                                9     Goodwill, property, plant and equipment and 
                                       other impairment 
                                10    Taxation 
                                11    Dividends 
                                12    Earnings per ordinary share 
------------------------------  ----  ----------------------------------------------- 
Assets and liabilities          13    Financial instruments 
 held at fair value 
                                14    Derivative financial instruments 
------------------------------  ----  ----------------------------------------------- 
Financial instruments           15    Reverse repurchase and repurchase agreements 
 held at amortised cost                including other similar lending and borrowing 
------------------------------  ----  ----------------------------------------------- 
Other assets and investments    16    Goodwill and intangible assets 
                                17    Property, plant and equipment 
                                18    Other assets 
                                19    Investment in associates and joint ventures 
                                20    Assets held for sale and associated liabilities 
------------------------------  ----  ----------------------------------------------- 
Funding, accruals, provisions,  21    Other liabilities 
 contingent liabilities 
 and legal proceedings 
------------------------------ 
                                22    Contingent liabilities and commitments 
------------------------------ 
                                23    Legal and regulatory matters 
------------------------------  ----  ----------------------------------------------- 
Capital instruments, equity     24    Subordinated liabilities and other borrowed 
 and reserves                          funds 
                                25    Share capital, other equity instruments and 
                                       reserves 
------------------------------  ----  ----------------------------------------------- 
Employee benefits               26    Retirement benefit obligations 
------------------------------  ----  ----------------------------------------------- 
Other disclosure matters        27    Related party transactions 
                                28    Post balance sheet events 
                                29    Corporate governance 
                                30    Statutory accounts 
                                31    Cash flow statement 
------------------------------  ----  ----------------------------------------------- 
 

Page 72

Notes to the financial statements

1. Accounting policies

Statement of compliance

The Group's condensed consolidated interim financial statements consolidate those of Standard Chartered PLC (the Company) and its subsidiaries (together referred to as the Group) and equity account the Group's interest in associates and jointly controlled entities.

These interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority (FCA), with UK-adopted IAS 34 Interim Financial Reporting and with IAS 34 Interim Financial Reporting as adopted by the EU. They should be read in conjunction the 2021 Annual Report, which was prepared in accordance with UK-adopted international accounting standards and International Financial Reporting Standards (IFRS) as adopted by the European Union (EU IFRS).

The following parts of the Risk review and Capital review form part of these condensed consolidated interim financial statements:

a) Risk review: Disclosures marked as 'reviewed' from the start of the Credit Risk section to the end of Other principal risks in the same section; and

b) Capital review: Tables marked as 'reviewed' from the start of 'CRD Capital base' to the end of 'Movement in total capital', excluding 'Total risk-weighted assets'.

Basis of preparation

The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of cash-settled share-based payments, assets held for sale, fair value through other comprehensive income, and financial assets and liabilities (including derivatives) at fair value through profit or loss. The consolidated financial statements are presented in United States dollars ($), and all values are rounded to the nearest million dollars, except when otherwise indicated. The considerations of the impact of climate risk on the Groups financial report are the same as those applied to the consolidated financial statements as at, and for the year ended 31 December 2021.

Significant accounting estimates and judgements

In determining the carrying amounts of certain assets and liabilities, the Group makes assumptions of the effects of uncertain future events on those assets and liabilities at the balance sheet date. The Group's estimates and assumptions are based on historical experience and expectation of future events and are reviewed periodically. The significant judgements made by management in applying the Group's accounting policies and key sources of uncertainty were the same as those applied to the consolidated financial statements as at, and for the year ended 31 December 2021 , except for revenue recognition within Net fees and commissions for bancassurance contracts as detailed below. Summaries of the Group's significant accounting policies are included throughout the 2021 Annual Report.

-- Note 4 Net fees and commission

IFRS and Hong Kong accounting requirements

As required by the Hong Kong Listing Rules, an explanation of the differences in accounting practices between UK-adopted IFRS and Hong Kong Financial Reporting Standards is required to be disclosed. There would be no significant differences had these accounts been prepared in accordance with Hong Kong Financial Reporting Standards.

Comparatives

Certain comparatives have been restated in line with current year disclosures. Details of these changes are set out in the relevant sections and notes below:

-- Note 2 Segmental information

-- Note 4 Net fees and commission

-- Note 13 Financial instruments

-- Risk review: Tables marked as 'reviewed' disaggregating Credit Risk information by client segment have been restated following the Group's change in organisational structure that came into effect on 1 January 2022

-- Risk review: Credit quality by industry

Page 73

New accounting standards in issue but not yet effective

IFRS 17 Insurance Contracts

IFRS 17 Insurance Contracts was issued in May 2017 to replace IFRS 4 Insurance Contracts and to establish a comprehensive standard for inceptors of insurance policies. The effective date has been deferred to 1 January 2023. The Group is assessing the likely implementation impact on adopting the standards on its financial statements.

Going concern

These interim financial statements were approved by the Board of Directors on 29 July 2022. The directors have made an assessment of the Group's ability to continue as a going concern. This assessment has been made having considered the impact of COVID-19, macroeconomic and geopolitical headwinds, including:

-- A review of the Group Strategy and Corporate Plan, both of which cover a year from the date of signing the annual report

-- An assessment of the actual performance to date, loan book quality, credit impairment, legal, regulatory and compliance matters, and the annual budget

-- Consideration of stress testing performed, including both the Bank of England annual stress test and a Group Recovery and Resolution Plan (RRP) as submitted to the PRA. Both these submissions include the application of stressed scenarios including; COVID additional waves with the accompanying economic shocks, credit impact and short-term liquidity shocks. Under the tests and through the range of scenarios, the results of these stress tests and the RRP demonstrate that the Group has sufficient capital and liquidity to continue as a going concern and meet minimum regulatory capital and liquidity requirements

-- Analysis of the capital, funding and liquidity position of the Group, including the capital and leverage ratios, and ICAAP which summarises the Group's capital and risk assessment processes, assesses its capital requirements and the adequacy of resources to meet them. Further, funding and liquidity was considered in the context of the risk appetite metrics, including the ADR and LCR ratios

-- The Group's Internal Liquidity Adequacy Assessment Process (ILAAP), which considers the Group's liquidity position, its framework and whether sufficient liquidity resources are being maintained to meet liabilities as they fall due, was also reviewed

-- The level of debt in issue, including redemptions and issuances during the year, debt falling due for repayment in the next 12 months and further planned debt issuances, including the appetite in the market for the Group's debt

-- A detailed review of all principal and emerging risks

Based on the analysis performed, the directors confirm they are satisfied that the Group has adequate resources to continue in business for the period from 29 July 2022 to 29 July 2023. For this reason, the Group continues to adopt the going concern basis of accounting for preparing the financial statements.

2. Segmental information

Basis of preparation

The analysis reflects how the client segments and geographic regions are managed internally. This is described as the Management View (on an underlying basis) and 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. In certain instances this approach is not appropriate and a Financial View is disclosed, that is, the location in which the transaction or balance was booked. Typically, the Financial View is used in areas such as the Market and Liquidity Risk reviews where actual booking location is more important for an assessment. Segmental information is therefore on a Management View unless otherwise stated.

Page 74

Segments and regions

The Group's segmental reporting is in accordance with IFRS 8 Operating Segments and is reported consistently with the internal performance framework and as presented to the Group's Management Team.

As part of the ongoing execution of its refreshed strategy, the Group has expanded and reorganised its reporting structure with the creation of a third client segment, Ventures, effective on 1st January 2022. Ventures is a consolidation of SC Ventures and its related entities as well as the Group's two majority-owned digital banks Mox in Hong Kong and Trust in Singapore.

-- SC Ventures is the platform and catalyst for the Group to promote innovation, invest in disruptive financial technology and explore alternative business models and was previously reported in Central & other items (segment)

-- Mox, a cloud-native, mobile only digital bank, was launched in Hong Kong as a joint venture with HKT, PCCW and Trip.com in September 2020

-- Trust in Singapore, in partnership with NTUC Enterprise, is the Group's second separately licensed digital bank in Asia, after Mox, with go-live planned for later this year

The changes above require comparative periods to be restated.

Restructuring items excluded from underlying results

The Group's statutory IFRS performance is adjusted for certain items to arrive at alternative performance measures. These items include profits or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are significant or material in the context of the Group's normal business earnings for the period and items which management and investors would ordinarily identify separately when assessing consistent performance period by period. The alternative performance measures are not within the scope of IFRS and not a substitute for IFRS measures. These adjustments are set out below.

Restructuring charges of $45 million primarily relate to redundancies partly offset by income from the Principal Finance and Ship Leasing portfolios.

The Group has announced the exit of seven markets in the AME region and will focus solely on the CCIB segment in two more. It is expected that the results from the markets and businesses being exited will be reported in restructuring by the end of 2022

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

Profit before taxation (PBT)

 
                                                         6 months ended 30.06.22 
-------------------------------------------------  ------------------------------------ 
                                                   Underlying  Restructuring  Statutory 
                                                     $million       $million   $million 
-------------------------------------------------  ----------  -------------  --------- 
Operating income                                        8,200             25      8,225 
Operating expenses                                    (5,267)           (61)    (5,328) 
-------------------------------------------------  ----------  -------------  --------- 
Operating profit/(loss) before impairment losses 
 and taxation                                           2,933           (36)      2,897 
Credit impairment                                       (267)              4      (263) 
Other impairment                                          (2)           (13)       (15) 
Profit from associates and joint ventures                 153              -        153 
-------------------------------------------------  ----------  -------------  --------- 
Profit/(loss) before taxation                           2,817           (45)      2,772 
-------------------------------------------------  ----------  -------------  --------- 
 
 
                                                         6 months ended 30.06.21 
-------------------------------------------------  ------------------------------------ 
                                                   Underlying  Restructuring  Statutory 
                                                     $million       $million   $million 
-------------------------------------------------  ----------  -------------  --------- 
Operating income                                        7,618             10      7,628 
Operating expenses                                    (5,092)          (129)    (5,221) 
-------------------------------------------------  ----------  -------------  --------- 
Operating profit/(loss) before impairment losses 
 and taxation                                           2,526          (119)      2,407 
Credit impairment                                          47              4         51 
Other impairment                                         (25)           (15)       (40) 
Profit from associates and joint ventures                 134              7        141 
-------------------------------------------------  ----------  -------------  --------- 
Profit/(loss) before taxation                           2,682          (123)      2,559 
-------------------------------------------------  ----------  -------------  --------- 
 

Page 75

Underlying performance by client segment

 
                                                           6 months ended 30.06.22 
--------------------------------------  -------------------------------------------------------------- 
                                              Corporate,    Consumer,               Central 
                                              Commercial      Private                     & 
                                         & Institutional   & Business                 other 
                                                 Banking      Banking   Ventures      items      Total 
                                                $million     $million   $million   $million   $million 
--------------------------------------  ----------------  -----------  ---------  ---------  --------- 
Operating income                                   4,877        2,871          5        447      8,200 
                                        ----------------  -----------  ---------  ---------  --------- 
  External                                         4,581        2,612          5      1,002      8,200 
  Inter-segment                                      296          259          -      (555)          - 
                                        ----------------  -----------  ---------  ---------  --------- 
Operating expenses                               (2,714)      (2,071)      (146)      (336)    (5,267) 
--------------------------------------  ----------------  -----------  ---------  ---------  --------- 
Operating profit/(loss) before 
 impairment losses and taxation                    2,163          800      (141)        111      2,933 
Credit impairment                                  (196)         (79)        (3)         11      (267) 
Other impairment                                       -          (1)          -        (1)        (2) 
Profit/(loss) from associates 
 and joint ventures                                    -            -        (7)        160        153 
--------------------------------------  ----------------  -----------  ---------  ---------  --------- 
Underlying profit/(loss) before 
 taxation                                          1,967          720      (151)        281      2,817 
Restructuring                                        (4)         (21)        (1)       (19)       (45) 
--------------------------------------  ----------------  -----------  ---------  ---------  --------- 
Statutory profit/(loss) before 
 taxation                                          1,963          699      (152)        262      2,772 
--------------------------------------  ----------------  -----------  ---------  ---------  --------- 
Total assets                                     427,483      134,979      1,371    272,084    835,917 
Of which: loans and advances to 
 customers2                                      192,439      132,275        342     29,418    354,474 
                                        ----------------  -----------  ---------  ---------  --------- 
     loans and advances to customers             134,154      132,233        342     26,779    293,508 
     loans held at fair value through 
      profit or loss (FVTPL)                      58,285           42          -      2,639     60,966 
                                        ----------------  -----------  ---------  ---------  --------- 
Total liabilities                                500,400      179,637        770    105,418    786,225 
  Of which: customer accounts2                   321,517      175,747        689      9,058    507,011 
--------------------------------------  ----------------  -----------  ---------  ---------  --------- 
 
 
                                                      6 months ended 30.06.21 (Restated)(1) 
--------------------------------------  ------------------------------------------------------------------ 
                                                                                       Central 
                                                                                             & 
                                              Corporate,    Consumer, 
                                              Commercial      Private 
                                         & Institutional   & Business                    other 
                                              Banking(1)   Banking(1)  Ventures(1)    items(1)       Total 
                                                $million     $million     $million    $million    $million 
--------------------------------------  ----------------  -----------  -----------  ----------  ---------- 
Operating income                                   4,292        2,971          (3)         358       7,618 
                                        ----------------  -----------  -----------  ----------  ---------- 
  External                                         4,087        2,775          (3)         759       7,618 
  Inter-segment                                      205          196            -       (401)           - 
                                        ----------------  -----------  -----------  ----------  ---------- 
Operating expenses                               (2,582)      (2,025)        (118)       (367)     (5,092) 
--------------------------------------  ----------------  -----------  -----------  ----------  ---------- 
Operating profit/(loss) before 
 impairment losses and taxation                    1,710          946        (121)         (9)       2,526 
Credit impairment                                    136         (93)            -           4          47 
Other impairment                                    (25)            -            -           -        (25) 
Profit/(loss) from associates 
 and joint ventures                                    -            -          (2)         136         134 
--------------------------------------  ----------------  -----------  -----------  ----------  ---------- 
Underlying profit/(loss) before 
 taxation                                          1,821          853        (123)         131       2,682 
Restructuring                                       (38)         (22)            -        (63)       (123) 
--------------------------------------  ----------------  -----------  -----------  ----------  ---------- 
Statutory profit/(loss) before 
 taxation                                          1,783          831        (123)          68       2,559 
--------------------------------------  ----------------  -----------  -----------  ----------  ---------- 
Total assets                                     387,542      137,190          624     270,554     795,910 
  Of which: loans and advances to 
   customers2                                    197,732      134,281           10      23,153     355,176 
                                        ----------------  -----------  -----------  ----------  ---------- 
     loans and advances to customers             141,205      134,182           10      22,606     298,003 
     loans held at fair value through 
      profit or loss (FVTPL)                      56,527           99            -         547      57,173 
                                        ----------------  -----------  -----------  ----------  ---------- 
Total liabilities                                452,449      179,249          757     110,598     743,053 
  Of which: customer accounts2                   307,619      174,862          695       8,416     491,592 
--------------------------------------  ----------------  -----------  -----------  ----------  ---------- 
 

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

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

Page 76

Operating income by client segment

 
                                                      6 months ended 30.06.22 
----------------------------  ------------------------------------------------------------------------ 
                                                                                   Central 
                                                                                         & 
                                    Corporate,     Consumer 
                                    Commercial      Private 
                               & Institutional   & Business                          other 
                                       Banking      Banking    Ventures    items (segment)       Total 
                                      $million     $million    $million           $million    $million 
----------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Underlying operating income              4,877        2,871           5                447       8,200 
Restructuring                               25            -           -                  -          25 
----------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Statutory operating income               4,902        2,871           5                447       8,225 
----------------------------  ----------------  -----------  ----------  -----------------  ---------- 
 
 
                                               6 months ended 30.06.21 (Restated)(1) 
----------------------------  ------------------------------------------------------------------------ 
                                                                                   Central 
                                                                                         & 
                                    Corporate,     Consumer 
                                    Commercial      Private 
                               & Institutional   & Business                          other 
                                      Banking1     Banking1    Ventures    items (segment)       Total 
                                      $million     $million    $million           $million    $million 
----------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Underlying operating income              4,292        2,971         (3)                358       7,618 
Restructuring                               12            -           -                (2)          10 
----------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Statutory operating income               4,304        2,971         (3)                356       7,628 
----------------------------  ----------------  -----------  ----------  -----------------  ---------- 
 

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

Underlying performance by region

 
                                                       6 months ended 30.06.22 
--------------------------------------  ------------------------------------------------------ 
                                                       Africa               Central 
                                                            &     Europe          & 
                                                       Middle          &      other 
                                             Asia        East   Americas      items      Total 
                                         $million    $million   $million   $million   $million 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Operating income                            5,522       1,291      1,445       (58)      8,200 
Operating expenses                        (3,417)       (808)      (771)      (271)    (5,267) 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Operating profit/(loss) before 
 impairment losses 
 and taxation                               2,105         483        674      (329)      2,933 
Credit impairment                           (398)          99         29          3      (267) 
Other impairment                              (2)         (1)          1          -        (2) 
Profit/(loss) from associates 
 and joint ventures                           157           -          -        (4)        153 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Underlying profit/(loss) before 
 taxation                                   1,862         581        704      (330)      2,817 
Restructuring                                (19)         (7)        (6)       (13)       (45) 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Statutory profit/(loss) before 
 taxation                                   1,843         574        698      (343)      2,772 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Total assets                              477,485      57,859    291,264      9,309    835,917 
  Of which: loans and advances to 
   customers1                             259,484      28,003     66,987          -    354,474 
                                        ---------  ----------  ---------  ---------  --------- 
     loans and advances to customers      243,169      26,656     23,683          -    293,508 
     loans held at fair value through 
      profit or loss (FVTPL)               16,315       1,347     43,304          -     60,966 
                                        ---------  ----------  ---------  ---------  --------- 
Total liabilities                         431,424      42,672    243,877     68,252    786,225 
  Of which: customer accounts1            332,705      33,480    140,826          -    507,011 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
 
 
                                                       6 months ended 30.06.21 
--------------------------------------  ------------------------------------------------------ 
                                                       Africa               Central 
                                                            &     Europe          & 
                                                       Middle          &      other 
                                             Asia        East   Americas      items      Total 
                                         $million    $million   $million   $million   $million 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Operating income                            5,463       1,250        993       (88)      7,618 
Operating expenses                        (3,298)       (815)      (725)      (254)    (5,092) 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Operating profit/(loss) before 
 impairment losses 
 and taxation                               2,165         435        268      (342)      2,526 
Credit impairment                            (47)          40         62        (8)         47 
Other impairment                             (15)           -          7       (17)       (25) 
Profit/(loss) from associates 
 and joint ventures                           136           -          -        (2)        134 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Underlying profit/(loss) before 
 taxation                                   2,239         475        337      (369)      2,682 
Restructuring                                (27)         (3)       (20)       (73)      (123) 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Statutory profit/(loss) before 
 taxation                                   2,212         472        317      (442)      2,559 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
Total assets                              467,933      57,797    261,041      9,139    795,910 
  Of which: loans and advances to 
   customers1                             255,630      29,825     69,721          -    355,176 
                                        ---------  ----------  ---------  ---------  --------- 
     loans and advances to customers      240,297      27,256     30,450          -    298,003 
     loans held at fair value through 
      profit or loss (FVTPL)               15,333       2,569     39,271          -     57,173 
                                        ---------  ----------  ---------  ---------  --------- 
Total liabilities                         418,583      39,464    213,713     71,293    743,053 
  Of which: customer accounts1            334,639      32,847    124,106          -    491,592 
--------------------------------------  ---------  ----------  ---------  ---------  --------- 
 

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

Page 77

Operating income by region

 
                                             6 months ended 30.06.22 
----------------------------  ------------------------------------------------------ 
                                             Africa               Central 
                                                  &     Europe          & 
                                             Middle          &      other 
                                   Asia        East   Americas      items      Total 
                               $million    $million   $million   $million   $million 
----------------------------  ---------  ----------  ---------  ---------  --------- 
Underlying operating income       5,522       1,291      1,445       (58)      8,200 
Restructuring                        10           1        (1)         15         25 
----------------------------  ---------  ----------  ---------  ---------  --------- 
Statutory operating income        5,532       1,292      1,444       (43)      8,225 
----------------------------  ---------  ----------  ---------  ---------  --------- 
 
 
                                                6 months ended 30.06.21 
----------------------------  ----------------------------------------------------------- 
                                               Africa      Europe     Central 
                                                    &           &           & 
                                               Middle                   other 
                                   Asia1         East    Americas       items       Total 
                                $million     $million    $million    $million    $million 
----------------------------  ----------  -----------  ----------  ----------  ---------- 
Underlying operating income        5,463        1,250         993        (88)       7,618 
Restructuring                         25            2           -        (17)          10 
----------------------------  ----------  -----------  ----------  ----------  ---------- 
Statutory operating income         5,488        1,252         993       (105)       7,628 
----------------------------  ----------  -----------  ----------  ----------  ---------- 
 

Additional segmental information (statutory)

 
                                                         6 months ended 30.06.22 
-------------------------------  ------------------------------------------------------------------------ 
                                                                                      Central 
                                                                                            & 
                                       Corporate,     Consumer 
                                       Commercial      Private 
                                  & Institutional   & Business                          other 
                                          Banking      Banking    Ventures    items (segment)       Total 
                                         $million     $million    $million           $million    $million 
-------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Net interest income                         1,579        1,735           4                320       3,638 
Net fees and commission income                788          868           3                  5       1,664 
Net trading and other income                2,535          268         (2)                122       2,923 
-------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Operating income                            4,902        2,871           5                447       8,225 
-------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
 
 
                                                  6 months ended 30.06.21 (Restated)(1) 
-------------------------------  ------------------------------------------------------------------------ 
                                                                                      Central 
                                                                                            & 
                                       Corporate,     Consumer 
                                       Commercial      Private 
                                  & Institutional   & Business                          other 
                                         Banking1     Banking1   Ventures1    items (segment)       Total 
                                         $million     $million    $million           $million    $million 
-------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Net interest income                         1,596        1,611         (2)                165       3,370 
Net fees and commission income                882        1,078           -               (21)       1,939 
Net trading and other income                1,826          282         (1)                212       2,319 
-------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Operating income                            4,304        2,971         (3)                356       7,628 
-------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
 

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

 
                                                6 months ended 30.06.22 
-------------------------------  ----------------------------------------------------- 
                                               Africa               Central 
                                                    &     Europe          & 
                                               Middle          &      other 
                                      Asia       East   Americas      items      Total 
                                  $million   $million   $million   $million   $million 
-------------------------------  ---------  ---------  ---------  ---------  --------- 
Net interest income                  2,668        577        357         36      3,638 
Net fees and commission income       1,167        271        301       (75)      1,664 
Net trading and other income         1,697        444        786        (4)      2,923 
-------------------------------  ---------  ---------  ---------  ---------  --------- 
Operating income                     5,532      1,292      1,444       (43)      8,225 
-------------------------------  ---------  ---------  ---------  ---------  --------- 
 
 
                                                6 months ended 30.06.21 
-------------------------------  ----------------------------------------------------- 
                                               Africa               Central 
                                                    &     Europe          & 
                                               Middle          &      other 
                                      Asia       East   Americas      items      Total 
                                  $million   $million   $million   $million   $million 
-------------------------------  ---------  ---------  ---------  ---------  --------- 
Net interest income                  2,549        585        233          3      3,370 
Net fees and commission income       1,464        310        256       (91)      1,939 
Net trading and other income         1,475        357        504       (17)      2,319 
-------------------------------  ---------  ---------  ---------  ---------  --------- 
Operating income                     5,488      1,252        993      (105)      7,628 
-------------------------------  ---------  ---------  ---------  ---------  --------- 
 

Page 78

 
                                                      6 months ended 30.06.22 
-----------  --------------------------------------------------------------------------------------------------------- 
                 Hong 
                 Kong     Korea     China     Taiwan  Singapore      India  Indonesia        UAE         UK         US 
             $million  $million  $million   $million   $million   $million   $million   $million   $million   $million 
-----------  --------  --------  --------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Net 
 interest 
 income           819       384       273         92        407        315         43        109        122        189 
Net fees 
 and 
 commission 
 income           307        89        75         86        307        135         30         53         42        198 
Net trading 
 and 
 other 
 income           620       138       251         58        161        227         38        143        609        145 
-----------  --------  --------  --------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Operating 
 income         1,746       611       599        236        875        677        111        305        773        532 
-----------  --------  --------  --------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 
                                                      6 months ended 30.06.21 
-----------  --------------------------------------------------------------------------------------------------------- 
                 Hong 
                 Kong     Korea     China     Taiwan  Singapore      India  Indonesia        UAE         UK         US 
             $million  $million  $million   $million   $million   $million   $million   $million   $million   $million 
-----------  --------  --------  --------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Net 
 interest 
 income           702       365       305         88        369        317         45        109        101         89 
Net fees 
 and 
 commission 
 income           465       124       111        113        353        128         26         45         28        170 
Net trading 
 and 
 other 
 income           696        99       153         57         94        168         38        122        355        130 
-----------  --------  --------  --------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Operating 
 income         1,863       588       569        258        816        613        109        276        484        389 
-----------  --------  --------  --------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 

3. Net interest income

 
                                                                      6 months         6 months 
                                                                ended 30.06.22   ended 30.06.21 
                                                                      $million         $million 
-------------------------------------------------------------  ---------------  --------------- 
Balances at central banks                                                  146               42 
Loans and advances to banks                                                326              247 
Loans and advances to customers                                          3,962         3,665(1) 
Debt securities                                                          1,080              904 
Other eligible bills                                                       206              149 
Accrued on impaired assets (discount unwind)                                65              115 
-------------------------------------------------------------  ---------------  --------------- 
Interest income                                                          5,785            5,122 
-------------------------------------------------------------  ---------------  --------------- 
  Of which: financial instruments held at fair value through 
   other comprehensive income                                              833              783 
 
Deposits by banks                                                           92               74 
Customer accounts                                                        1,438            1,121 
Debt securities in issue                                                   347              284 
Subordinated liabilities and other borrowed funds                          247              246 
Interest expense on IFRS 16 lease liabilities                               23               27 
-------------------------------------------------------------  ---------------  --------------- 
Interest expense                                                         2,147            1,752 
-------------------------------------------------------------  ---------------  --------------- 
Net interest income                                                      3,638            3,370 
-------------------------------------------------------------  ---------------  --------------- 
 

1 Includes a $73 million adjustment in relation to interest earned on impaired assets as required by IFRS9 Financial Instruments: Recognition and Measurement

Page 79

4. Net fees and commission

Significant accounting estimates and judgements

Included within one of our bancassurance contracts is an annual performance bonus that is only received if an annual performance sales target is met. In applying the accounting policy on revenue recognition, management have made the judgement that it is highly probable that the annual target will be met.

This judgement is based on management's forecast analysis of performance against the bonus targets. This analysis is a significant estimate which includes assumptions based on historical actual performance and projected future sales initiatives expected to increase sales volumes over time.

 
                                                                  6 months         6 months 
                                                            ended 30.06.22   ended 30.06.21 
                                                                  $million         $million 
---------------------------------------------------------  ---------------  --------------- 
Fees and commissions income                                          2,023            2,300 
  Of which: 
                                                           ---------------  --------------- 
  Financial instruments that are not fair valued through 
   profit or loss                                                      650              660 
  Trust and other fiduciary activities                                 284              385 
                                                           ---------------  --------------- 
 
Fees and commissions expense                                         (359)            (361) 
  Of which: 
                                                           ---------------  --------------- 
  Financial instruments that are not fair valued through 
   profit or loss                                                    (114)            (104) 
  Trust and other fiduciary activities                                (24)             (23) 
---------------------------------------------------------  ---------------  --------------- 
Net fees and commission                                              1,664            1,939 
---------------------------------------------------------  ---------------  --------------- 
 
 
                                                          6 months ended 30.06.22 
--------------------------------  ------------------------------------------------------------------------ 
                                                                                       Central 
                                                                                             & 
                                        Corporate,     Consumer 
                                        Commercial      Private 
                                   & Institutional   & Business                          other 
                                           Banking      Banking    Ventures    Items (Segment)       Total 
                                          $million     $million    $million           $million    $million 
--------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Transaction Banking                            558           16           -                  -         574 
                                  ----------------  -----------  ----------  -----------------  ---------- 
  Trade & Working Capital2                     299           13           -                  -         312 
  Cash Management                              259            3           -                  -         262 
                                  ----------------  -----------  ----------  -----------------  ---------- 
Financial Markets                              178            -           -                  -         178 
Lending & Portfolio Management2                 52            3           -                  -          55 
Wealth Management                                -          658           -                  -         658 
Retail Products                                  -          191           2                  -         193 
Treasury                                         -            -           -               (20)        (20) 
Others                                           -            -           1                 25          26 
--------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Net fees and commission                        788          868           3                  5       1,664 
--------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
 
 
                                                   6 months ended 30.06.21 (Restated)(1) 
--------------------------------  ------------------------------------------------------------------------ 
                                                                                       Central 
                                                                                             & 
                                        Corporate,     Consumer 
                                        Commercial      Private 
                                   & Institutional   & Business                          other 
                                           Banking     Banking1   Ventures1    Items (Segment)       Total 
                                          $million     $million    $million           $million    $million 
--------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Transaction Banking                            547           20           -                  -         567 
                                  ----------------  -----------  ----------  -----------------  ---------- 
  Trade & Working Capital2                     298           14           -                  -         312 
  Cash Management                              249            6           -                  -         255 
                                  ----------------  -----------  ----------  -----------------  ---------- 
Financial Markets                              268            -           -                  -         268 
Lending & Portfolio Management2                 66            1           -                  -          67 
Wealth Management                                1          849           -                  -         850 
Retail Products                                  -          208         (1)                  -         207 
Treasury                                         -            -           -               (19)        (19) 
Others                                           -            -           1                (2)         (1) 
--------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
Net fees and commission                        882        1,078           -               (21)       1,939 
--------------------------------  ----------------  -----------  ----------  -----------------  ---------- 
 

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

2 Following a reorganisation, there has been a reclassification of balances from Lending & Portfolio Management into Trade & Working Capital including prior period numbers. Prior periods have been re-presented and there is no change in the total income

Page 80

Upfront bancassurance consideration amounts are amortised on a straight-line basis over the contractual period to which the consideration relates. Deferred income on the balance sheet in respect of these activities is $592 million (30 June 2021: $676 million). The income will be earned evenly over the next 7 years (30 June 2021: 8 years). For the six months ended 30 June 2022, $42 million of fee income was released from deferred income (30 June 2021: $42 million).

For the bancassurance contract with the annual performance bonus, based on progress so far and expectation of meeting the performance targets by year-end with a high probability, a pro-rata portion of the total performance fee, equal to $84 million of the fee has been recognised as fee income in the period.

5. Net trading income

 
                                                               6 months         6 months 
                                                         ended 30.06.22   ended 30.06.21 
                                                               $million         $million 
------------------------------------------------------  ---------------  --------------- 
Net trading income                                                2,679            1,870 
------------------------------------------------------  ---------------  --------------- 
Significant items within net trading income include: 
Gains on instruments held for trading(1)                          2,480            1,865 
Gains on financial assets mandatorily at fair value 
 through profit or loss                                             157               81 
Losses on financial assets designated at fair value 
 through profit or loss                                             (6)              (9) 
Gains/(losses) on financial liabilities designated at 
 fair value through profit or loss                                  178             (25) 
------------------------------------------------------  ---------------  --------------- 
 

1 Includes $666 million gain (30 June 2021: $250 million gain) from the translation of foreign currency monetary assets and liabilities

6. Other operating income

 
                                                              6 months         6 months 
                                                        ended 30.06.22   ended 30.06.21 
                                                              $million         $million 
-----------------------------------------------------  ---------------  --------------- 
Other operating income includes: 
Rental income from operating lease assets                          203              229 
Gains less losses on disposal of fair value through 
 other comprehensive income debt instruments                        12              153 
Gains less losses on amortised cost financial assets                 2                8 
Dividend income                                                      6                7 
Gain on sale of aircrafts                                            6               23 
Other                                                               15               29 
-----------------------------------------------------  ---------------  --------------- 
Other operating income                                             244              449 
-----------------------------------------------------  ---------------  --------------- 
 

7. Operating expenses

 
                                         6 months         6 months 
                                   ended 30.06.22   ended 30.06.21 
                                         $million         $million 
--------------------------------  ---------------  --------------- 
Staff costs: 
  Wages and salaries                        2,963            2,914 
  Social security costs                       115              103 
  Other pension costs (Note 26)               195              199 
  Share-based payment costs                   122               99 
  Other staff costs                           458              471 
--------------------------------  ---------------  --------------- 
                                            3,853            3,786 
--------------------------------  ---------------  --------------- 
 

Other staff costs include redundancy expenses of $24 million (30 June 2021: $43 million). Further costs in this category include training, travel costs and other staff-related costs.

The following table summarises the number of employees within the Group:

 
                                     Support 
                         Business   services   Total 
-----------------------  --------  ---------  ------ 
At 30 June 2022            31,436     51,797  83,233 
                         --------  ---------  ------ 
At 31 December 2021(1)     30,940     51,017  81,957 
-----------------------  --------  ---------  ------ 
 

The Company employed nil staff at 30 June 2022 (30 June 2021: nil) and it incurred costs of nil (30 June 2021: nil).

Page 81

 
                                                 6 months         6 months 
                                           ended 30.06.22   ended 30.06.21 
                                                 $million         $million 
----------------------------------------  ---------------  --------------- 
Premises and equipment expenses:                      197              184 
 
General administrative expenses: 
  Other general administrative expenses               686              655 
----------------------------------------  ---------------  --------------- 
                                                      686              655 
----------------------------------------  ---------------  --------------- 
 
Depreciation and amortisation: 
Property, plant and equipment: 
                                          ---------------  --------------- 
  Premises                                            161              188 
  Equipment                                            64               60 
  Operating lease assets                              105              112 
                                          ---------------  --------------- 
                                                      330              360 
Intangibles: 
  Software                                            260              233 
  Acquired on business combinations                     2                3 
----------------------------------------  ---------------  --------------- 
                                                      592              596 
----------------------------------------  ---------------  --------------- 
Total operating expenses                            5,328            5,221 
----------------------------------------  ---------------  --------------- 
 

Operating expenses include research expenditure of $408 million (30 June 2021: $376 million), which was recognised as an expense in the period.

8. Credit impairment

 
                                                                6 months         6 months 
                                                          ended 30.06.22   ended 30.06.21 
                                                                $million         $million 
-------------------------------------------------------  ---------------  --------------- 
Net credit impairment on loans and advances to banks 
 and customers                                                       278              (6) 
Net credit impairment on debt securities                             (1)                6 
Net credit impairment relating to financial guarantees 
 and loan commitments                                               (14)             (51) 
-------------------------------------------------------  ---------------  --------------- 
Credit impairment1                                                   263             (51) 
-------------------------------------------------------  ---------------  --------------- 
 

1 No material purchased or originated credit-impaired (POCI) assets

9. Goodwill, property, plant and equipment and other impairment

 
                                                                      6 months         6 months 
                                                                ended 30.06.22   ended 30.06.21 
                                                                      $million         $million 
-------------------------------------------------------------  ---------------  --------------- 
Impairment of goodwill (Note 16)                                             -                - 
-------------------------------------------------------------  ---------------  --------------- 
 
Impairment of property, plant and equipment (Note 17)                      (1)               47 
Impairment of other intangible assets (Note 16)                              1                - 
Other                                                                       15              (7) 
-------------------------------------------------------------  ---------------  --------------- 
Property, plant and equipment and other impairment                          15               40 
-------------------------------------------------------------  ---------------  --------------- 
Goodwill, property, plant and equipment and other impairment                15               40 
-------------------------------------------------------------  ---------------  --------------- 
 

Page 82

10. Taxation

The following table provides analysis of taxation charge in the period:

 
                                                                     6 months         6 months 
                                                               ended 30.06.22   ended 30.06.21 
                                                                     $million         $million 
------------------------------------------------------------  ---------------  --------------- 
The charge for taxation based upon the profit for the 
 period comprises: 
Current tax: 
United Kingdom corporation tax at 19 per cent (2021:19 
 per cent): 
                                                              ---------------  --------------- 
  Current tax charge on income for the period                               -                - 
  Adjustments in respect of prior periods (including double 
   tax relief)                                                              -                2 
Foreign tax: 
  Current tax charge on income for the period                             578              497 
  Adjustments in respect of prior periods                                 (6)             (34) 
                                                              ---------------  --------------- 
                                                                          572              465 
Deferred tax: 
                                                              ---------------  --------------- 
  Origination/reversal of temporary differences                           113              167 
  Adjustments in respect of prior periods                                 (1)              (1) 
                                                              ---------------  --------------- 
                                                                          112              166 
------------------------------------------------------------  ---------------  --------------- 
Tax on profits on ordinary activities                                     684              631 
------------------------------------------------------------  ---------------  --------------- 
Effective tax rate                                                      24.7%            24.7% 
------------------------------------------------------------  ---------------  --------------- 
 

The tax charge for the period has been calculated by applying the effective rate of tax which is expected to apply for the year ending 31 December 2022 using rates substantively enacted at 30 June 2022. The rate has been calculated by estimating and applying an average annual effective income tax rate to each tax jurisdiction individually.

The tax charge for the period of $684 million (30 June 2021: $631 million) on a profit before tax of $2,772 million (30 June 2021: $2,559 million) reflects the impact of countries with tax rates higher or lower than the UK, the most significant of which is India, non-deductible expenses and non-creditable withholding taxes.

Foreign tax includes current tax of $4 million (30 June 2021: $60 million) on the profits assessable in Hong Kong. Deferred tax includes origination or reversal of temporary differences of $36 million (30 June 2021: $35 million) provided at a rate of 16.5 per cent (30 June 2021: 16.5 per cent) on the profits assessable in Hong Kong.

Deferred tax comprises assets and liabilities as follows:

 
                                            30.06.22                         31.12.21 
-------------------------------  -------------------------------  ------------------------------- 
                                     Total      Asset  Liability      Total      Asset  Liability 
                                  $million   $million   $million   $million   $million   $million 
-------------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
Deferred tax comprises: 
Accelerated tax depreciation         (566)         13      (579)      (515)         18      (533) 
Impairment provisions 
 on loans and advances                 334        350       (16)        351        389       (38) 
Tax losses carried forward             274        138        136        263        172         91 
Fair value through other 
 comprehensive income                   24         49       (25)      (126)       (22)      (104) 
Cash flow hedges                        84         65         19          -        (3)          3 
Own credit adjustment                 (26)       (10)       (16)        (3)        (1)        (2) 
Retirement benefit obligations         (1)         13       (14)         27         16         11 
Share-based payments                    30          2         28         32          -         32 
Other temporary differences           (41)        289      (330)         30        290      (260) 
-------------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
                                       112        909      (797)         59        859      (800) 
-------------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
 

Page 83

11. Dividends

Ordinary equity shares

 
                                 6 months ended       6 months ended       6 months ended 
                                     30.06.22             31.12.21             30.06.21 
-----------------------------  -------------------  -------------------  ------------------- 
                               Cents per            Cents per            Cents per 
                                   share  $million      share  $million      share  $million 
-----------------------------  ---------  --------  ---------  --------  ---------  -------- 
2021 / 2020 final dividend 
 declared and 
 paid during the year                  9       274          -         -          9       282 
2022 / 2021 interim dividend 
 declared and paid during 
 the year                              -         -          3        92          -         - 
-----------------------------  ---------  --------  ---------  --------  ---------  -------- 
 

The 2021 final dividend per share of 9 cents per ordinary share ($274 million) was paid to eligible shareholders on 12 May 2022, and is recognised in these interim accounts.

Interim dividends on ordinary equity shares are recorded in the period in which they are declared and, in respect of the final dividend, have been approved by the shareholders.

2022 recommended interim dividend

The 2022 interim dividend of 4 cents per ordinary share will be paid in pounds sterling, Hong Kong dollars or US dollars on 14 October 2022 to shareholders on the UK register of members at the close of business in the UK on 12 August 2022.

Preference shares and Additional Tier 1 securities

Dividends on these preference shares and securities classified as equity are recorded in the period in which they are declared.

 
                                                               6 months         6 months         6 months 
                                                         ended 30.06.22   ended 31.12.21   ended 30.06.21 
                                                               $million         $million         $million 
--------------------------  --------------------------  ---------------  ---------------  --------------- 
Non-cumulative redeemable   7.014 per cent preference 
 preference shares:          shares of $5 each                       26               27               26 
 6.409 per cent preference 
  shares of $5 each                                                   6                6                7 
 -----------------------------------------------------  ---------------  ---------------  --------------- 
                                                                     32               33               33 
Additional Tier 1 securities: fixed rate resetting 
 perpetual subordinated contingent convertible 
 securities                                                         184              181              163 
------------------------------------------------------  ---------------  ---------------  --------------- 
                                                                    216              214              196 
 -----------------------------------------------------  ---------------  ---------------  --------------- 
 

12. Earnings per ordinary share

 
                                                                     6 months         6 months 
                                                               ended 30.06.22   ended 30.06.21 
                                                                     $million         $million 
------------------------------------------------------------  ---------------  --------------- 
Profit for the period attributable to equity holders                    2,088            1,928 
------------------------------------------------------------  ---------------  --------------- 
Non-controlling interest                                                    1             (14) 
Dividend payable on preference shares and AT1 classified 
 as equity                                                              (216)            (196) 
------------------------------------------------------------  ---------------  --------------- 
Profit for the period attributable to ordinary shareholders             1,873            1,718 
------------------------------------------------------------  ---------------  --------------- 
 
Items normalised: 
  Restructuring                                                            45              123 
  Tax on normalised items                                                 (8)             (15) 
------------------------------------------------------------  ---------------  --------------- 
Underlying profit                                                       1,910            1,826 
------------------------------------------------------------  ---------------  --------------- 
 
Basic - Weighted average number of shares (millions)                    3,014            3,133 
Diluted - Weighted average number of shares (millions)                  3,069            3,185 
 
Basic earnings per ordinary share (cents)                                62.1             54.8 
------------------------------------------------------------  ---------------  --------------- 
Diluted earnings per ordinary share (cents)                              61.0             53.9 
------------------------------------------------------------  ---------------  --------------- 
Underlying basic earnings per ordinary share (cents)                     63.4             58.3 
------------------------------------------------------------  ---------------  --------------- 
Underlying diluted earnings per ordinary share (cents)                   62.2             57.3 
------------------------------------------------------------  ---------------  --------------- 
 

Page 84

13. Financial instruments

Classification and measurement

The Group's classification of its financial assets and liabilities is summarised in the following tables.

 
                                                  Assets at fair value 
---------------  -----  -------------------------------------------------------------------------  ---------  -------- 
                                               Non-trading 
                                               mandatorily  Designated            Fair 
                                                   at fair     at fair           value      Total     Assets 
                                                     value       value         through  financial       held 
                                  Derivatives      through     through           other     assets         at 
                                         held       profit      profit  compre-hensive    at fair  amortised 
                         Trading  for hedging      or loss     or loss          income      value       cost     Total 
Assets           Notes  $million     $million     $million    $million        $million   $million   $million  $million 
---------------  -----  --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
Cash and 
 balances 
 at central 
 banks                         -            -            -           -               -          -     67,005    67,005 
Financial 
assets held 
at fair value 
through 
profit or loss 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
  Loans and 
   advances 
   to banks(1)             1,884            -        2,678           -               -      4,562          -     4,562 
  Loans and 
   advances 
   to 
   customers(1)            5,223            -        3,222           -               -      8,445          -     8,445 
  Reverse 
   repurchase 
   agreements 
   and other 
   similar 
   secured 
   lending          15       528            -       73,870           -               -     74,398          -    74,398 
  Debt 
   securities, 
   alternative 
   tier one and 
   other 
   eligible 
   bills                  27,665            -          646          75               -     28,386          -    28,386 
  Equity shares            2,105            -          220           -               -      2,325          -     2,325 
  Other assets      18         -            -           25           -               -         25          -        25 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
                          37,405            -       80,661          75               -    118,141          -   118,141 
Derivative 
 financial 
 instruments        14    73,448        3,228            -           -               -     76,676          -    76,676 
Loans and 
 advances 
 to banks(1)                   -            -            -           -               -          -     36,201    36,201 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
  Of which: 
   reverse 
   repurchase 
   agreements 
   and other 
   similar 
   secured 
   lending          15         -            -            -           -               -          -        795       795 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
Loans and 
 advances 
 to 
 customers(1)                  -            -            -           -               -          -    293,508   293,508 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
  Of which: 
   reverse 
   repurchase 
   agreements 
   and other 
   similar 
   secured 
   lending          15         -            -            -           -               -          -      7,894     7,894 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
Investment 
securities 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
  Debt 
   securities, 
   alternative 
   tier one and 
   other 
   eligible 
   bills                       -            -            -           -         112,271    112,271     51,866   164,137 
  Equity shares                -            -            -           -             755        755          -       755 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
                               -            -            -           -         113,026    113,026     51,866   164,892 
Other assets        18         -            -            -           -               -          -     51,135    51,135 
Assets held for 
 sale               20         -            -            -           1               -          1         60        61 
---------------  -----  --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
Total at 30 
 June 2022               110,853        3,228       80,661          76         113,026    307,844    499,775   807,619 
---------------  -----  --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
 

1 Further analysed in Risk review and Capital review

Page 85

 
                                                  Assets at fair value 
---------------  -----  -------------------------------------------------------------------------  ---------  -------- 
                                               Non-trading 
                                               mandatorily  Designated            Fair 
                                                   at fair     at fair           value      Total     Assets 
                                                     value       value         through  financial       held 
                                  Derivatives      through     through           other     assets         at 
                                         held       profit      profit  compre-hensive    at fair  amortised 
                         Trading  for hedging      or loss     or loss          income      value       cost     Total 
Assets           Notes  $million     $million     $million    $million        $million   $million   $million  $million 
---------------  -----  --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
Cash and 
 balances 
 at central 
 banks                         -            -            -           -               -          -     72,663    72,663 
Financial 
assets held 
at fair value 
through 
profit or loss 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
  Loans and 
   advances 
   to banks(1)             1,491            -        2,356           -               -      3,847          -     3,847 
  Loans and 
   advances 
   to 
   customers(1)            5,813            -        4,140           -               -      9,953          -     9,953 
  Reverse 
   repurchase 
   agreements 
   and other 
   similar 
   secured 
   lending          15         -            -       80,009           -               -     80,009          -    80,009 
  Debt 
   securities, 
   alternative 
   tier one and 
   other 
   eligible 
   bills                  28,801            -          463         161               -     29,425          -    29,425 
  Equity shares            5,653            -          208           -               -      5,861          -     5,861 
  Other assets      18         -            -           26           -               -         26          -        26 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
                          41,758            -       87,202         161               -    129,121          -   129,121 
Derivative 
 financial 
 instruments        14    51,002        1,443            -           -               -     52,445          -    52,445 
Loans and 
 advances 
 to banks(1)                   -            -            -           -               -          -     44,383    44,383 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
  Of which: 
   reverse 
   repurchase 
   agreements 
   and other 
   similar 
   secured 
   lending          15         -            -            -           -               -          -      1,079     1,079 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
Loans and 
 advances 
 to 
 customers(1)                  -            -            -           -               -          -    298,468   298,468 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
  Of which: 
   reverse 
   repurchase 
   agreements 
   and other 
   similar 
   secured 
   lending          15         -            -            -           -               -          -      7,331     7,331 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
Investment 
securities 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
  Debt 
   securities, 
   alternative 
   tier one and 
   other 
   eligible 
   bills                       -            -            -           -         121,375    121,375     41,325   162,700 
  Equity shares                -            -            -           -             737        737          -       737 
                        --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
                               -            -            -           -         122,112    122,112     41,325   163,437 
Other assets        18         -            -            -           -               -          -     40,068    40,068 
Assets held for 
 sale               20         -            -            -          43               -         43         52        95 
---------------  -----  --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
Total at 31 
 December 
 2021                     92,760        1,443       87,202         204         122,112    303,721    496,959   800,680 
---------------  -----  --------  -----------  -----------  ----------  --------------  ---------  ---------  -------- 
 

1 Further analysed in Risk review and Capital review

Page 86

 
                                                       Liabilities at fair value 
----------------------------------  -----  -------------------------------------------------  ---------  --------- 
                                                                    Designated 
                                                                       at fair         Total 
                                                                         value     financial 
                                                       Derivatives     through   liabilities 
                                                              held      profit       at fair  Amortised 
                                             Trading   for hedging     or loss         value       cost      Total 
Liabilities                         Notes   $million      $million    $million      $million   $million   $million 
----------------------------------  -----  ---------  ------------  ----------  ------------  ---------  --------- 
Financial liabilities held at 
 fair value through profit or 
 loss 
                                           ---------  ------------  ----------  ------------  ---------  --------- 
  Deposits by banks                               63             -       1,527         1,590          -      1,590 
  Customer accounts                               98             -      10,937        11,035          -     11,035 
  Repurchase agreements and other 
   similar 
   secured borrowing                   15          -             -      55,320        55,320          -     55,320 
  Debt securities in issue                         -             -       6,807         6,807          -      6,807 
  Short positions                              8,218             -           -         8,218          -      8,218 
  Other liabilities                                9             -           4            13          -         13 
                                           ---------  ------------  ----------  ------------  ---------  --------- 
                                               8,388             -      74,595        82,983          -     82,983 
Derivative financial instruments       14     73,196         2,901           -        76,097          -     76,097 
Deposits by banks                                  -             -           -             -     31,173     31,173 
Customer accounts                                  -             -           -             -    453,742    453,742 
Repurchase agreements and other 
 similar 
 secured borrowing                     15          -             -           -             -      1,723      1,723 
Debt securities in issue                           -             -           -             -     58,043     58,043 
Other liabilities                      21          -             -           -             -     60,102     60,102 
Subordinated liabilities and 
 other borrowed funds                  24          -             -           -             -     14,933     14,933 
----------------------------------  -----  ---------  ------------  ----------  ------------  ---------  --------- 
Total at 30 June 2022                         81,584         2,901      74,595       159,080    619,716    778,796 
----------------------------------  -----  ---------  ------------  ----------  ------------  ---------  --------- 
 
 
                                                       Liabilities at fair value 
----------------------------------  -----  -------------------------------------------------  ---------  --------- 
                                                                    Designated 
                                                                       at fair         Total 
                                                                         value     financial 
                                                       Derivatives     through   liabilities 
                                                              held      profit       at fair  Amortised 
                                             Trading   for hedging     or loss         value       cost      Total 
Liabilities                         Notes   $million      $million    $million      $million   $million   $million 
----------------------------------  -----  ---------  ------------  ----------  ------------  ---------  --------- 
Financial liabilities held at 
 fair value through profit or 
 loss 
                                           ---------  ------------  ----------  ------------  ---------  --------- 
  Deposits by banks                                -             -       1,352         1,352          -      1,352 
  Customer accounts                              198             -       9,093         9,291          -      9,291 
  Repurchase agreements and other 
   similar 
   secured borrowing                   15          -             -      62,388        62,388          -     62,388 
  Debt securities in issue                         -             -       5,597         5,597          -      5,597 
  Short positions                              6,562             -           -         6,562          -      6,562 
  Other liabilities                                6             -           1             7          -          7 
                                           ---------  ------------  ----------  ------------  ---------  --------- 
                                               6,766             -      78,431        85,197          -     85,197 
Derivative financial instruments       14     52,706           693           -        53,399          -     53,399 
Deposits by banks                                  -             -           -             -     30,041     30,041 
Customer accounts                                  -             -           -             -    474,570    474,570 
Repurchase agreements and other 
 similar 
 secured borrowing                     15          -             -           -             -      3,260      3,260 
Debt securities in issue                           -             -           -             -     61,293     61,293 
Other liabilities                      21          -             -           -             -     43,432     43,432 
Subordinated liabilities and 
 other borrowed funds                  24          -             -           -             -     16,646     16,646 
----------------------------------  -----  ---------  ------------  ----------  ------------  ---------  --------- 
Total at 31 December 2021                     59,472           693      78,431       138,596    629,242    767,838 
----------------------------------  -----  ---------  ------------  ----------  ------------  ---------  --------- 
 

Financial liabilities designated at fair value through profit or loss

 
                                                              30.06.22    31.12.21 
                                                              $million    $million 
----------------------------------------------------------  ----------  ---------- 
Carrying balance aggregate fair value                           74,595      78,431 
Amount contractually obliged to repay at maturity               75,495      78,691 
Difference between aggregate fair value and contractually 
 obliged to repay at maturity                                    (900)       (260) 
Cumulative change in fair value accredited to Credit 
 Risk difference                                                   140           3 
----------------------------------------------------------  ----------  ---------- 
 

The net fair value gain on financial liabilities designated at fair value through profit or loss was $178 million for the half year ended 30 June 2022 (31 December 2021: net loss of $133 million). Further details of the Group's own credit adjustment (OCA) valuation technique is described later in this Note.

Page 87

Interest rate benchmark reform

The Group previously disclosed its exposures to IBOR benchmarks as of 31 December 2021 (refer to page 348 of the 2021 Annual Report). In the Group's view the change in exposure since this date has not been significant, with USD LIBOR continuing to be the Group's largest exposure for both cash products and derivatives. In the second half of 2022 the Group will continue its efforts to actively transition financial contracts referencing USD LIBOR that mature after 30 June 2023 to the Secured Overnight Financing Rate (SOFR). For bilateral lending products, the plan is to achieve such remediation through bilateral negotiation with clients or, where that is not possible, amending the loan contract by adding a clause agreeing to a robust contractual fallback in advance of the cessation of LIBOR. For syndicated lending products, the remediation approach will largely be determined by the lender syndicate in consultation with the client. The Group will also be looking to achieve remediation of trade assets through bilateral negotiation with clients.

The Group's approach to managing the transition to alternative benchmark rates and risks to which the Group is exposed to due to IBOR transition are substantially the same as they were at 31 December 2021, except that the Group is no longer exposed to GBP, JPY, EUR and CHF LIBORs - please refer to pages 347-348 of the 2021 Annual Report.

Valuation of financial instruments

The fair values of quoted financial assets and liabilities in active markets are based on current prices. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for identical instruments held by the Group. Where quoted market prices are not available, or are unreliable because of poor liquidity, fair values have been determined using valuation techniques which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Valuation techniques used include discounted cashflow analysis and pricing models and, where appropriate, comparison with instruments that have characteristics similar to those of the instruments held by the Group.

The Valuation Methodology function is responsible for independent price verification, oversight of fair value and appropriate value adjustments and escalation of valuation issues. Independent price verification is the process of determining that the valuations incorporated into the financial statements are validated independent of the business area responsible for the product. The Valuation Methodology function has oversight of the fair value adjustments to ensure that the financial instruments are priced to exit. These are key controls in ensuring the material accuracy of the valuations incorporated in the financial statements. The market data used for price verification (PV) may include data sourced from recent trade data involving external counterparties or third parties such as Bloomberg, Reuters, brokers and consensus pricing providers. Valuation Methodology performs an ongoing review of the market data sources that are used as part of the PV, fair and prudential valuation processes which are formally documented on a semi-annual basis, detailing the suitability of the market data used for price testing. PV uses independently sourced data that is deemed most representative of the market the instruments trade in. To determine the quality of the market data inputs, factors such as independence, relevance, reliability, availability of multiple data sources and methodology employed by the pricing provider are taken into consideration.

The Valuation and Benchmarks Committee (VBC) is the valuation governance forum consisting of representatives from Group Market Risk, Product Control, Valuation Methodology and the business, which meets monthly to discuss and approve the independent valuations of the inventory. For Principal Finance and Strategic Investments, the valuation forums are held on a quarterly basis to review investments and their valuations.

Significant accounting estimates and judgements

The Group evaluates the significance of financial instruments and material accuracy of the valuations incorporated in the financial statements as they involve a high degree of judgement and estimation uncertainty in determining the carrying values of financial assets and liabilities at the balance sheet date.

-- Fair value of financial instruments is determined using valuation techniques and estimates (see below) which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Changes in the observability of significant valuation inputs can materially affect the fair values of financial instruments.

-- When establishing the exit price of a financial instrument using a valuation technique, the Group estimates valuation adjustments in determining the fair value.

-- In determining the valuation of financial instruments, the Group makes judgements on the amounts reserved to cater for model and valuation risks, which cover both Level 2 and Level 3 assets, and the significant valuation judgements in respect of Level 3 instruments.

-- Where the estimated measurement of fair value is more judgemental in respect of Level 3 assets, these are valued based on models that use a significant degree of non-market-based unobservable inputs.

Page 88

Valuation techniques

Refer to the fair value hierarchy explanation - Level 1, 2 and 3

Financial instruments held at fair value

-- Debt securities - asset-backed securities: Asset-backed securities are valued based on external prices obtained from consensus pricing providers, broker quotes, recent trades, arrangers' quotes, etc. Where an observable price is available for a given security, it is classified as Level 2. In instances where third-party prices are not available or reliable, the security is classified as Level 3. The fair value of Level 3 securities is estimated using market standard cashflow models with input parameter assumptions, which include prepayments, default rates, discount margins derived from comparable securities with similar vintage, collateral type, and credit ratings

-- Debt securities in issue: These debt securities relate to structured notes issued by the Group. Where independent market data is available through pricing vendors and broker sources, these positions are classified as Level 2. Where such liquid external prices are not available, valuations of these debt securities are implied using input parameters such as bond spreads and credit spreads, and are classified as Level 3. These input parameters are determined with reference to the same issuer (if available) or proxies from comparable issuers or assets

-- Derivatives: Derivative products are classified as Level 2 if the valuation of the product is based upon input parameters which are observable from independent and reliable market data sources. Derivative products are classified as Level 3 if there are significant valuation input parameters which are unobservable in the market, such as products where the performance is linked to more than one underlying variable. Examples are foreign exchange basket options, equity options based on the performance of two or more underlying indices and interest rate products with quanto payouts. In most cases these unobservable correlation parameters cannot be implied from the market, and methods such as historical analysis and comparison with historical levels or other benchmark data must be employed

-- Equity shares - private equity: The majority of private equity unlisted investments are valued based on market multiples -Price-to-Earnings (P/E), Price-to-Book (P/B) or enterprise value to earnings before income tax, depreciation and amortisation (EV/EBITDA) ratios - of comparable listed companies. The two primary inputs for the valuation of these investments are the actual or forecast earnings or book values of the investee companies and market multiples for the comparable listed companies. To ensure comparability between these unquoted investments and the comparable listed companies, appropriate adjustments are also applied (for example, liquidity and size) in the valuation. In circumstances where an investment does not have direct comparables, or where the multiples for the comparable companies cannot be sourced from reliable external sources, alternative valuation techniques (for example, discounted cashflow models), which use predominantly unobservable inputs or Level 3 inputs, may be applied. Even though market multiples for the comparable listed companies can be sourced from third-party sources (for example, Bloomberg), and those inputs can be deemed Level 2 inputs, all unlisted investments (excluding those where observable inputs are available, for example, over-the-counter (OTC) prices) are classified as Level 3 on the basis that the valuation methods involve judgements ranging from determining comparable companies to discount rates where the discounted cashflow method is applied

-- Loans and advances: These primarily include loans in the FM Bond and Loan Syndication business which were not syndicated as of the balance sheet date and other financing transactions within Financial Markets, and loans and advances including reverse repurchase agreements that do not have SPPI cashflows or are managed on a fair value basis. These loans are generally bilateral in nature and, where available, their valuation is based on observable clean sales transactions prices or market observable spreads. If observable credit spreads are not available, proxy spreads based on comparables with similar credit grade, sector and region, are used. Where observable credit spreads and market standard proxy methods are available, these loans are classified as Level 2. Where there are no recent transactions or comparables, these loans are classified as Level 3

-- Other debt securities: These debt securities include convertible bonds, corporate bonds, credit and structured notes. Where quoted prices are available through pricing vendors, brokers or observable trading activities from liquid markets, these are classified as Level 2 and valued using such quotes. Where there are significant valuation inputs which are unobservable in the market, due to illiquid trading or the complexity of the product, these are classified as Level 3. The valuations of these debt securities are implied using input parameters such as bond spreads and credit spreads. These input parameters are determined with reference to the same issuer (if available) or proxied from comparable issuers or assets.

Page 89

Financial instruments held at amortised cost

The following sets out the Group's basis for establishing fair values of amortised cost financial instruments and their classification between Levels 1, 2 and 3. As certain categories of financial instruments are not actively traded, there is a significant level of management judgement involved in calculating the fair values:

-- Cash and balances at central banks: The fair value of cash and balances at central banks is their carrying amounts

-- Debt securities in issue, subordinated liabilities and other borrowed funds: The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cashflow model is used based on a current market related yield curve appropriate for the remaining term to maturity

-- Deposits and borrowings: The estimated fair value of deposits with no stated maturity is the amount repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings without quoted market prices is based on discounted cashflows using the prevailing market rates for debts with a similar credit risk and remaining maturity

-- Investment securities: For investment securities that do not have directly observable market values, the Group utilises a number of valuation techniques to determine fair value. Where available, securities are valued using input proxies from the same or closely related underlying (for example, bond spreads from the same or closely related issuer) or input proxies from a different underlying (for example, a similar bond but using spreads for a particular sector and rating). Certain instruments cannot be proxies as set out above, and in such cases the positions are valued using non-market observable inputs. This includes those instruments held at amortised cost and predominantly relates to asset-backed securities. The fair value for such instruments is usually proxies from internal assessments of the underlying cashflows

-- Loans and advances to banks and customers: For loans and advances to banks, the fair value of floating rate placements and overnight deposits is their carrying amounts. The estimated fair value of fixed interest-bearing deposits is based on discounted cashflows using the prevailing money market rates for debts with a similar credit risk and remaining maturity. The Group's loans and advances to customers' portfolio is well diversified by geography and industry. Approximately a quarter of the portfolio re-prices within one month, and approximately half re-prices within 12 months. Loans and advances are presented net of provisions for impairment. The fair value of loans and advances to customers with a residual maturity of less than one year generally approximates the carrying value. The estimated fair value of loans and advances with a residual maturity of more than one year represents the discounted amount of future cashflows expected to be received, including assumptions relating to prepayment rates and creditrRisk. Expected cash flows are discounted at current market rates to determine fair value. The Group has a wide range of individual instruments within its loans and advances portfolio and as a result providing quantification of the key assumptions used to value such instruments is impractical

-- Other assets: Other assets comprise primarily cash collateral and trades pending settlement. The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are either short-term in nature or re-price to current market rates frequently

Page 90

Fair value adjustments

When establishing the exit price of a financial instrument using a valuation technique, the Group considers adjustments to the modelled price which market participants would make when pricing that instrument. The main valuation adjustments (described further below) in determining fair value for financial assets and financial liabilities are as follows:

 
                                                Movement                             Movement 
                                                  during                               during 
                                   01.01.22   the period    30.06.22    01.01.21   the period    31.12.21 
                                   $million     $million    $million    $million     $million    $million 
-------------------------------  ----------  -----------  ----------  ----------  -----------  ---------- 
Bid-offer valuation adjustment          101           16         117         103          (2)         101 
Credit valuation adjustment             165           82         247         189         (24)         165 
Debit valuation adjustment             (70)        (115)       (185)        (55)         (15)        (70) 
Model valuation adjustment                5          (1)           4           5            -           5 
Funding valuation adjustment              -           33          33           5          (5)           - 
Other fair value adjustments             20           10          30          32         (12)          20 
-------------------------------  ----------  -----------  ----------  ----------  -----------  ---------- 
Total                                   221           25         246         279         (58)         221 
-------------------------------  ----------  -----------  ----------  ----------  -----------  ---------- 
 
Income deferrals 
Day 1 and other deferrals               147         (36)         111         138            9         147 
-------------------------------  ----------  -----------  ----------  ----------  -----------  ---------- 
Total                                   147         (36)         111         138            9         147 
-------------------------------  ----------  -----------  ----------  ----------  -----------  ---------- 
 

Note: Bracket represents an asset and credit to the income statement

-- Bid-offer valuation adjustment: Generally, market parameters are marked on a mid-market basis in the revaluation systems, and a bid-offer valuation adjustment is required to quantify the expected cost of neutralising the business' positions through dealing away in the market, thereby bringing long positions to bid and short positions to offer. The methodology to calculate the bid-offer adjustment for a derivative portfolio involves netting between long and short positions and the grouping of risk by strike and tenor based on the hedging strategy where long positions are marked to bid and short positions marked to offer in the systems

-- Credit valuation adjustment (CVA): The Group accounts for CVA against the fair value of derivative products. CVA is an adjustment to the fair value of the transactions to reflect the possibility that our counterparties may default and we may not receive the full market value of the outstanding transactions. It represents an estimate of the adjustment a market participant would include when deriving a purchase price to acquire our exposures. CVA is calculated for each subsidiary, and within each entity for each counterparty to which the entity has exposure and takes account of any collateral we may hold. The Group calculates the CVA by using estimates of future positive exposure, market-implied probability of default (PD) and recovery rates. Where market-implied data is not readily available, we use market-based proxies to estimate the PD. Wrong-way risk occurs when the exposure to a counterparty is adversely correlated with the credit quality of that counterparty, and the Group has implemented a model to capture this impact for key wrong-way exposures. The Group also captures the uncertainties associated with wrong-way risk in the Group's Prudential Valuation Adjustments framework

-- Debit valuation adjustment (DVA): The Group calculates DVA adjustments on its derivative liabilities to reflect changes in its own credit standing. The Group's DVA adjustments will increase if its credit standing worsens and conversely, decrease if its credit standing improves. For derivative liabilities, a DVA adjustment is determined by applying the Group's probability of default to the Group's negative expected exposure against the counterparty. The Group's probability of default and loss expected in the event of default is derived based on bond and credit default swap (CDS) spreads associated with the Group's issuances and market standard recovery levels. The expected exposure is modelled based on the simulation of the underlying risk factors over the expected life of the deal. This simulation methodology incorporates the collateral posted by the Group and the effects of master netting agreements

Page 91

-- Model valuation adjustment: Valuation models may have pricing deficiencies or limitations that require a valuation adjustment. These pricing deficiencies or limitations arise due to the choice, implementation and calibration of the pricing model

-- Funding valuation adjustment (FVA): The Group makes FVA adjustments against derivative products. FVA reflects

an estimate of the adjustment to its fair value that a market participant would make to incorporate funding costs or benefits that could arise in relation to the exposure. FVA is calculated by determining the net expected exposure at a counterparty level and then applying a funding rate to those exposures that reflect the market cost of funding. The FVA for uncollateralised (including partially collateralised) derivatives incorporates the estimated present value of the market funding cost or benefit associated with funding these transactions

-- Other fair value adjustments: The Group calculates the fair value on the interest rate callable products by calibrating to a set of market prices with differing maturity, expiry and strike of the trades

-- Day one and other deferrals: In certain circumstances the initial fair value is based on a valuation technique which differs to the transaction price at the time of initial recognition. However, these gains can only be recognised when the valuation technique used is based primarily on observable market data. In those cases where the initially recognised fair value is based on a valuation model that uses inputs which are not observable in the market, the difference between the transaction price and the valuation model is not recognised immediately in the income statement. The difference is amortised to the income statement until the inputs become observable, or the transaction matures or is terminated. Other deferrals primarily represent adjustments taken to reflect the specific terms and conditions of certain derivative contracts which affect the termination value at the measurement date

In addition, the Group calculates own credit adjustment (OCA) on its issued debt designated at fair value, including structured notes, in order to reflect changes in its own credit standing. Own issued note liabilities are discounted utilising spreads as at the measurement date. These spreads consist of a market level of funding component and an idiosyncratic own credit component. Under IFRS 9 the change in the OCA component is reported under other comprehensive income. The Group's OCA reserve will increase if its credit standing worsens and, conversely, decrease if its credit standing improves. The Group's OCA reserve will reverse over time as its liabilities mature. The OCA at 30 June 2022 is a gain of $140 million (31 December 2021: $3 million gain).

Fair value hierarchy - financial instruments held at fair value

Assets and liabilities carried at fair value, or for which fair values are disclosed, have been classified into three levels according to the observability of the significant inputs used to determine the fair values. Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy. The Group recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level of observability of the inputs to the valuation techniques at the end of the reporting period.

-- Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities

-- Level 2: Fair value measurements are those with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable

-- Level 3: Fair value measurements are those where inputs which could have a significant effect on the instrument's valuation are not based on observable market data

Page 92

The following tables show the classification of financial instruments held at fair value into the valuation hierarchy:

 
                                                    Level 1     Level 2     Level 3       Total 
Assets                                             $million    $million    $million    $million 
-----------------------------------------------  ----------  ----------  ----------  ---------- 
Financial instruments held at fair value 
 through profit or loss 
  Loans and advances to banks                             -       4,476          86       4,562 
  Loans and advances to customers                         4       7,456         985       8,445 
  Reverse repurchase agreements and other 
   similar secured lending                                -      72,784       1,614      74,398 
  Debt securities and other eligible bills           12,714      15,135         537      28,386 
  Of which: 
                                                 ----------  ----------  ----------  ---------- 
     Issued by central banks & governments           12,254       5,283           -      17,537 
     Issued by corporates other than financial 
      institutions(1)                                    52       4,087         504       4,643 
     Issued by financial institutions(1)                408       5,765          33       6,206 
                                                 ----------  ----------  ----------  ---------- 
 
  Equity shares                                       2,069          11         245       2,325 
Derivative financial instruments                      1,681      74,891         104      76,676 
  Of which: 
                                                 ----------  ----------  ----------  ---------- 
     Foreign exchange                                   130      62,947          62      63,139 
     Interest rate                                       24       7,356          20       7,400 
     Credit                                               -       2,115           1       2,116 
     Equity and stock index options                       -         210           1         211 
     Commodity                                        1,527       2,263          20       3,810 
                                                 ----------  ----------  ----------  ---------- 
 
Investment securities 
  Debt securities and other eligible bills           50,959      61,298          14     112,271 
  Of which: 
                                                 ----------  ----------  ----------  ---------- 
     Issued by central banks & governments           38,265      23,727          14      62,006 
     Issued by corporates other than financial 
      institutions(1)                                 1,544       4,164           -       5,708 
     Issued by financial institutions(1)             11,150      33,407           -      44,557 
                                                 ----------  ----------  ----------  ---------- 
 
Equity shares                                           182           6         567         755 
Other assets                                              -           -          25          25 
-----------------------------------------------  ----------  ----------  ----------  ---------- 
Total financial instruments at 30 June 
 2022(2)                                             67,609     236,057       4,177     307,843 
-----------------------------------------------  ----------  ----------  ----------  ---------- 
 
Liabilities 
Financial instruments held at fair value 
 through profit or loss 
  Deposits by banks                                       -       1,271         319       1,590 
  Customer accounts                                       -      10,350         685      11,035 
  Repurchase agreements and other similar 
   secured borrowing                                      -      55,320           -      55,320 
  Debt securities in issue                                -       6,162         645       6,807 
  Short positions                                     5,154       2,967          97       8,218 
 
Derivative financial instruments                      1,636      74,265         196      76,097 
  Of which: 
                                                 ----------  ----------  ----------  ---------- 
     Foreign exchange                                   139      59,525          16      59,680 
     Interest rate                                       22       9,031          53       9,106 
     Credit                                               -       2,695           5       2,700 
     Equity and stock index options                       -         126         122         248 
     Commodity                                        1,475       2,888           -       4,363 
     Other liabilities                                    -           9           4          13 
                                                 ----------  ----------  ----------  ---------- 
 
Total financial instruments at 30 June 
 2022(2)                                              6,790     150,344       1,946     159,080 
-----------------------------------------------  ----------  ----------  ----------  ---------- 
 

1 Includes covered bonds of $9,347 million, securities issued by Multilateral Development Banks/International Organisations of $12,830 million and State-owned agencies and development banks of $11,950 million

2 The above table does not include held for sale assets of $1 million and liabilities of $ nil

There were no significant changes to valuation or levelling approaches during the period ended 30 June 2022.

There were no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the period ended 30 June 2022.

Page 93

 
                                                    Level 1     Level 2     Level 3       Total 
Assets                                             $million    $million    $million    $million 
-----------------------------------------------  ----------  ----------  ----------  ---------- 
Financial instruments held at fair value 
 through profit or loss 
  Loans and advances to banks                             -       3,838           9       3,847 
  Loans and advances to customers                         -       8,596       1,357       9,953 
  Reverse repurchase agreements and other 
   similar secured lending                                -      78,443       1,566      80,009 
  Debt securities and other eligible bills           12,057      17,019         349      29,425 
  Of which: 
                                                 ----------  ----------  ----------  ---------- 
     Issued by central banks & governments           10,731       7,201           -      17,932 
     Issued by corporates other than financial 
      institutions(1)                                     1       3,750         111       3,862 
     Issued by financial institutions(1)              1,325       6,068         238       7,631 
                                                 ----------  ----------  ----------  ---------- 
 
  Equity shares                                       5,637          38         186       5,861 
Derivative financial instruments                      1,066      51,289          90      52,445 
  Of which: 
                                                 ----------  ----------  ----------  ---------- 
     Foreign exchange                                   161      41,577          10      41,748 
     Interest rate                                        9       6,314          53       6,376 
     Credit                                               -       2,265          24       2,289 
     Equity and stock index options                       -         133           3         136 
     Commodity                                          896       1,000           -       1,896 
                                                 ----------  ----------  ----------  ---------- 
 
Investment securities 
  Debt securities and other eligible bills           51,298      70,037          40     121,375 
  Of which: 
                                                 ----------  ----------  ----------  ---------- 
     Issued by central banks & governments           39,590      24,651          40      64,281 
     Issued by corporates other than financial 
      institutions(1)                                     -       1,963           -       1,963 
     Issued by financial institutions(1)             11,708      43,423           -      55,131 
                                                 ----------  ----------  ----------  ---------- 
 
  Equity shares                                         227          17         493         737 
  Other Assets                                            -           -          26          26 
-----------------------------------------------  ----------  ----------  ----------  ---------- 
Total financial instruments at 31 December 
 2021(2)                                             70,285     229,277       4,116     303,678 
-----------------------------------------------  ----------  ----------  ----------  ---------- 
 
Liabilities 
Financial instruments held at fair value 
 through profit or loss 
                                                 ----------  ----------  ----------  ---------- 
  Deposits by banks                                       -       1,069         283       1,352 
  Customer accounts                                       -       8,837         454       9,291 
  Repurchase agreements and other similar 
   secured borrowing                                      -      62,388           -      62,388 
  Debt securities in issue                                -       4,776         821       5,597 
  Short positions                                     4,187       2,375           -       6,562 
                                                 ----------  ----------  ----------  ---------- 
 
Derivative financial instruments                        949      52,356          94      53,399 
  Of which: 
     Foreign exchange                                   169      41,555           3      41,727 
     Interest rate                                        7       6,448          16       6,471 
     Credit                                               -       3,084          41       3,125 
     Equity and stock index options                       -         126          34         160 
     Commodity                                          773       1,143           -       1,916 
     Other Liabilities                                    -           6           1           7 
                                                 ----------  ----------  ----------  ---------- 
 
Total financial instruments at 31 December 
 2021(2)                                              5,136     131,807       1,653     138,596 
-----------------------------------------------  ----------  ----------  ----------  ---------- 
 

1 Includes covered bonds of $7,326 million, securities issued by Multilateral Development Banks/International Organisations of $12,109 million, and State-owned agencies and development banks of $19,959 million

   2   The above table does not include held for sale assets of $43 million and liabilities of $ nil 

Page 94

Fair value hierarchy - financial instruments measured at amortised cost

The following table shows the carrying amounts and incorporates the Group's estimate of fair values of those financial assets and liabilities not presented on the Group's balance sheet at fair value. These fair values may be different from the actual amount that will be received or paid on the settlement or maturity of the financial instrument. For certain instruments, the fair value may be determined using assumptions for which no observable prices are available.

 
                                                                          Fair value 
------------------------------------------  ----------  ---------------------------------------------- 
                                              Carrying 
                                                 value     Level 1     Level 2     Level 3       Total 
                                              $million    $million    $million    $million    $million 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
Assets 
Cash and balances at central banks(1)           67,005           -      67,005           -      67,005 
Loans and advances to banks                     36,201           -      36,146          32      36,178 
                                            ----------  ----------  ----------  ----------  ---------- 
  Of which: reverse repurchase agreements 
   and other 
   similar secured lending                         795           -         795           -         795 
                                            ----------  ----------  ----------  ----------  ---------- 
Loans and advances to customers                293,508           -      53,961     239,075     293,036 
                                            ----------  ----------  ----------  ----------  ---------- 
  Of which: reverse repurchase agreements 
   and other 
   similar secured lending                       7,894           -       3,189       4,705       7,894 
                                            ----------  ----------  ----------  ----------  ---------- 
Investment securities(2)                        51,866           -      50,627          25      50,652 
Other assets(1)                                 51,135           -      51,135           -      51,135 
Assets held for sale                                60           -           -          60          60 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
At 30 June 2022                                499,775           -     258,874     239,192     498,066 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
Liabilities 
Deposits by banks                               31,173           -      31,248           -      31,248 
Customer accounts                              453,742           -     453,691           -     453,691 
Repurchase agreements and other 
 similar secured borrowing                       1,723           -       1,723           -       1,723 
Debt securities in issue                        58,043      25,231      32,400           -      57,631 
Subordinated liabilities and other 
 borrowed funds                                 14,933      14,143          68           -      14,211 
Other liabilities(1)                            60,102           -      60,101           1      60,102 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
At 30 June 2022                                619,716      39,374     579,231           1     618,606 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
 
 
                                                                          Fair value 
------------------------------------------  ----------  ---------------------------------------------- 
                                              Carrying 
                                                 value     Level 1     Level 2     Level 3       Total 
                                              $million    $million    $million    $million    $million 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
Assets 
Cash and balances at central banks(1)           72,663           -      72,663           -      72,663 
Loans and advances to banks                     44,383           -      44,383           -      44,383 
                                            ----------  ----------  ----------  ----------  ---------- 
  Of which: reverse repurchase agreements 
   and other 
   similar secured lending                       1,079           -       1,079           -       1,079 
                                            ----------  ----------  ----------  ----------  ---------- 
Loans and advances to customers                298,468           -      42,136     256,289     298,425 
                                            ----------  ----------  ----------  ----------  ---------- 
  Of which: reverse repurchase agreements 
   and other 
   similar secured lending                       7,331           -       3,764       3,567       7,331 
                                            ----------  ----------  ----------  ----------  ---------- 
Investment securities(2)                        41,325           -      41,864           -      41,864 
Other assets(1)                                 40,068           -      40,067           1      40,068 
Assets held for sale                                52           -           -          52          52 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
At 31 December 2021                            496,959           -     241,113     256,342     497,455 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
Liabilities 
Deposits by banks                               30,041           -      30,041           -      30,041 
Customer accounts                              474,570           -     474,645           -     474,645 
Repurchase agreements and other 
 similar secured borrowing                       3,260           -       3,260           -       3,260 
Debt securities in issue                        61,293      26,073      35,503           -      61,576 
Subordinated liabilities and other 
 borrowed funds                                 16,646      16,811         519           -      17,330 
Other liabilities(1)                            43,432           -      43,431           1      43,432 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
At 31 December 2021                            629,242      42,884     587,399           1     630,284 
------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
 

1 The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are short-term in nature or reprice to current market rates frequently

2 Includes Government bonds and Treasury bills of $17,570 million at 30 June 2022 and $17,153 million at 31 December 2021

Page 95

Fair value of financial instruments

Level 3 Summary and significant unobservable inputs

The following table presents the Group's primary Level 3 financial instruments which are held at fair value. The table also presents the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, the range of values for those inputs and the weighted average of those inputs:

 
                             Value as at 
                             30 June 2022 
----------------------  ----------------------  --------------------  --------------------  -------------  --------- 
                                                                      Significant 
                           Assets  Liabilities  Principal valuation   unobservable                          Weighted 
Instrument               $million     $million   technique            inputs                       Range1   average2 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Loans and advances                              Discounted cash 
 to banks                      86            -   flows                Price/yield            1.5% - 10.2%       8.4% 
----------------------  ---------  ----------- 
                                                                      Credit spreads                 1.0%       1.0% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Loans and advances                              Discounted cash 
 to customers                 985            -   flows                Price/yield            1.3% - 16.3%       4.6% 
----------------------  ---------  ----------- 
                                                                      Recovery rates          5.3% - 100%      89.8% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Reverse repurchase 
 agreements and 
 other similar                                  Discounted cash 
 secured lending            1,614            -   flows                Repo curve              0.4% - 4.9%       3.1% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Debt securities, 
 alternative tier 
 one and other                                  Discounted cash 
 eligible securities          536            -   flows                Price/yield            3.3% - 12.4%       8.3% 
----------------------  ---------  ----------- 
                                                                                                  0.01% - 
                                                                      Recovery rates                 1.0%       0.2% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Government bonds                                Discounted cash 
 and treasury bills            14            -   flows                Price/yield             2.7% - 5.5%       3.7% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Asset-backed                                    Discounted cash 
 securities                     1            -   flows                Price/yield                    5.0%       5.0% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Equity shares 
 (includes private                              Comparable 
 equity investments)          812            -  pricing/yield         EV/EBITDA multiples    6.1x - 13.3x       7.5x 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                      EV/Revenue multiples   8.7x - 57.6x      24.1x 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                                                  12.2x - 
                                                                      P/E multiples                 21.2x      13.7x 
                                                                      --------------------  -------------  --------- 
                                                                      P/B multiples           0.4x - 3.2x       1.2x 
                                                                      --------------------  -------------  --------- 
                                                                      P/S multiples                  1.8x       1.8x 
                                                                      --------------------  -------------  --------- 
                                                                      Liquidity discount     9.3% - 29.5%      14.6% 
                                                --------------------  --------------------  -------------  --------- 
                                                Discounted cash 
                                                 flows                Discount rates         6.9% - 18.1%       8.7% 
                                                --------------------  --------------------  -------------  --------- 
                                                                      Equity value based 
                                                Option pricing         on EV/Revenue 
                                                 model                 multiples             1.3x - 87.0x      15.8x 
                                                --------------------  --------------------  -------------  --------- 
                                                                      Equity value based          60.0% - 
                                                                       on volatility                70.0%      66.8% 
                                                --------------------  --------------------  -------------  --------- 
                                                Internal pricing 
                                                 model                Equity correlation      15.0%-99.0%      69.0% 
                                                                      --------------------  -------------  --------- 
                                                                      Equity-FX 
                                                                      correlation           (70.0%)-85.0%    (21.0)% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Other Assets                   25            -  NAV                   N/A                             N/A        N/A 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Derivative financial 
 instruments of 
 which: 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                      Foreign exchange 
                                                Option pricing         option implied 
  Foreign exchange             62           16   model                 volatility            5.9% - 15.4%       7.2% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Discounted cash       Foreign exchange            (15.8%) 
                                                 flows                 curves                     - 39.3%       0.9% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Discounted cash       Interest rate               (15.8%) 
  Interest rate                20           53   flows                 curves                     - 15.3%       0.1% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Option pricing        Bond option implied 
                                                 model                 volatility                   20.0%      20.0% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Discounted cash 
  Credit                        1            5   flows                Credit spreads          0.1% - 4.5%       1.4% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                      Price/yield            5.1% - 14.6%       8.9% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Internal pricing 
  Commodities                  20                model                CM-CM correlation             92.7%      92.7% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
  Equity and stock                              Internal pricing                                  15.0% - 
   index                        1          122   model                Equity correlation            99.0%      69.0% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                      Equity-FX                   (70.0)% 
                                                                      correlation                 - 85.0%    (21.0)% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Discounted cash 
Deposits by banks               -          319   flows                Credit spreads          0.3% - 3.7%       2.0% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                      Price/yield                     N/A        N/A 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Discounted cash 
Customer accounts               -          685   flows                Credit spreads          1.0% - 2.4%       1.0% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                      Interest rate               27.8% - 
                                                                       curves                       39.3%      31.0% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                      Price/yield            6.7% - 18.1%      14.8% 
                                                --------------------  --------------------  -------------  --------- 
                                                Internal pricing                                  15.0% - 
                                                 model                Equity correlation            99.0%      69.0% 
                                                --------------------  --------------------  -------------  --------- 
                                                                      Equity-FX                   (70.0)% 
                                                                      correlation                 - 85.0%    (21.0)% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Debt securities                                 Discounted cash 
 in issue                       -          645   flows                Credit spreads          0.5% - 2.4%       1.1% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                                      Price/yield            6.9% - 13.7%      10.5% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Internal pricing                                  15.0% - 
                                                 model                Equity correlation            99.0%      69.0% 
                                                --------------------  --------------------  -------------  --------- 
                                                                      Equity-Fx                   (70.0)% 
                                                                      correlation                 - 85.0%    (21.0)% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Discounted cash 
Short positions                 -           97   flows                Price/yield             7.7% - 7.7%       7.7% 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
                                                Comparable                                        3.14x - 
Other Liabilities               -            4  pricing/yield         EV/EBITDA multiples           9.41x      6.32x 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
Total                       4,177        1,946 
----------------------  ---------  -----------  --------------------  --------------------  -------------  --------- 
 

1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group's Level 3 financial instruments as at

30 June 2022. The ranges of values used are reflective of the underlying characteristics of these Level 3 financial instruments based on the market conditions at the balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group's Level 3 financial instruments

2 Weighted average for non-derivative financial instruments has been calculated by weighting inputs by the relative fair value. Weighted average for derivatives has been provided by weighting inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indicator

Page 96

 
                            Value as at 
                             31 December 
                                2021 
---------------------  ----------------------  -------------------  --------------------  -------------  ----------- 
                                                                    Significant 
                          Assets  Liabilities  Principal valuation  unobservable                            Weighted 
Instrument              $million     $million   technique           inputs                       Range1   average(2) 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Loans and advances                             Discounted cash 
 to banks                      9            -   flows               Recovery rates           87.3%-100%        93.6% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Loans and advances                             Discounted cash 
 to customers              1,357            -   flows               Price/yield            0.2% - 11.8%         3.1% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                                                10.6% - 
                                                                    Recovery rates                 100%        87.8% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Reverse repurchase 
 agreements and 
 other similar                                 Discounted cash 
 secured lending           1,566            -   flows               Repo curve                0.3%-3.0%         2.4% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Debt securities, 
 alternative tier 
 one and other                                 Discounted cash 
 eligible securities         349            -   flows               Price/yield            5.1% - 12.4%         7.5% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                                                0.01% - 
                                                                    Recovery rates                 1.0%         0.2% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Government bonds                               Discounted cash 
 and treasury bills           40            -   flows               Price/yield             2.7% - 5.5%         3.7% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Asset-backed                   -            -  Discounted cash      Price/yield                     N/A          N/A 
securities                                      flows 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Equity shares 
 (includes private                             Comparable 
 equity investments)         679            -  pricing/yield        EV/EBITDA multiples      6.1x-15.3x         8.6x 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    EV/Revenue multiples          10.1x        10.1x 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    P/E multiples           12.6x-25.3x        14.9x 
                                                                    --------------------  -------------  ----------- 
                                                                    P/B multiples             0.4x-3.3x         1.4x 
                                                                    --------------------  -------------  ----------- 
                                                                    P/S multiples             1.8x-2.6x         1.8x 
                                                                    --------------------  -------------  ----------- 
                                                                    Liquidity discount       7.9%-29.2%        16.5% 
                                               -------------------  --------------------  -------------  ----------- 
                                               Discounted cash 
                                                flows               Discount rates           6.0%-17.4%         8.6% 
                                               -------------------  --------------------  -------------  ----------- 
                                               Option pricing 
                                                model               EV/Revenue multiples     4.0x-85.5x        12.1x 
                                               -------------------  --------------------  -------------  ----------- 
                                                                    Volatility              55.0%-65.0%        60.3% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Other Assets                  26            -  NAV                  N/A                             N/A          N/A 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Derivative financial 
 instruments of 
 which: 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    Foreign exchange 
                                               Option pricing        option implied 
  Foreign exchange            10            3   model                volatility             3.1% - 6.1%         5.1% 
---------------------  ---------  ----------- 
                                               Discounted cash      Foreign exchange            (16.4)% 
                                                flows                curves                     - 57.3%         9.0% 
---------------------  ---------  ----------- 
                                               Discounted cash      Interest rate 
  Interest rate               53           16   flows                curves               (16.4)%-18.8%         5.0% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                               Option pricing       Bond option implied             N/A          N/A 
                                                model                volatility 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                               Discounted cash 
  Credit                      24           41   flows               Credit spreads           0.1%-11.5%         1.0% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    Price/yield              5.9% -7.3%         6.6% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
  Equity and stock                             Internal pricing 
   index                       3           34   model               Equity correlation     8.0% - 96.0%        70.0% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    Equity-FX 
                                                                    correlation           (70.0)%-85.0%      (33.0)% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                               Discounted cash 
Deposits by banks              -          283   flows               Credit spreads          0.4% - 3.0%         1.4% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    Price/yield               6.8%-8.3%         7.5% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                               Discounted cash 
Customer accounts              -          454   flows               Credit spreads          1.0% - 2.0%         1.2% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    Interest rate 
                                                                     curves                   0.9%-5.6%         4.7% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    Price/yield              8.9%-12.1%        10.1% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Debt securities                                Discounted cash 
 in issue                      -          821   flows               Credit spreads            0.9%-2.2%         1.0% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                                                    Interest rate 
                                                                     curves                 0.9% - 5.6%         4.9% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                               Internal pricing 
                                                model               Equity correlation     8.0% - 96.0%        70.0% 
                                               -------------------  --------------------  -------------  ----------- 
                                                                    Equity-FX 
                                                                    correlation           (70.0)%-85.0%      (33.0)% 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Short positions                -            -  N/A                  N/A                             N/A          N/A 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
                                               Comparable 
Other Liabilities              -            1  pricing/yield        EV/EBITDA multiples     3.07x-9.95x        6.84x 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
Total                      4,116        1,653 
---------------------  ---------  -----------  -------------------  --------------------  -------------  ----------- 
 

1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group's Level 3 financial instruments as at 31 December 2021. The ranges of values used are reflective of the underlying characteristics of these Level 3 financial instruments based on the market conditions at the balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group's Level 3 financial instruments

2 Weighted average for non-derivative financial instruments has been calculated by weighting inputs by the relative fair value. Weighted average for derivatives has been provided by weighting inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indicator

Page 97

The following section describes the significant unobservable inputs identified in the valuation technique table:

-- Comparable price/yield is a valuation methodology in which the price of a comparable instrument is used to estimate the fair value where there are no direct observable prices. Yield is the interest rate that is used to discount the future cashflows in a discounted cashflow model. Valuation using comparable instruments can be done by calculating an implied yield (or spread over a liquid benchmark) from the price of a comparable instrument, then adjusting that yield (or spread) to derive a value for the instrument. The adjustment should account for relevant differences in the financial instruments such as maturity and/or credit quality. Alternatively, a price-to-price basis can be assumed between the comparable instrument and the instrument being valued in order to establish the value of the instrument (for example, deriving a fair value for a junior unsecured bond from the price of a senior secured bond). An increase in price, in isolation, would result in a favourable movement in the fair value of the asset. An increase in yield, in isolation, would result in an unfavourable movement in the fair value of the asset

-- Correlation is the measure of how movement in one variable influences the movement in another variable. An equity correlation is the correlation between two equity instruments, while an interest rate correlation refers to the correlation between two swap rates

-- Credit spread represents the additional yield that a market participant would demand for taking exposure to the Credit Risk of an instrument

-- Discount rate refers to the rate of return used to convert expected cash flows into present value

-- Equity-FX correlation is the correlation between equity instrument and foreign exchange instrument

-- EV/EBITDA multiple is the ratio of Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA). EV is the aggregate market capitalisation and debt minus the cash and cash equivalents. An increase in

EV/EBITDA multiple will result in a favourable movement in the fair value of the unlisted firm

-- EV/Revenue multiple is the ratio of Enterprise Value (EV) to Revenue. An increase in EV/Revenue multiple will result in a favourable movement in the fair value of the unlisted firm

-- Foreign exchange curves is the term structure for forward rates and swap rates between currency pairs over a specified period

-- Net asset value (NAV) is the value of an entity's assets after deducting any liabilities

-- Interest rate curves is the term structure of interest rates and measure of future interest rates at a particular point in time

-- Liquidity discounts in the valuation of unlisted investments are primarily applied to the valuation of unlisted firms' investments to reflect the fact that these stocks are not actively traded. An increase in liquidity discount will result in an unfavourable movement in the fair value of the unlisted firm

-- Price-Earnings (P/E) multiple is the ratio of the market value of the equity to the net income after tax. An increase in P/E multiple will result in a favourable movement in the fair value of the unlisted firm

-- Price-Book (P/B) multiple is the ratio of the market value of equity to the book value of equity. An increase in P/B multiple will result in a favourable movement in the fair value of the unlisted firm

-- Price-Sales (P/S) multiple is the ratio of the market value of equity to sales. An increase in P/S multiple will result in a favourable movement in the fair value of the unlisted firm

-- Recovery rates are the expectation of the rate of return resulting from the liquidation of a particular loan. As the probability of default increases for a given instrument, the valuation of that instrument will increasingly reflect its expected recovery level assuming default. An increase in the recovery rate, in isolation, would result in a favourable movement in the fair value of the loan

-- Repo curve is the term structure of repo rates on repos and reverse repos at a particular point in time

-- Volatility represents an estimate of how much a particular instrument, parameter or index will change in value over time. Generally, the higher the volatility, the more expensive the option will be

Page 98

Level 3 movement tables - financial assets

The table below analyses movements in Level 3 financial assets carried at fair value.

 
                                                                    30.06.22 
---------------  --------------------------------------------------------------------------------------------------------------- 
                                Held at fair value through profit                                     Investment 
                                              or loss                                                 securities 
                 ----------------------------------------------------------------  -----------  ----------------------  -------- 
                                                         Debt                                          Debt 
                                                  securities,                                   securities, 
                                         Reverse  alternative                                   alternative 
                                      repurchase         tier                                          tier 
                               Loans  agreements          one                                           one 
                    Loans        and   and other          and                                           and 
                      and   advances     similar        other                       Derivative        other 
                 advances         to     secured     eligible    Equity     Other    financial     eligible     Equity 
                 to banks  customers     lending        bills    shares    Assets  instruments        bills     shares     Total 
                 $million   $million    $million     $million  $million  $million     $million     $million   $million  $million 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
At 1 January 
 2022                   9      1,357       1,566          349       186        26           90           40        493     4,116 
Total 
 (losses)/gains 
 recognised 
 in 
 income 
 statement            (4)       (76)           2        (129)         4         -           13            -          -     (190) 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
  Net trading 
   income             (4)       (76)           2        (129)         4         -           13            -          -     (190) 
  Other 
  operating 
  income                -          -           -            -         -         -            -            -          -         - 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Total 
 (losses)/gains 
 recognised 
 in other 
 comprehensive 
 income (OCI)           -          -           -            -         -         -            -            -       (40)      (40) 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
  Fair value 
   through OCI 
   reserve              -          -           -            -         -         -            -            -       (32)      (32) 
  Exchange 
   difference           -          -           -            -         -         -            -            -        (8)       (8) 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Purchases              90        326       2,764          347        58         -           44          (1)        115     3,743 
Issues 
Sales                 (9)      (255)     (2,497)        (104)       (3)       (1)         (46)            -        (1)   (2,916) 
Settlements             -      (321)       (221)          (2)         -         -          (4)         (25)          -     (573) 
Transfers out1          -       (65)           -            -         -         -          (4)            -          -      (69) 
Transfers in2           -         19           -           76         -         -           11            -          -       106 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
At 30 June 
 2022                  86        985       1,614          537       245        25          104           14        567     4,177 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Total 
 unrealised 
 (losses)/gains 
 recognised 
 in the income 
 statement, 
 within net 
 trading 
 income, 
 relating to 
 change in fair 
 value 
 of assets 
 held at 
 30 June 2022           -       (40)           -          (2)         8         -            3            -          -      (31) 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
 

1 Transfers out includes loans and advances and derivative financial instruments where the valuation parameters became observable during the period and were transferred to Level 1 and Level 2

2 Transfers in primarily relate to loans and advances, debt securities, alternative tier one and other eligible bills, and derivatives financial instruments where the valuation parameters become unobservable during the period

Page 99

The table below analyses movements in Level 3 financial assets carried at fair value.

 
                                                                    30.06.21 
---------------  --------------------------------------------------------------------------------------------------------------- 
                                Held at fair value through profit                                     Investment 
                                              or loss                                                 securities 
                 ----------------------------------------------------------------  -----------  ----------------------  -------- 
                                                         Debt                                          Debt 
                                                  securities,                                   securities, 
                                         Reverse  alternative                                   alternative 
                                      repurchase         tier                                          tier 
                               Loans  agreements          one                                           one 
                    Loans        and   and other          and                                           and 
                      and   advances     similar        other                       Derivative        other 
                 advances         to     secured     eligible    Equity     Other    financial     eligible     Equity 
                 to banks  customers     lending        bills    shares    Assets  instruments        bills     shares     Total 
Assets           $million   $million    $million     $million  $million  $million     $million     $million   $million  $million 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
At 1 January 
 2021                 200        718       1,064          258       279         -            8           40        381     2,948 
Total 
 gains/(losses) 
 recognised 
 in 
 income 
 statement              1       (42)           -            -      (21)         -            -            -          -      (62) 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
  Net trading 
   income               1       (42)           -            -      (21)         -            -            -          -      (62) 
  Other 
  operating 
  income                -          -           -            -         -         -            -            -          -         - 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Total gains 
 recognised 
 in other 
 comprehensive 
 income (OCI)           -          -           -            -         -         -            -            1         42        43 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
  Fair value 
   through OCI 
   reserve              -          -           -            -         -         -            -            1         42        43 
  Exchange 
  difference            -          -           -            -         -         -            -            -          -         - 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Purchases               -        495       2,454          184         8         -           43            -         28     3,212 
Issues 
Sales                   -      (316)     (2,196)        (115)      (44)         -          (2)            -        (3)   (2,676) 
Settlements         (201)      (153)           -            -         -         -          (3)         (10)          -     (367) 
Transfers out1          -       (46)           -            -       (6)         -          (4)            -       (60)     (116) 
Transfers in2           -        558           -            -         -        17            4           10          -       589 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
At 30 June 
 2021                   -      1,214       1,322          327       216        17           46           41        388     3,571 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Total 
 unrealised 
 (losses) 
 recognised 
 in the income 
 statement, 
 within 
 net trading 
 income, 
 relating 
 to change 
 in fair value 
 of assets held 
 at 30 June 
 2021                   -        (1)           -          (7)       (2)         -          (3)            -          -      (13) 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
 

Page 100

 
                                                                    31.12.21 
---------------  --------------------------------------------------------------------------------------------------------------- 
                                Held at fair value through profit                                     Investment 
                                              or loss                                                 securities 
                 ----------------------------------------------------------------  -----------  ----------------------  -------- 
                                                         Debt                                          Debt 
                                                  securities,                                   securities, 
                                         Reverse  alternative                                   alternative 
                                      repurchase         tier                                          tier 
                               Loans  agreements          one                                           one 
                    Loans        and   and other          and                                           and 
                      and   advances     similar        other                       Derivative        other 
                 advances         to     secured     eligible    Equity     Other    financial     eligible     Equity 
                 to banks  customers     lending        bills    shares    Assets  instruments        bills     shares     Total 
Assets           $million   $million    $million     $million  $million  $million     $million     $million   $million  $million 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
At 1 July 2021          -      1,214       1,322          327       216        17           46           41        388     3,571 
Total 
 (losses)/gains 
 recognised 
 in 
 income 
 statement              -       (55)           2         (24)       (9)         -           34            -          -      (52) 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
  Net trading 
   income               -       (55)           2         (23)       (9)         -           34            -          -      (51) 
  Other 
   operating 
   income               -          -           -          (1)         -         -            -            -          -       (1) 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Impairment 
 charge                 -          -           -            -         -         -            -            -          -         - 
Total gains 
 /(losses) 
 recognised 
 in other 
 comprehensive 
 income (OCI)           -          -           -            -         -         -            -            2         19        21 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
  Fair value 
   through OCI 
   reserve              -          -           -            -         -         -            -            5         21        26 
  Cash flow 
  hedge reserve         -          -           -            -         -         -            -            -          -         - 
  Exchange 
   difference           -          -           -            -         -         -            -          (3)        (2)       (5) 
                 --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Purchases               9        786       2,519          203         -         -           48            -         95     3,660 
Issues 
Sales                   -      (371)     (2,196)        (111)      (11)         -         (30)            -        (6)   (2,725) 
Settlements             -      (149)        (81)         (70)         -         -          (2)          (3)          -     (305) 
Transfers out1          -       (14)           -            -      (10)         -          (7)            -        (3)      (34) 
Transfers in2           -       (54)           -           24         -         9            1            -          -      (20) 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
At 31 December 
 2021                   9      1,357       1,566          349       186        26           90           40        493     4,116 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
Total 
 unrealised 
 gains/(losses) 
 recognised 
 in the income 
 statement, 
 within net 
 trading 
 income, 
 relating to 
 change in fair 
 value 
 of assets 
 held at 
 31 December 
 2021                   -          1           -           15      (13)         -           22            -          -        25 
---------------  --------  ---------  ----------  -----------  --------  --------  -----------  -----------  ---------  -------- 
 

1 Transfers out includes loans and advances, derivative financial instruments, debt securities, alternative tier one and other eligible bills and equity shares where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2.

2 Transfers in primarily relate to loans and advances, debt securities, alternative tier one and other eligible bills, and equity shares where the valuation parameters become unobservable during the year

Page 101

Level 3 movement tables - financial liabilities

 
                                                                        30.06.22 
--------------------------------  ------------------------------------------------------------------------------------ 
                                                               Debt    Derivative 
                                   Deposits   Customer   securities     financial       Short         Other 
                                   by banks   accounts     in issue   instruments   positions   Liabilities      Total 
                                   $million   $million     $million      $million    $million      $million   $million 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
At 1 January 2022                       283        454          821            94           -             1      1,653 
Total (gains)/losses recognised 
 in income statement - 
 net trading income                    (15)       (56)        (142)           104         (3)             3      (109) 
Issues                                  223        934          387            89         100             -      1,733 
Settlements                           (172)      (647)        (473)          (89)           -             -    (1,381) 
Transfers out1                            -          -         (24)           (3)           -             -       (27) 
Transfers in2                             -          -           76             1           -             -         77 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
At 30 June 2022                         319        685          645           196          97             4      1,946 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
Total unrealised (gains) 
 recognised 
 in the income statement, within 
 net trading income, relating 
 to change in fair value of 
 liabilities 
 held at 30 June 2022                     -        (2)          (7)           (2)           -             -       (11) 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
 
 
                                                                        30.06.21 
--------------------------------  ------------------------------------------------------------------------------------ 
                                                               Debt    Derivative 
                                   Deposits   Customer   securities     financial       Short         Other 
                                   by banks   Accounts     in issue   instruments   positions   Liabilities      Total 
                                   $million   $million     $million      $million    $million      $million   $million 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
At 1 January 2021                       146         21          160           119           -             -        446 
Total losses/(gains) recognised 
 in income statement - 
 net trading income                       8         11            -           (3)           -             -         16 
Issues                                  268        228          734           100           -             -      1,330 
Settlements                           (146)       (52)        (361)         (107)           -             -      (666) 
Transfers out1                            -          -         (22)           (1)           -             -       (23) 
Transfers in2                             -          -           92             3           -             -         95 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
At 30 June 2021                         276        208          603           111           -             -      1,198 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
Total unrealised losses/(gains) 
 recognised in the income 
 statement, 
 within net trading income, 
 relating 
 to change in fair value of 
 liabilities 
 held at 30 June 2021                     -         12          (7)             -           -             -          5 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
 
 
                                                                        31.12.21 
--------------------------------  ------------------------------------------------------------------------------------ 
                                                               Debt    Derivative 
                                   Deposits   Customer   securities     financial       Short         Other 
                                   by banks   Accounts     in issue   instruments   positions   Liabilities      Total 
                                   $million   $million     $million      $million    $million      $million   $million 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
At 1 July 2021                          276        208          603           111           -             -      1,198 
Total (gains) recognised in 
 income statement - 
 net trading income                       -       (16)         (12)          (20)           -             -       (48) 
Issues                                    1        575          881            66           -             -      1,523 
Settlements                               1      (313)        (625)          (74)           -             -    (1,011) 
Transfers out1                            -          -         (26)           (5)           -             -       (31) 
Transfers in2                             5          -            -            16           -             1         22 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
At 31 December 2021                     283        454          821            94           -             1      1,653 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
Total unrealised (gains)/losses 
 recognised in the income 
 statement, 
 within net trading income, 
 relating 
 to change in fair value of 
 liabilities 
 held at 31 December 2021                 -       (12)            7          (14)           -             -       (19) 
--------------------------------  ---------  ---------  -----------  ------------  ----------  ------------  --------- 
 

1 Transfers out during the year primarily relate to debt securities in issue and derivative financial instruments where the valuation parameters became observable during the year and were transferred to Level 2 financial liabilities

2 Transfers in during the year primarily relate to derivative financial instruments and debt securities in issue where the valuation parameters become unobservable during the year

Page 102

Sensitivities in respect of the fair values of Level 3 assets and liabilities

Sensitivity analysis is performed on products with significant unobservable inputs. The Group applies a 10 per cent increase

or decrease on the values of these unobservable inputs, to generate a range of reasonably possible alternative valuations. The percentage shift is determined by statistical analysis performed on a set of reference prices based on the composition

of the Group's Level 3 inventory as the measurement date. Favourable and unfavourable changes (which show the balance adjusted for input change) are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable parameters. The Level 3 sensitivity analysis assumes a one-way market move and does not consider offsets for hedges.

 
                                         Held at fair value through               Fair value through other 
                                               profit or loss                       comprehensive income 
---------------------------------  --------------------------------------  -------------------------------------- 
                                                 Favourable  Unfavourable                Favourable  Unfavourable 
                                   Net exposure     changes       changes  Net exposure     changes       changes 
                                       $million    $million      $million      $million    $million      $million 
---------------------------------  ------------  ----------  ------------  ------------  ----------  ------------ 
Financial instruments 
 held at fair value 
Loans and advances                        1,071       1,096         1,030             -           -             - 
Reverse Repurchase agreements 
 and other similar secured 
 lending                                  1,614       1,624         1,604             -           -             - 
Asset backed securities                       1           1             1             -           -             - 
Debt securities, alternative 
 tier one and other eligible 
 bills                                      536         554           519            14          14            14 
Equity shares                               245         270           220           567         614           514 
Other Assets                                 25          28            23             -           -             - 
Derivative financial instruments           (92)        (57)         (127)             -           -             - 
Customers accounts                        (685)       (654)         (716)             -           -             - 
Deposits by banks                         (319)       (319)         (319)             -           -             - 
Debt securities in issue                  (645)       (594)         (696)             -           -             - 
Short positions                            (97)        (95)          (99)             -           -             - 
Other Liabilities                           (4)         (4)           (4)             -           -             - 
---------------------------------  ------------  ----------  ------------  ------------  ----------  ------------ 
At 30 June 2022                           1,650       1,850         1,436           581         628           528 
---------------------------------  ------------  ----------  ------------  ------------  ----------  ------------ 
 
Financial instruments 
 held at fair value 
Loans and advances                        1,366       1,398         1,328             -           -             - 
Reverse Repurchase agreements 
 and other similar secured 
 lending                                  1,566       1,579         1,550             -           -             - 
Asset backed securities                       -           -             -             -           -             - 
Debt securities, alternative 
 tier one and other eligible 
 bills                                      349         366           332            40          41            38 
Equity shares                               186         205           168           493         541           442 
Other Assets                                 26          29            24             -           -             - 
Derivative financial instruments            (4)          10          (16)             -           -             - 
Customers accounts                        (454)       (447)         (461)             -           -             - 
Deposits by banks                         (283)       (278)         (287)             -           -             - 
Debt securities in issue                  (821)       (764)         (879)             -           -             - 
Short positions                               -           -             -             -           -             - 
Other Liabilities                           (1)         (1)           (1)             -           -             - 
---------------------------------  ------------  ----------  ------------  ------------  ----------  ------------ 
At 31 December 2021                       1,930       2,097         1,758           533         582           480 
---------------------------------  ------------  ----------  ------------  ------------  ----------  ------------ 
 

The reasonably possible alternatives could have increased or decreased the fair values of financial instruments held at

fair value through profit or loss and those classified as fair value through other comprehensive income by the amounts disclosed below.

 
                                                                30.06.22    31.12.21 
Financial instruments                    Fair value changes     $million    $million 
---------------------------------------  -------------------  ----------  ---------- 
Held at fair value through 
 profit or loss                          Possible increase           200         167 
--------------------------------------- 
 Possible decrease                                                 (214)       (172) 
 -----------------------------------------------------------  ----------  ---------- 
Fair value through other comprehensive 
 income                                  Possible increase            47          49 
--------------------------------------- 
 Possible decrease                                                  (53)        (53) 
 -----------------------------------------------------------  ----------  ---------- 
 

Page 103

14. Derivative financial instruments

The tables below analyse the notional principal amounts and the positive and negative fair values of derivative financial instruments. Notional principal amounts are the amounts of principal underlying the contract at the reporting date.

Derivatives

 
                                              30.06.22                            31.12.21 
-------------------------------  ----------------------------------  ---------------------------------- 
                                   Notional                            Notional 
                                  principal                           principal 
                                    amounts     Assets  Liabilities     amounts     Assets  Liabilities 
Derivatives                        $million   $million     $million    $million   $million     $million 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Foreign exchange derivative 
 contracts: 
Forward foreign exchange 
 contracts                        3,519,329     43,417       39,988   3,750,151     30,256       30,068 
Currency swaps and options        1,405,464     19,722       19,692   1,412,055     11,492       11,659 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
                                  4,924,793     63,139       59,680   5,162,206     41,748       41,727 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Interest rate derivative 
 contracts: 
Swaps                             3,925,932     48,516       49,707   3,609,625     31,490       31,078 
Forward rate agreements 
 and options                        105,819      1,742        2,290     127,287      1,328        1,859 
Exchange traded futures 
 and options                        409,195        355          322     295,192        156          132 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
                                  4,440,946     50,613       52,319   4,032,104     32,974       33,069 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Credit derivative contracts         229,152      2,116        2,700     184,953      2,289        3,125 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Equity and stock index 
 options                              5,907        211          248       8,714        136          160 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Commodity derivative contracts      154,156      3,810        4,363     113,807      1,896        1,916 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Gross total derivatives           9,754,954    119,889      119,310   9,501,784     79,043       79,997 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Offset                                    -   (43,213)     (43,213)           -   (26,598)     (26,598) 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Net total derivatives             9,754,954     76,676       76,097   9,501,784     52,445       53,399 
-------------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
 

The Group limits exposure to credit losses in the event of default by entering into master netting agreements with certain market counterparties. As required by IAS 32, exposures are only presented net in these accounts where they are subject to legal right of offset and intended to be settled net in the ordinary course of business.

The Group applies balance sheet offsetting only in the instance where we are able to demonstrate legal enforceability of the right to offset (e.g. via legal opinion) and the ability and intention to settle on a net basis (e.g. via operational practice).

The Group may enter into economic hedges that do not qualify for IAS 39 hedge accounting treatment, including derivative such as interest rate swaps, interest rate futures and cross-currency swaps to manage interest rate and currency risks of the Group. These derivatives are measured at fair value, with fair value changes recognised in net trading income: refer to Market Risk.

Derivatives held for hedging

 
                                          30.06.22                            31.12.21 
---------------------------  ----------------------------------  ---------------------------------- 
                               Notional                            Notional 
                              principal                           principal 
                                amounts     Assets  Liabilities     amounts     Assets  Liabilities 
                               $million   $million     $million    $million   $million     $million 
---------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Derivatives designated 
 as fair value hedges: 
Interest rate swaps              78,903      1,704        2,034      78,666        957          338 
Currency swaps                    2,280         33          274       2,262         43          151 
---------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
                                 81,183      1,737        2,308      80,928      1,000          489 
---------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Derivatives designated 
 as cash flow hedges: 
Interest rate swaps              38,698        139          498      10,381         60           74 
Forward foreign exchange 
 contracts                        5,353        275            -          72          2            - 
Currency swaps                   10,434        610           94      12,214        293           51 
---------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
                                 54,485      1,024          592      22,667        355          125 
---------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Derivatives designated 
 as net investment hedges: 
Forward foreign exchange 
 contracts                       17,096        467            1      13,198         88           79 
---------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
Total derivatives held 
 for hedging                    152,764      3,228        2,901     116,793      1,443          693 
---------------------------  ----------  ---------  -----------  ----------  ---------  ----------- 
 

Page 104

Interest rate benchmark reform

As at 30 June 2022, the following populations of derivative instruments designated in fair value or cash flow hedge accounting relationships were linked to IBOR reference rates:

 
                                                                              Weighted 
                                           Fair value  Cash flow               average 
                                               hedges     hedges      Total   exposure 
                                             $million   $million   $million      Years 
-----------------------------------------  ----------  ---------  ---------  --------- 
Interest rate swaps 
USD LIBOR                                      35,906     29,743     65,649        2.6 
GBP LIBOR                                           -          -          -          - 
JPY LIBOR                                           -          -          -          - 
SGD SOR                                             -          -          -          - 
-----------------------------------------  ----------  ---------  ---------  --------- 
                                               35,906     29,743     65,649        2.6 
-----------------------------------------  ----------  ---------  ---------  --------- 
Cross-currency swaps 
USD LIBOR vs Fixed rate foreign currency        1,646      3,079      4,725        0.7 
-----------------------------------------  ----------  ---------  ---------  --------- 
Total notional of hedging instruments 
 in scope of IFRS amendments as at 
 30 June 2022                                  37,552     32,822     70,374        2.5 
-----------------------------------------  ----------  ---------  ---------  --------- 
 
 
                                                                              Weighted 
                                           Fair value  Cash flow               average 
                                               hedges     hedges      Total   exposure 
                                             $million   $million   $million      Years 
-----------------------------------------  ----------  ---------  ---------  --------- 
Interest rate swaps 
USD LIBOR                                      46,615      2,636     49,251        3.6 
GBP LIBOR                                       1,444          -      1,444        0.1 
JPY LIBOR                                         637          -        637        0.2 
SGD SOR                                             -          -          -          - 
-----------------------------------------  ----------  ---------  ---------  --------- 
                                               48,696      2,636     51,332        3.5 
-----------------------------------------  ----------  ---------  ---------  --------- 
Cross-currency swaps 
USD LIBOR vs Fixed rate foreign currency        2,262      3,681      5,943        0.9 
-----------------------------------------  ----------  ---------  ---------  --------- 
Total notional of hedging instruments 
 in scope of IFRS amendments as at 
 31 December 2021                              50,958      6,317     57,275        3.2 
-----------------------------------------  ----------  ---------  ---------  --------- 
 

The Group's primary exposure is to USD LIBOR due to the extent of fixed rate debt security assets and issued notes denominated in USD that are designated in fair value hedge relationships. Where fixed rate instruments are in other currencies, cross-currency swaps are used to achieve an equivalent floating USD exposure.

15. Reverse repurchase and repurchase agreements including other similar lending and borrowing

Reverse repurchase agreements and other similar secured lending

 
                                      30.06.22    31.12.21 
                                      $million    $million 
----------------------------------  ----------  ---------- 
Banks                                   22,672      19,806 
Customers                               60,415      68,613 
----------------------------------  ----------  ---------- 
                                        83,087      88,419 
----------------------------------  ----------  ---------- 
Of which: 
Fair value through profit or loss       74,398      80,009 
                                    ----------  ---------- 
  Banks                                 21,877      18,727 
  Customers                             52,521      61,282 
                                    ----------  ---------- 
Held at amortised cost                   8,689       8,410 
                                    ----------  ---------- 
  Banks                                    795       1,079 
  Customers                              7,894       7,331 
                                    ----------  ---------- 
 
 

Page 105

Under reverse repurchase and securities borrowing arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms are:

 
                                                                  30.06.22    31.12.21 
                                                                  $million    $million 
--------------------------------------------------------------  ----------  ---------- 
Securities and collateral received (at fair value)                 109,863     118,636 
--------------------------------------------------------------  ----------  ---------- 
Securities and collateral which can be repledged or 
 sold (at fair value)                                              108,816     117,408 
--------------------------------------------------------------  ----------  ---------- 
Amounts repledged/transferred to others for financing 
 activities, to satisfy liabilities under sale and repurchase 
 agreements (at fair value)                                         48,520      57,879 
--------------------------------------------------------------  ----------  ---------- 
 

Repurchase agreements and other similar secured borrowing

 
                                      30.06.22    31.12.21 
                                      $million    $million 
----------------------------------  ----------  ---------- 
Banks                                   14,809       7,054 
Customers                               42,234      58,594 
----------------------------------  ----------  ---------- 
                                        57,043      65,648 
----------------------------------  ----------  ---------- 
Of which: 
Fair value through profit or loss       55,320      62,388 
                                    ----------  ---------- 
  Banks                                 13,086       5,107 
  Customers                             42,234      57,281 
                                    ----------  ---------- 
Held at amortised cost                   1,723       3,260 
                                    ----------  ---------- 
  Banks                                  1,723       1,947 
  Customers                                  -       1,313 
                                    ----------  ---------- 
 
 

The tables below set out the financial assets provided as collateral for repurchase and other secured borrowing transactions:

 
                                                                     30.06.22 
--------------------------------------  ------------------------------------------------------------------- 
                                        Fair value            Fair value 
                                           through               through 
                                            profit   other comprehensive  Amortised  Off-balance 
Collateral pledged against repurchase      or loss                income       cost        sheet      Total 
 agreements                               $million              $million   $million     $million   $million 
--------------------------------------  ----------  --------------------  ---------  -----------  --------- 
On-balance sheet 
  Debt securities and other eligible 
   bills                                     4,368                 2,014      3,492            -      9,874 
Off-balance sheet 
  Repledged collateral received                  -                     -          -       48,520     48,520 
--------------------------------------  ----------  --------------------  ---------  -----------  --------- 
At 30 June 2022                              4,368                 2,014      3,492       48,520     58,394 
--------------------------------------  ----------  --------------------  ---------  -----------  --------- 
 
 
                                                                     31.12.21 
--------------------------------------  ------------------------------------------------------------------- 
                                        Fair value            Fair value 
                                           through               through 
                                            profit   other comprehensive  Amortised  Off-balance 
Collateral pledged against repurchase      or loss                income       cost        sheet      Total 
 agreements                               $million              $million   $million     $million   $million 
--------------------------------------  ----------  --------------------  ---------  -----------  --------- 
On-balance sheet 
  Debt securities and other eligible 
   bills                                     3,427                 2,655      2,601            -      8,683 
Off-balance sheet 
  Repledged collateral received                  -                     -          -       57,879     57,879 
--------------------------------------  ----------  --------------------  ---------  -----------  --------- 
At 31 December 2021                          3,427                 2,655      2,601       57,879     66,562 
--------------------------------------  ----------  --------------------  ---------  -----------  --------- 
 

Page 106

16. Goodwill and intangible assets

 
                                            30.06.22                                       31.12.21 
------------------------  ---------------------------------------------  --------------------------------------------- 
                                         Acquired   Computer                            Acquired   Computer 
                           Goodwill   intangibles   software      Total   Goodwill   intangibles   software      Total 
                           $million      $million   $million   $million   $million      $million   $million   $million 
------------------------  ---------  ------------  ---------  ---------  ---------  ------------  ---------  --------- 
Cost 
At 1 January                  2,595           457      4,464      7,516      2,617           473      3,682      6,772 
Exchange translation 
 differences                   (82)          (50)      (119)      (251)       (22)          (14)       (73)      (109) 
Additions                         -             -        486        486          -             -        989        989 
Amounts written off               -             -       (26)       (26)          -           (2)      (134)      (136) 
------------------------  ---------  ------------  ---------  ---------  ---------  ------------  ---------  --------- 
At 30 June/31 December        2,513           407      4,805      7,725      2,595           457      4,464      7,516 
------------------------  ---------  ------------  ---------  ---------  ---------  ------------  ---------  --------- 
Provision for 
amortisation 
At 1 January                      -           437      1,608      2,045          -           451      1,258      1,709 
Exchange translation 
 differences                      -          (52)       (49)      (101)          -          (22)       (20)       (42) 
Amortisation                      -             2        260        262          -             8        461        469 
Impairment charge                 -             -          1          1          -             -          4          4 
Amounts written off               -             -       (19)       (19)          -             -       (95)       (95) 
------------------------  ---------  ------------  ---------  ---------  ---------  ------------  ---------  --------- 
At 30 June/31 December            -           387      1,801      2,188          -           437      1,608      2,045 
------------------------  ---------  ------------  ---------  ---------  ---------  ------------  ---------  --------- 
Net book value                2,513            20      3,004      5,537      2,595            20      2,856      5,471 
------------------------  ---------  ------------  ---------  ---------  ---------  ------------  ---------  --------- 
 

At 30 June 2022, accumulated goodwill impairment losses incurred from 1 January 2005 amounted to $3,317 million (31 December 2021: $3,317 million), of which nil was recognised in 2022 (31 December 2021: nil million).

Outcome of impairment assessment

At 30 June 2022, the Group performed a review of the goodwill that has been assigned to the Group's CGUs for indicators of impairment, considering whether there were any reduced expectations for future cashflows and/or fluctuations in the discount rate or the assumptions. Due to the ongoing global pandemic and global economic environment, it was decided to perform a full impairment analysis. The results of this review indicated that at 30 June 2022 there are no goodwill impairments to be recognised in the first half of 2022.

The goodwill allocated to each CGU and key assumptions used in determining the recoverable amounts are set out below and are solely estimates for the purposes of assessing impairment of acquired goodwill.

 
                                         30.06.22                           31.12.21 
---------------------------  ---------------------------------  --------------------------------- 
                                                     Long-term                          Long-term 
                                          Pre-tax     forecast               Pre-tax     forecast 
                                         discount   GDP growth              discount   GDP growth 
                              Goodwill      rates        rates   Goodwill      rates        rates 
Cash-generating unit          $million   per cent     per cent   $million   per cent     per cent 
---------------------------  ---------  ---------  -----------  ---------  ---------  ----------- 
Country CGUs 
Asia                             1,046                              1,073 
                             ---------                          --------- 
  Hong Kong                        355       10.9          2.2        357       10.6          2.5 
  Taiwan                           342       10.9          1.2        361       10.4          2.0 
  Singapore                        335       11.7          1.6        341       11.6          2.4 
  Bangladesh                        14       18.7          6.5         14       15.0          7.3 
                             ---------                          --------- 
Africa & Middle East                88                                 92 
                             ---------                          --------- 
  Pakistan                          39       25.4          5.1         43       22.2          6.0 
  Bahrain                           49       13.3          2.1         49       13.1          3.0 
                             ---------                          --------- 
Global CGUs                      1,379                              1,430 
                             ---------                          --------- 
  Global Private Banking            84       12.6          1.8         84       12.4          2.5 
  Corporate, Commercial 
   & Institutional Banking       1,295       12.7          2.5      1,346       12.5          3.0 
                             ---------                          --------- 
 
                                 2,513                              2,595 
---------------------------  ---------  ---------  -----------  ---------  ---------  ----------- 
 

In the current period there are no CGUs that are sensitive to any individual movement on key estimates (cashflow, discount rate and GDP growth rate).

Page 107

17. Property, plant and equipment

 
                                                                       30.06.22 
-----------------------------------------  ----------------------------------------------------------------- 
                                                                 Operating     Leased      Leased 
                                                                     lease   premises   equipment 
                                            Premises  Equipment     assets     assets      assets      Total 
                                            $million   $million   $million   $million    $million   $million 
-----------------------------------------  ---------  ---------  ---------  ---------  ----------  --------- 
Cost or valuation 
At 1 January                                   1,980        901      4,248      1,854          33      9,016 
Exchange translation differences                (92)       (59)          -       (66)         (3)      (220) 
Additions1                                        36         39        478         54           1        608 
Disposals and fully depreciated assets 
 written off2                                   (36)       (15)      (258)       (25)         (1)      (335) 
Transfers to assets held for sale                  -          -          -          -           -          - 
-----------------------------------------  ---------  ---------  ---------  ---------  ----------  --------- 
As at 30 June                                  1,888        866      4,468      1,817          30      9,069 
-----------------------------------------  ---------  ---------  ---------  ---------  ----------  --------- 
Depreciation 
Accumulated at 1 January                         795        611      1,155        819          20      3,400 
Exchange translation differences                (35)       (31)          -       (33)         (4)      (103) 
Charge for the period                             35         60        105        126           4        330 
Impairment charge                                  -          -        (1)          -           -        (1) 
Attributable to assets sold, transferred 
 or written off2                                (19)       (15)      (177)       (17)           -      (228) 
Transfers to assets held for sale                  -          -          -          -           -          - 
-----------------------------------------  ---------  ---------  ---------  ---------  ----------  --------- 
Accumulated at 30 June                           776        625      1,082        895          20      3,398 
-----------------------------------------  ---------  ---------  ---------  ---------  ----------  --------- 
Net book amount at 30 June                     1,112        241      3,386        922          10      5,671 
-----------------------------------------  ---------  ---------  ---------  ---------  ----------  --------- 
 

1 Refer to the cash flow statement under cash flows from investing activities section for the purchase of property, plant and equipment during the year of $553 million, primarily on aircraft purchases for the Group's aircraft operating leasing business

2 Disposals for property, plant and equipment during the year of $139 million in the cash flow statement would include the gains and losses incurred as part of other operating income (Note 6) on disposal of assets during the period and the net book value disposed

 
                                                                          31.12.21 
-----------------------------------------  ---------------------------------------------------------------------- 
                                                                    Operating      Leased 
                                                                        lease    premises 
                                                                                               Leased 
                                                                                            equipment 
                                             Premises   Equipment      assets      assets     assets3       Total 
                                             $million    $million    $million    $million    $million    $million 
-----------------------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Cost or valuation 
At 1 January                                    2,048         874       5,233       1,577          31       9,763 
Exchange translation differences                 (63)        (13)           -        (38)         (1)       (115) 
Additions1                                        107         135         110         373           4         729 
Disposals and fully depreciated assets 
 written off2                                   (100)        (95)     (1,095)        (58)         (1)     (1,349) 
Transfers to assets held for sale                (12)           -           -           -           -        (12) 
-----------------------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
As at 31 December                               1,980         901       4,248       1,854          33       9,016 
-----------------------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Depreciation 
Accumulated at 1 January                          770         594       1,336         536          12       3,248 
Exchange translation differences                 (15)        (14)           -        (15)           -        (44) 
Charge for the period                              74         121         213         296           8         712 
Impairment charge                                   -           -          64          42           -         106 
Attributable to assets sold, transferred 
 or written off2                                 (31)        (90)       (458)        (40)           -       (619) 
Transfers to assets held for sale                 (3)           -           -           -           -         (3) 
-----------------------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Accumulated at 31 December                        795         611       1,155         819          20       3,400 
-----------------------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Net book amount at 31 December                  1,185         290       3,092       1,036          13       5,616 
-----------------------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
 

1 Refer to the cash flow statement (FY'21) under cash flows from investing activities section for the purchase of property, plant and equipment during the year of $352 million, primarily on aircrafts purchase for the Group's aircraft operating leasing business

2 Disposals for property, plant and equipment during the year of $816 million in the cash flow statement would include the gains and losses incurred as part of other operating income (Note 6) on disposal of assets during the period and the net book value disposed

Page 108

Operating lease assets

The operating lease assets subsection of property, plant and equipment is the Group's aircraft leasing business, consisting of 100 commercial aircraft at 30 June 2022, of which 98 are narrow-bodies and 2 wide-bodies. The leases are classified as operating leases as they do not transfer substantially all the risks and rewards incidental to the ownership of the assets, and rental income from operating lease assets is disclosed in Note 6. At 30 June 2022, these assets had a net book value of $3,386 million (31 December 2021: $3,092 million).

Under these leases the lessee is responsible for the maintenance and servicing of the aircraft during the lease term while the Group receives rental income and assumes the risks of the residual value of the aircraft at the end of the lease. Initial lease terms range in length up to 12 years, while the average remaining lease term at 30 June 2022 is approximately five years. By varying the lease terms the effects of changes in cyclical market conditions at the time aircraft become eligible for re-lease are mitigated. The Group will look at entering into a lease extension with existing lessees well in advance of lease expiry in order to minimise the risk of aircraft downtime and aircraft transition costs. Aircraft may also be sold from time to time to manage the composition and average age of the fleet.

A series of stress sensitivities conducted on the narrow-body portfolio highlight that the two biggest risks remain either an increase in the discount rate, as the majority of the leased portfolio is valued on a VIU basis, or a substantial number of airline clients defaulting. A sensitivity test was performed on the narrow-body portfolio assuming a discount rate increase of 50 basis points which resulted in a possible increase in impairment of $47 million.

A further sensitivity test considered that the lessees with lower credit ratings defaulted on their current leases. This scenario would result in a possible increase in impairment of $47 million.

18. Other assets

 
                                                            30.06.22    31.12.21 
                                                            $million    $million 
--------------------------------------------------------  ----------  ---------- 
Financial assets held at amortised cost (Note 13): 
  Hong Kong SAR Government certificates of indebtedness 
   (Note 21)(1)                                                7,232       7,284 
  Cash collateral                                             11,459       9,217 
  Acceptances and endorsements                                 6,037       4,930 
  Unsettled trades and other financial assets                 26,407      18,637 
--------------------------------------------------------  ----------  ---------- 
                                                              51,135      40,068 
Non-financial assets: 
  Commodities and emissions certificates(2)                   10,506       9,265 
Other assets                                                     470         599 
--------------------------------------------------------  ----------  ---------- 
                                                              62,111      49,932 
--------------------------------------------------------  ----------  ---------- 
 

1 The Hong Kong SAR Government certificates of indebtedness are subordinated to the claims of other parties in respect of bank notes issued

2 Commodities and emissions certificates are carried at fair value less costs to sell, $5.0 billion are classified as Level 1 and $5.5 million are classified as Level 2

19. Investment in associates and joint ventures

Share of profit from investment in associates and joint ventures comprises:

 
                                           30.06.22    31.12.21 
                                           $million    $million 
---------------------------------------  ----------  ---------- 
Loss from investment in joint ventures          (3)         (2) 
Profit from investment in associates            156         198 
---------------------------------------  ----------  ---------- 
Total                                           153         196 
---------------------------------------  ----------  ---------- 
 
 
                                               30.06.22    31.12.21 
Interests in associates and joint ventures     $million    $million 
-------------------------------------------  ----------  ---------- 
As at 1 January                                   2,147       2,162 
Exchange translation difference                    (58)          43 
Additions                                             4          90 
Share of profits                                    153         196 
Dividend received                                  (58)        (38) 
Disposals                                           (1)        (16) 
Impairment                                            -       (300) 
Share of FVOCI and Other reserves                  (82)          10 
-------------------------------------------  ----------  ---------- 
As at 30 June/ 31 December                        2,105       2,147 
-------------------------------------------  ----------  ---------- 
 

Page 109

The Group's principal associate are:

 
                                                        Group interest 
                                                           in ordinary 
                                Nature      Main areas   share capital 
Associate                of activities    of operation               % 
---------------------  ---------------  --------------  -------------- 
China Bohai Bank               Banking           China           16.26 
CurrencyFair Limited           Banking         Ireland           43.42 
---------------------  ---------------  --------------  -------------- 
 

The Group's investment in China Bohai Bank is less than 20 per cent but it is considered to be an associate because of the significant influence the Group exercises over the financial and operating policy decisions. This influence is through board representation and the provision of technical expertise to Bohai. The Group applies the equity method of accounting for investments in associates.

The Group's ownership percentage in China Bohai Bank is 16.26 per cent.

For the period ended 30 June 2022, the Group recognised Bohai's results from 1 October 2021 through 31 March 2022 (six months of earnings). Bohai publishes their results after the Group. The Group will therefore continue on a three-month lag in recognising its share of Bohai's earnings going forward.

If the Group did not have significant influence in Bohai, the investment would be carried at fair value rather than the current carrying value.

Impairment testing

At 30 June 2022, the listed equity value, which is considered the fair value of Bohai is below the carrying amount of the investment in associate. As a result, the Group has performed an impairment test on the carrying amount, which confirmed that there was no impairment at 30 June 2022.

 
                       30.06.22    31.12.21 
Bohai                  $million    $million 
-------------------  ----------  ---------- 
VIU                       1,881       1,917 
Carrying amount(1)        1,881       2,217 
Fair value                  491       1,114 
-------------------  ----------  ---------- 
 

1 The above represents the Group's 16.26 per cent share of net assets less other equity instruments the Group does not hold (for 2022 this is net of a $300m impairment taken in 2021)

Basis of recoverable amount

The impairment test was performed by comparing the recoverable amount of Bohai, determined by a VIU calculation, with its carrying amount. The VIU calculation uses the following primary inputs:

-- short to medium term projections based on management's best estimates of future profits available to ordinary shareholders. These projections have been determined with reference to the latest published financial results and

historical performance. We have adjusted these cash flows as a result of continued market uncertainty in China;

-- a discount rate based upon a capital asset pricing model (CAPM) calculation for Bohai representing the risk-free rate and company risk premium. Management compares this CAPM against external sources and the cost of equity used for transactions in the China market;

-- a long-term growth rate, for China, which is used to extrapolate in perpetuity those expected short to medium term earnings to derive a terminal value, and;

-- an estimation of RWAs and RWA growth to determine a capital maintenance haircut to forecast profits. This haircut is taken in order for Bohai to meet its target regulatory capital requirements over the forecast period. This haircut takes into account movements in risk weighted assets and the total capital required, including required retained earnings over time to meet the target capital ratios.

Page 110

The key assumptions used in the VIU calculation:

 
                                         30.06.22   31.12.21 
                                         per cent   per cent 
--------------------------------------  ---------  --------- 
Pre-tax discount rate                       14.90      14.83 
Forecast profit long-term growth rate        4.00       4.75 
Long-term RWA growth rate                    4.00       4.75 
Capital requirement adequacy ratio           7.50       7.50 
--------------------------------------  ---------  --------- 
 
 
                        Base case                                                    Sensitivities - 30.06.22 
---------  -----------------------------------  --------------------------------------------------------------------------------------------------- 
                                                                                                                                Combined   Combined 
           --------  --------  --------  -----  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------- 
                                                                         Discount            Forecast                                RWA        RWA 
                                                       GDP                 rate               profit               RWA              -10%       +10% 
                                                ------------------  ------------------  ------------------  ------------------  --------  --------- 
                                                     +1%       -1%       +1%       -1%      +10%      -10%      +10%      -10%   CF -10%    CF +10% 
                                                --------  --------  --------  --------  --------  --------  --------  --------  --------  --------- 
Carrying                        Pre-tax 
amount          VIU  Headroom  discount         Headroom  Headroom  Headroom  Headroom  Headroom  Headroom  Headroom  Headroom  Headroom   Headroom 
$millions  $million  $million      rate    GDP  $million  $million  $million  $million  $million  $million  $million  $million  $million   $million 
---------  --------  --------  --------  -----  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------- 
1,881         1,881         -    14.90%  4.00%         1       (5)     (197)       263       265     (265)     (180)       180      (85)         85 
---------  --------  --------  --------  -----  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------- 
 

The movement in RWAs is correlated to forecast profit growth. This can be seen above in the combined RWA and cashflow scenarios in the sensitivity table.

The following table sets out the summarised financial statements of China Bohai Bank prior to the Group's share of the associates being applied:

 
                                31.03.22  31.03.2021 
                                $million    $million 
----------------------------  ----------  ---------- 
Total assets                     240,876     225,705 
Total liabilities                224,212     209,356 
 
Operating income1                  1,954       2,545 
Profit after tax1                    963         834 
Other comprehensive income1        (483)        (29) 
----------------------------  ----------  ---------- 
 

1 This represents six months of earnings (1 October to 31 March)

20. Assets held for sale and associated liabilities

Assets held for sale

 
                                                          30.06.22    31.12.21 
                                                          $million    $million 
------------------------------------------------------  ----------  ---------- 
Financial assets held at fair value through profit or 
 loss                                                            1          43 
                                                        ----------  ---------- 
  Loans and advances to customers                                -          20 
  Equity shares                                                  1          23 
                                                        ----------  ---------- 
 
Financial assets held at amortised cost                         60          52 
                                                        ----------  ---------- 
  Loans and advances to customers                               60          52 
                                                        ----------  ---------- 
 
Property, plant and equipment                                  160         239 
                                                        ----------  ---------- 
  Vessels                                                      156         230 
  Others                                                         4           9 
------------------------------------------------------  ----------  ---------- 
                                                               221         334 
------------------------------------------------------  ----------  ---------- 
 

Disposal of Property, Plant and equipment classified under assets held for sale during 30 June 2022 was $79 million (31 December 2021: $149 million).

As at 30 June 2022, there were no liabilities included in disposal groups held for sale (31 December 2021: nil).

Page 111

21. Other liabilities

 
                                                           30.06.22    31.12.21 
                                                           $million    $million 
-------------------------------------------------------  ----------  ---------- 
Financial liabilities held at amortised cost (Note 13) 
  Notes in circulation1                                       7,232       7,284 
  Acceptances and endorsements                                6,037       4,930 
  Cash collateral                                            14,559       8,092 
  Property leases2                                            1,045       1,170 
  Equipment leases2                                              13          17 
  Unsettled trades and other financial liabilities           31,216      21,940 
-------------------------------------------------------  ----------  ---------- 
                                                             60,102      43,433 
Non-financial liabilities 
  Cash-settled share-based payments                              61          55 
  Other liabilities                                           1,352         826 
-------------------------------------------------------  ----------  ---------- 
                                                             61,515      44,314 
-------------------------------------------------------  ----------  ---------- 
 

1 Hong Kong currency notes in circulation of $7,232 million (31 December 2021: $7,284 million) that are secured by the Government of Hong Kong SAR certificates of indebtedness of the same amount included in Other assets (Note 18)

2 Other financial liabilities include the present value of lease liabilities, as required by IFRS 16 from 1 January 2019.

22. Contingent liabilities and commitments

The table below shows the contract or underlying principal amounts of unmatured off-balance sheet transactions at the balance sheet date. The contract or underlying principal amounts indicate the volume of business outstanding and do not represent amounts at risk.

 
                                                             30.06.22    31.12.21 
                                                             $million    $million 
---------------------------------------------------------  ----------  ---------- 
Financial guarantees and trade credits 
Financial guarantees, trade credits and irrevocable 
 letters of credit                                             58,415      58,535 
---------------------------------------------------------  ----------  ---------- 
                                                               58,415      58,535 
---------------------------------------------------------  ----------  ---------- 
Commitments 
Undrawn formal standby facilities, credit lines and 
 other commitments to lend 
  One year and over                                            72,055      69,542 
  Less than one year                                           28,341      27,306 
  Unconditionally cancellable                                  62,445      61,675 
---------------------------------------------------------  ----------  ---------- 
                                                              162,841     158,523 
---------------------------------------------------------  ----------  ---------- 
Capital Commitments 
Contracted capital expenditure approved by the directors 
 but not provided for in these accounts(1)                        120         124 
---------------------------------------------------------  ----------  ---------- 
 

1 Of which the Group has commitments totalling $96 million to purchase aircraft for delivery in 2022 (31 December 2021: $96 million). Pre-delivery payments of $26 million (2021: $26 million) have been made in respect of these commitments

As set out in Note 23, the Group has contingent liabilities in respect of certain legal and regulatory matters for which it is not practicable to estimate the financial impact as there are many factors that may affect the range of possible outcomes.

23. Legal and regulatory matters

The Group receives legal claims against it in a number of jurisdictions and is subject to regulatory and enforcement investigations and proceedings from time to time. Apart from the matters described below, the Group currently considers none of the ongoing claims, investigations or proceedings to be material. However, in light of the uncertainties involved in such matters there can be no assurance that the outcome of a particular matter or matters currently not considered to be material may not ultimately be material to the Group's results in a particular reporting period depending on, among other things, the amount of the loss resulting from the matter(s) and the results otherwise reported for such period.

Page 112

Since 2014, the Group has been named as a defendant in a series of lawsuits that have been filed in the United States District Courts for the Southern and Eastern Districts of New York against a number of banks (including Standard Chartered Bank or its affiliates) on behalf of plaintiffs who are, or are relatives of, victims of various terrorist attacks in Iraq and Afghanistan. The most recent lawsuit was filed in April 2022 and concerns terrorist attacks that occurred in Afghanistan between 2013 and 2016. The plaintiffs in each of these lawsuits have alleged that the defendant banks aided and abetted the unlawful conduct of parties with connections to terrorist organisations in breach of the U.S. Anti-Terrorism Act. While the courts have ruled in favour of the banks' motions to dismiss in five of these lawsuits, plaintiffs have appealed or are expected to appeal against certain of these judgements. The remaining cases are at an early procedural stage and, except for the lawsuit filed in April 2022 and a similar lawsuit filed in August 2021, have been stayed pending the outcomes of the appeals in the dismissed cases. None of these lawsuits have specified the amount of damages claimed.

In January 2020, a shareholder derivative complaint was filed by the City of Philadelphia in New York State Court against 45 current and former directors and senior officers of the Group. It is alleged that the individuals breached their duties to the Group and caused a waste of corporate assets by permitting the conduct that gave rise to the costs and losses to the Group related to legacy conduct and control issues. In March 2021, an amended complaint was served in which SCB and seven individuals were removed from the case. Standard Chartered PLC and Standard Chartered Holdings Limited remained as named "nominal defendants" in the complaint. In May 2021, Standard Chartered PLC filed a motion to dismiss the complaint. On 2 February 2022, the New York State Court ruled in favour of Standard Chartered PLC's motion to dismiss the complaint. On 2 March 2022, the plaintiffs filed a notice of appeal against the 2 February 2022 ruling.

Since October 2020, two lawsuits have been filed in the English High Court against Standard Chartered PLC on behalf of more than 300 shareholders in relation to alleged untrue and/or misleading statements and/or omissions in information published by Standard Chartered PLC in its rights issue prospectuses of 2008, 2010 and 2015 and/or public statements regarding the Group's historic sanctions, money laundering and financial crime compliance issues. These lawsuits have been brought under sections 90 and 90A of the Financial Services and Markets Act 2000. Section 90 permits shareholders to pursue a claim if they acquire shares, and suffer loss, as a result of misleading statements in, or omissions of necessary information from, a prospectus or listing particulars. Section 90A permits shareholders to pursue a claim if they acquire, hold or dispose of shares in reliance upon a knowingly or recklessly made untrue or misleading statement in, or dishonest omission of required information from published information, or if there has been a dishonest delay in publishing relevant information. These lawsuits are at an early procedural stage.

As the Group has previously disclosed, Bernard Madoff's 2008 confession to running a Ponzi scheme through Bernard L. Madoff Investment Securities LLC (BMIS) gave rise to a number of lawsuits against the Group. BMIS and the Fairfield funds (which invested in BMIS) are in bankruptcy and liquidation, respectively. Between 2010 and 2012, five lawsuits were brought against the Group by the BMIS bankruptcy trustee and the Fairfield funds' liquidators, in each case seeking to recover funds paid to the Group's clients pursuant to redemption requests made prior to BMIS' bankruptcy filing. The total amount sought in these cases exceeds USD 300 million, excluding any pre-judgment interest that may be awarded. The four lawsuits commenced by the Fairfield funds' liquidators have been dismissed and the appeals of those dismissals by the funds' liquidators are ongoing. The lawsuit brought against the Group by the BMIS bankruptcy trustee had been stayed pending a ruling by the US Second Circuit Court of Appeals in related cases brought by the BMIS bankruptcy trustee against other defendants that had been dismissed. In August 2021, the US Court of Appeals issued its ruling in the related cases with the result that the BMIS bankruptcy trustee's lawsuit against the Group is no longer stayed and is now ongoing. While the Group continues to vigorously defend these lawsuits, there is a range of possible outcomes in this litigation.

The Group has concluded that the threshold for recording provisions pursuant to IAS 37 Provisions, Contingent Liabilities and Contingent Assets is not met with respect to the above matters; however, the outcomes of these lawsuits are inherently uncertain and difficult to predict.

Page 113

24. Subordinated liabilities and other borrowed funds

 
                                                   30.06.22 
--------------------------------  ------------------------------------------ 
                                        USD        GBP        EUR      Total 
                                   $million   $million   $million   $million 
--------------------------------  ---------  ---------  ---------  --------- 
Fixed rate subordinated debt         10,662        903      3,207     14,772 
Floating rate subordinated debt         161          -          -        161 
--------------------------------  ---------  ---------  ---------  --------- 
Total                                10,823        903      3,207     14,933 
--------------------------------  ---------  ---------  ---------  --------- 
 
 
                                                   31.12.21 
--------------------------------  ------------------------------------------ 
                                        USD        GBP        EUR      Total 
                                   $million   $million   $million   $million 
--------------------------------  ---------  ---------  ---------  --------- 
Fixed rate subordinated debt         11,636      1,160      3,689     16,485 
Floating rate subordinated debt         161          -          -        161 
--------------------------------  ---------  ---------  ---------  --------- 
Total                                11,797      1,160      3,689     16,646 
--------------------------------  ---------  ---------  ---------  --------- 
 

Redemption during the year

On 25 January 2022, Standard Chartered PLC exercised its right to redeem USD 1 billion 5.7 per cent subordinated notes 2022.

Issuance during the year

On 12 January 2022, Standard Chartered PLC issued USD 750 million 3.603 per cent Fixed Rate Reset Dated Subordinated Notes due 2033.

25. Share capital, other equity instruments and reserves

Group and Company

 
                                               Ordinary    Ordinary 
                                                                                      Total share 
                                     Number                                               capital 
                                of ordinary       share       share       Preference    and share  Other equity 
                                     shares    capital1     premium   share premium2      premium   instruments 
                                   millions    $million    $million         $million     $million      $million 
-----------------------------  ------------  ----------  ----------  ---------------  -----------  ------------ 
At 1 January 2021                     3,156       1,578       3,986            1,494        7,058         4,518 
Cancellation of shares 
 including share buy-back              (37)        (19)           -                -         (19)             - 
Additional Tier 1 equity 
 issuance                                 -           -           -                -            -         1,239 
Other movements                           -           -           3                -            3             - 
-----------------------------  ------------  ----------  ----------  ---------------  -----------  ------------ 
At 30 June 2021                       3,119       1,559       3,989            1,494        7,042         5,757 
Cancellation of shares 
 including share buy-back              (40)        (20)           -                -         (20)             - 
Additional Tier 1 equity 
 issuance                                 -           -           -                -            -         1,489 
Additional Tier 1 redemption              -           -           -                -            -         (992) 
-----------------------------  ------------  ----------  ----------  ---------------  -----------  ------------ 
At 31 December 2021                   3,079       1,539       3,989            1,494        7,022         6,254 
Cancellation of shares 
 including share buy-back             (111)        (56)           -                -         (56)             - 
Additional Tier 1 redemption              -           -           -                -            -         (990) 
-----------------------------  ------------  ----------  ----------  ---------------  -----------  ------------ 
At 30 June 2022                       2,968       1,483       3,989            1,494        6,966         5,264 
-----------------------------  ------------  ----------  ----------  ---------------  -----------  ------------ 
 

1 Issued and fully paid ordinary shares of 50 cents each

2 Includes preference share capital of $75,000

Share buy-back

On 18 February 2022, the Group announced the buy-back programme for a share buy-back of its ordinary shares of

$0.50 each. Nominal value of share purchases was $56 million, and the total consideration paid was $754 million (including $4 million of fees and stamp duty), The buy-back completed on 19 May 2022. The total number of shares purchased was 111,295,408, representing 3.61% per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account. The shares were purchased by Standard Chartered PLC on various exchanges not including the Hong Kong Stock Exchange.

 
                                                  Average 
                              Highest  Lowest       price    Aggregate    Aggregate 
                      Number    price   price        paid        price        price 
                 of ordinary     paid    paid   per share         paid         paid 
                      shares      GBP     GBP         GBP          GBP            $ 
--------------  ------------  -------  ------  ----------  -----------  ----------- 
February 2022     14,397,852     5.85    5.15     5.55486   79,978,036  107,767,620 
March 2022        49,510,420     5.45    4.31     4.94563  244,860,409  322,288,357 
April 2022        29,085,345     5.27    4.79     5.05874  147,135,270  190,912,883 
May 2022          18,301,791     5.99    5.45     5.71978  104,682,211  129,028,610 
--------------  ------------  -------  ------  ----------  -----------  ----------- 
 

Page 114

Ordinary share capital

In accordance with the Companies Act 2006 the Company does not have authorised share capital. The nominal value of each ordinary share is 50 cents.

During the period nil shares were issued under employee share plans.

Preference share capital

At 30 June 2022, the Company has 15,000 $5 non-cumulative redeemable preference shares in issue, with a premium of $99,995 making a paid up amount per preference share of $100,000. The preference shares are redeemable at the option

of the Company and are classified in equity.

The available profits of the Company are distributed to the holders of the issued preference shares in priority to payments made to holders of the ordinary shares and in priority to, or pari passu with, any payments to the holders of any other class of shares in issue. On a winding up, the assets of the Company are applied to the holders of the preference shares in priority to any payment to the ordinary shareholders and in priority to, or pari passu with, the holders of any other shares in issue, for an amount equal to any dividends payable (on approval of the Board) and the nominal value of the shares together with any premium as determined by the Board. The redeemable preference shares are redeemable at the paid up amount (which includes premium) at the option of the Company in accordance with the terms of the shares. The holders of the preference shares are not entitled to attend or vote at any general meeting except where any relevant dividend due is not paid in full or where a resolution is proposed varying the rights of the preference shares.

Other equity instruments

The table provides details of outstanding Fixed Rate Resetting Perpetual Subordinated Contingent Convertible AT1 securities issued by Standard Chartered PLC. All issuances are made for general business purposes and to increase the regulatory capital base of the Group.

 
                                Proceeds                                                 Conversion 
                                     net                                                  price per 
Issuance                        of issue  Interest                          First reset    ordinary 
 date           Nominal value      costs     rate1  Coupon payment dates2        dates3       share 
------------  ---------------  ---------  --------  ---------------------  ------------  ---------- 
18 January          USD 1,000    USD 992               2 April, 2 October 
 2017                 million    million     7.75%              each year  2 April 2023   USD 7.732 
                                 USD 552               3 April, 3 October     3 October 
3 July 2019   SGD 750 million    million    5.375%              each year          2024  SGD 10.909 
                    USD 1,000    USD 992              26 January, 26 July    26 January 
26 June 2020          million    million        6%              each year          2026   USD 5.331 
14 January          USD 1,250  USD 1,239              14 January, 14 July 
 2021                 million    million     4.75%              each year  14 July 2031   USD 6.353 
19 August           USD 1,500  USD 1,489                  19 February, 19     19 August 
 2021                 million    million     4.30%       August each year          2028   USD 6.382 
------------  ---------------  ---------  --------  ---------------------  ------------  ---------- 
 

1 Interest rates for the period from (and including) the issue date to (but excluding) the first reset date

2 Interest payable semi-annually in arrears

3 Securities are resettable each date falling five years, or an integral multiple of five years, after the first reset date

Standard Chartered PLC redeemed $999m Fixed Rate Resetting Perpetual Contingent Convertible Securities on its first optional redemption date of 2 April 2022.

The AT1 issuances above are primarily purchased by institutional investors.

Page 115

The principal terms of the AT1 securities are described below:

-- The securities are perpetual and redeemable, at the option of Standard Chartered PLC in whole but not in part, on the first interest reset date and each date falling five years after the first reset date

-- The securities are also redeemable for certain regulatory or tax reasons on any date at 100 per cent of their principal amount together with any accrued but unpaid interest up to (but excluding) the date fixed for redemption. Any redemption is subject to Standard Chartered PLC giving notice to the relevant regulator and the regulator granting permission to redeem

-- Interest payments on these securities will be accounted for as a dividend

-- Interest on the securities is due and payable only at the sole and absolute discretion of Standard Chartered PLC, subject to certain additional restrictions set out in the terms and conditions. Accordingly, Standard Chartered PLC may at any time elect to cancel any interest payment (or part thereof) which would otherwise be payable on any interest payment date

-- The securities convert into ordinary shares of Standard Chartered PLC, at a pre-determined price detailed in the table above, should the fully loaded Common Equity Tier 1 ratio of the Group fall below 7.0 per cent. Approximately 817 million ordinary shares would be required to satisfy the conversion of all the securities mentioned above

The securities rank behind the claims against Standard Chartered PLC of (a) unsubordinated creditors; (b) which are expressed to be subordinated to the claims of unsubordinated creditors of Standard Chartered PLC but not further or otherwise; or (c) which are, or are expressed to be, junior to the claims of other creditors of Standard Chartered PLC, whether subordinated or unsubordinated, other than claims which rank, or are expressed to rank, pari passu with, or junior to, the claims of holders of the AT1 securities in a winding-up occurring prior to the conversion trigger.

Reserves

The constituents of the reserves are summarised as follows:

-- The capital reserve represents the exchange difference on redenomination of share capital and share premium from sterling to US dollars in 2001. The capital redemption reserve represents the nominal value of preference shares redeemed

-- The amounts in the "Capital and Merger Reserve" represents the premium arising on shares issued using a cash box financing structure, which required the Company to create a merger reserve under section 612 of the Companies Act

2006. Shares were issued using this structure in 2005 and 2006 to assist in the funding of Korea ($1.9 billion) and Taiwan ($1.2 billion) acquisitions, in 2008, 2010 and 2015 for the shares issued by way of a rights issue, primarily for capital maintenance requirements and for the shares issued in 2009 by way of an accelerated book build, the proceeds of which were used in the ordinary course of business of the Group. The funding raised by the 2008, 2010 and 2015 rights issues and 2009 share issue was fully retained within the Company. Of the 2015 funding, $1.5 billion was used to subscribe to additional equity in Standard Chartered Bank, a wholly owned subsidiary of the Company. Apart from the Korea, Taiwan and Standard Chartered Bank funding, the merger reserve is considered realised and distributable

-- Own credit adjustment reserve represents the cumulative gains and losses on financial liabilities designated at fair value through profit or loss relating to own credit. Gains and losses on financial liabilities designated at fair value through profit or loss relating to own credit in the year have been taken through other comprehensive income into this reserve. On derecognition of applicable instruments the balance of any OCA will not be recycled to the income statement, but will be transferred within equity to retained earnings

-- Fair value through other comprehensive income (FVOCI) debt reserve represents the unrealised fair value gains and

losses in respect of financial assets classified as FVOCI, net of expected credit losses and taxation. Gains and losses

are deferred in this reserve and are reclassified to the income statement when the underlying asset is sold, matures or becomes impaired

-- FVOCI equity reserve represents unrealised fair value gains and losses in respect of financial assets classified as FVOCI, net of taxation. Gains and losses are recorded in this reserve and never recycled to the income statement

Page 116

-- Cash flow hedge reserve represents the effective portion of the gains and losses on derivatives that meet the criteria for these types of hedges. Gains and losses are deferred in this reserve and are reclassified to the income statement when the underlying hedged item affects profit and loss or when a forecast transaction is no longer expected to occur

-- Translation reserve represents the cumulative foreign exchange gains and losses on translation of the net investment of the Group in foreign operations. Since 1 January 2004, gains and losses are deferred to this reserve and are reclassified to the income statement when the underlying foreign operation is disposed. Gains and losses arising from derivatives used as hedges of net investments are netted against the foreign exchange gains and losses on translation of the net investment of the foreign operations

-- Retained earnings represents profits and other comprehensive income earned by the Group and Company in the current and prior periods, together with the after tax increase relating to equity-settled share options, less dividend distributions, own shares held (treasury shares) and share buy-backs

A substantial part of the Group's reserves is held in overseas subsidiary undertakings and branches, principally to support local operations or to comply with local regulations. The maintenance of local regulatory capital ratios could potentially restrict the amount of reserves which can be remitted. In addition, if these overseas reserves were to be remitted, further unprovided taxation liabilities might arise.

As at 30 June 2022, the distributable reserves of Standard Chartered PLC (the Company) were $13.8 billion (31 December 2021: $15.0 billion). These comprised retained earnings and $12.6 billion of the merger reserve account. Distribution of reserves is subject to maintaining minimum capital requirements.

Own shares

Computershare Trustees (Jersey) Limited is the trustee of the 2004 Employee Benefit Trust ('2004 Trust') and Ocorian Trustees (Jersey) Limited is the trustee of the 1995 Employees' Share Ownership Plan Trust ('1995 Trust'). The 2004 Trust is used in conjunction with the Group's employee share schemes and other employee share-based payments (such as upfront shares and salary shares) and the 1995 Trust has historically been used for the delivery of other employee share-based payments (such as upfront shares and fixed pay allowances). Group companies fund these trusts from time to time to enable the trustees to acquire shares to satisfy these arrangements.

Except as disclosed, neither the Company nor any of its subsidiaries has bought, sold or redeemed any securities of the Company listed on The Stock Exchange of Hong Kong Limited during the period. Details of the shares purchased and held by the trusts are set out below.

 
                             1995 Trust                     2004 Trust1                           Total 
------------------  ----------------------------  --------------------------------  ---------------------------------- 
                    30.06.22  31.12.21  30.06.21  30.06.22    31.12.21    30.06.21    30.06.22    31.12.21    30.06.21 
------------------  --------  --------  --------  --------  ----------  ----------  ----------  ----------  ---------- 
Shares purchased 
 during 
 the period                -         -         -         -  36,487,747  12,243,256           -  36,487,747  12,243,256 
------------------  --------  --------  --------  --------  ----------  ----------  ----------  ----------  ---------- 
Market price of 
 shares 
 purchased 
 ($million)                -         -         -         -         237          82           -         237          82 
------------------  --------  --------  --------  --------  ----------  ----------  ----------  ----------  ---------- 
Shares transferred 
 between trusts            -         -         -         -           -           -           -           -           - 
------------------  --------  --------  --------  --------  ----------  ----------  ----------  ----------  ---------- 
Shares held at the 
 end of 
 the period                -         -         -   479,591  22,461,243      82,213     479,591  22,461,243      82,213 
------------------  --------  --------  --------  --------  ----------  ----------  ----------  ----------  ---------- 
Maximum number of 
 shares held 
 during 
 the period                                                                         22,459,399  23,076,993  17,560,740 
------------------  --------  --------  --------  --------  ----------  ----------  ----------  ----------  ---------- 
 

1 Note that in 2021, 35,768 shares were purchased by the trustee of the 2004 Trust using $0.2 million participant savings as part of Sharesave exercises

Dividend waivers

The trustees of the 2004 Trust, which holds ordinary shares in Standard Chartered PLC in connection with the operation of its employee share plans, have lodged standing instructions in relation to shares held by them that have not been allocated to employees, whereby any dividend is waived on the balance of ordinary shares and recalculated and paid at the rate of 0.01p per share.

Page 117

26. Retirement benefit obligations

Retirement benefit obligations comprise:

 
                                           30.06.22    31.12.21    30.06.21 
                                           $million    $million    $million 
---------------------------------------  ----------  ----------  ---------- 
Total market value of assets                  2,242       2,942       2,889 
Present value of the plans liabilities      (2,362)     (3,134)     (3,228) 
---------------------------------------  ----------  ----------  ---------- 
Defined benefit plans obligation              (120)       (192)       (339) 
Defined contribution plans obligation          (21)        (18)        (17) 
---------------------------------------  ----------  ----------  ---------- 
Net obligation                                (141)       (210)       (356) 
---------------------------------------  ----------  ----------  ---------- 
 

Retirement benefit charge comprises:

 
                                                             6 months         6 months         6 months 
                                                       ended 30.06.22   ended 31.12.21   ended 30.06.21 
                                                             $mIllion         $million         $million 
----------------------------------------------------  ---------------  ---------------  --------------- 
The pension cost for defined benefit plans was: 
Current service cost                                               28               33               31 
Past service cost and curtailments                                (1)              (5)                - 
Settlement cost                                                     -              (4)                - 
Interest income on pension plan assets                           (32)             (28)             (25) 
Interest on pension plan liabilities                               34               31               29 
----------------------------------------------------  ---------------  ---------------  --------------- 
Total charge to profit before deduction of tax                     29               27               35 
----------------------------------------------------  ---------------  ---------------  --------------- 
Losses /(returns) on plan assets excluding interest 
 income                                                           429            (110)               39 
(Gains) /losses on liabilities                                  (513)               38            (146) 
----------------------------------------------------  ---------------  ---------------  --------------- 
Total (gains) /losses recognised directly in 
 statement of comprehensive income before tax                    (84)             (72)            (107) 
Deferred taxation                                                  23                3               14 
----------------------------------------------------  ---------------  ---------------  --------------- 
Total (gains) /losses after tax                                  (61)             (69)             (93) 
----------------------------------------------------  ---------------  ---------------  --------------- 
 

Defined benefit liability values have decreased since 31 December 2021 due to rising bond yields, which lead to the liabilities being discounted at a higher rate. Asset values have fallen since 31 December due to the effect of rising yields on bond assets, in addition to poor equity performance over the 6 months to 30 June 2022.

Liabilities have decreased to a greater extent than assets, and as a result there is a reduction in the net balance sheet liability compared to 31 December 2021.

The defined benefit income statement charge for the six months to 30 June 2022 is lower than the corresponding income statement charge for the six months to 30 June 2021, driven by increase in the yields used to calculate current service cost at December 2021 (compared to 31 December 2020 yields used for FY21 service cost), a reduction in the finance cost due to improvement in funding levels from 31 Dec 2020 to 31 Dec 2021, and currency depreciation against the US dollar which has led to a reduction in the DB service cost in USD terms in most countries.

27. Related party transactions

Directors and officers

As at 30 June 2022, Standard Chartered Bank had in place a charge over $89 million (31 December 2021: $100 million) of cash assets in favour of the independent trustee of its employer financed retirement benefit scheme.

There were no changes in the related party transactions described in the Annual Report 2021 that could have or have had a material effect on the financial position or performance of the Group in the period ended 30 June 2022. All related party transactions have taken place in the period were similar in nature to those disclosed in the Annual Report 2021.

Page 118

Associate and joint ventures

The following transactions with related parties are on an arm's length basis:

 
                                             30.06.22    31.12.21 
                                             $million    $million 
-----------------------------------------  ----------  ---------- 
Assets 
Loans and advances                                  -           - 
Debt securities                                     -           - 
-----------------------------------------  ----------  ---------- 
Total assets                                        -           - 
-----------------------------------------  ----------  ---------- 
 
Liabilities 
Deposits                                          702         984 
Derivative liabilities                              -           1 
-----------------------------------------  ----------  ---------- 
Total liabilities                                 702         985 
-----------------------------------------  ----------  ---------- 
Loan commitments and other guarantees(1)           52          80 
-----------------------------------------  ----------  ---------- 
 

1 The maximum loan commitments and other guarantees during the period were $52 million (31 December 2021: $80 million)

28. Post balance sheet events

The Board has recommended an interim ordinary dividend for the half year 2022 of 4 cents a share or $119 million.

The Board has also decided to carry out a share buy-back for up to a maximum consideration of $500 million to further reduce the number of ordinary shares in issue by cancelling the repurchased shares.

29. Corporate governance

The directors confirm that, throughout the period, the Company has complied with the code provisions set out in the Corporate Governance Code contained in Appendix 14 of the Hong Kong Listing Rules. The directors also confirm that the announcement of these results has been reviewed by the Company's Audit Committee. The Company confirms that it has adopted a code of conduct regarding securities transactions by directors on terms no less exacting than the required standard set out in Appendix 10 of the Hong Kong Listing Rules and that, having made specific enquiry of all directors, the directors of the Company have complied with the required standards of the adopted code of conduct throughout the period.

As previously announced, the following changes to the composition of the Board have taken place since 31 December

2021. On 30 April 2022, Naguib Kheraj, Deputy Chairman, Chair of the Board Risk Committee (BRC) and member of the Governance and Nomination Committee, retired from the Board. Phil Rivett was appointed as interim Chair of the BRC with effect from 1 May 2022, pending the appointment of Maria Ramos as Chair of the BRC receiving regulatory approval. Shirish Apte was appointed to the Board as an Independent Non-Executive Director (INED) and a member of each of the Audit Committee and BRC on 4 May 2022. Robin Lawther was appointed to the Board as an INED and a member of each of the BRC and Remuneration Committee on 1 July 2022. Biographies for each of the directors and a list of the committees' membership can be found at sc.com.

Given the progress made on the Board Financial Crime Risk Committee's (BFCRC) purpose with respect to financial crime risk management, the BFCRC ceased to be a standalone Board Committee with effect from 1 April 2022. Its remit was reallocated to a combination of the BRC, the Audit Committee and the Board. This enables a more holistic and efficient examination and discussion of risk as fraud, information and cyber security and financial crime are closely linked, as these areas are currently discussed in different meetings of the Board and its Committees. Gay Huey Evans, CBE; David Conner; Christine Hodgson, CBE; Naguib Kheraj and Carlson Tong stepped down from their respective roles on the BFCRC. With the exception of Naguib Kheraj, who retired from the Group on 30 April 2022, all former BFCRC members have continued to perform their other Board and Board Committee roles. The two BFCRC external advisors, Sir Iain Lobban and Boon Hui Khoo, have agreed to remain at the disposal of the Board Risk Committee and Audit Committee for a further year.

In compliance with Rule 13.51B(1) of the Hong Kong Listing Rules, the Company confirms that, Gay Huey Evans, CBE, INED, was appointed to the board of S&P Global as a non-executive director and member of its Audit Committee on 28 February 2022, and resigned as an independent director of IHS Markit on the same date. On 25 May 2022, Carlson Tong, INED, was appointed to the board of MTR Corporation Limited, a company listed on the Hong Kong Stock Exchange, as an INED, Chairman of its Audit & Risk Committee and a member of its Finance and Investment Committee. Byron Grote, INED, retired from Anglo American plc on 19 April 2022 and was appointed to the board of InterContinental Hotels Group PLC as a non-executive director and member of its Audit and Remuneration Committees, with effect from 1 July 2022.

Page 119

30. Statutory accounts

The information in this Half Year Report is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This document was approved by the Board on 29 July 2022. The statutory accounts for the year ended 31 December 2021 have been audited and delivered to the Registrar of Companies in England and Wales. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under sections 498(2)

and 498(3) of the Companies Act 2006.

31. Cash flow note

Adjustment for non-cash items and other adjustments included within income statement

 
                                                             30.06.22    30.06.21 
                                                             $million    $million 
---------------------------------------------------------  ----------  ---------- 
Amortisation of discounts and premium of investment 
 securities                                                       195          46 
Interest expense on subordinated liabilities                      247         246 
Interest expense on senior debt securities in issue               283         259 
Other non-cash items                                               16        (84) 
Pension costs for defined benefit schemes                          29          35 
Share-based payment costs                                         122          99 
Impairment losses on loans and advances and other Credit 
 Risk provisions                                                  263        (51) 
Other impairment                                                   15          40 
Gain on disposal of property, plant and equipment                (32)        (34) 
Gain on disposal of FVOCI and AMCST financial assets             (14)       (161) 
Depreciation and amortisation                                     592         596 
Fair value changes taken to income statement                    (199)         (7) 
Foreign currency revaluation                                    (666)       (250) 
Loss on derecognition of investment in associate                    2           - 
Profit from associates and joint ventures                       (153)       (141) 
---------------------------------------------------------  ----------  ---------- 
Total                                                             700         593 
---------------------------------------------------------  ----------  ---------- 
 

Change in operating assets

 
                                                               30.06.22    30.06.21 
                                                               $million    $million 
-----------------------------------------------------------  ----------  ---------- 
(Increase)/decrease in derivative financial instruments        (25,182)      16,982 
Net decrease/(increase) in debt securities, treasury 
 bills and equity shares held at fair value through profit 
 or loss                                                          7,861        (17) 
Decrease/(increase) in loans and advances to banks and 
 customers                                                        5,139    (20,881) 
Net (increase) in prepayments and accrued income                  (244)       (118) 
Net (increase) in other assets                                 (11,859)     (2,997) 
-----------------------------------------------------------  ----------  ---------- 
Total                                                          (24,285)     (7,031) 
-----------------------------------------------------------  ----------  ---------- 
 

Change in operating liabilities

 
                                                             30.06.22    30.06.21 
                                                             $million    $million 
---------------------------------------------------------  ----------  ---------- 
Increase/(decrease) in derivative financial instruments        23,620    (19,161) 
Net (decrease)/increase in deposits from banks, customer 
 accounts, debt securities in issue, Hong Kong notes 
 in circulation and short positions                          (14,783)      13,528 
Net decrease in accruals and deferred income                    (353)       (381) 
Net increase in other liabilities                              17,558      11,417 
---------------------------------------------------------  ----------  ---------- 
Total                                                          26,042       5,403 
---------------------------------------------------------  ----------  ---------- 
 

In H1 2021, $416 million of additions to internally generated capitalised software were included in the cash flows from operating activities section of the cash flow statement within change in operating assets. In H1 2022, $486 million of additions to internally generated capitalised software are included in cash flows from investing activities as a separate line item. The H1 2021 comparative cash flow statement has been adjusted for this change in classification.

Page 120

Disclosures

 
                                                    30.06.22    30.06.21 
                                                    $million    $million 
------------------------------------------------  ----------  ---------- 
Subordinated debt (including accrued interest): 
Opening balance                                       16,885      16,892 
Proceeds from the issue                                  750       1,186 
Interest paid                                          (310)       (293) 
Repayment                                            (1,048)       (530) 
Foreign exchange movements                             (401)        (69) 
Fair value changes                                   (1,018)       (282) 
Accrued Interest and Others                              320         313 
------------------------------------------------  ----------  ---------- 
Closing balance                                       15,178      17,217 
------------------------------------------------  ----------  ---------- 
 
Senior debt (including accrued interest): 
Opening balance                                       29,904      29,989 
Proceeds from the issue                                6,511       8,276 
Interest paid                                          (487)       (366) 
Repayment                                            (3,618)     (4,865) 
Foreign exchange movements                             (881)       (316) 
Fair value changes                                     (804)       (248) 
Accrued Interest and Others                              521         369 
------------------------------------------------  ----------  ---------- 
Closing balance                                       31,146      32,839 
------------------------------------------------  ----------  ---------- 
 

Page 121

Other supplementary financial information

Supplementary financial information

1. Average balance sheets and yields

The following tables set out the average balances and yields for the Group's assets and liabilities for the periods ended 30 June 2022, 31 December 2021 and 30 June 2021. For the purpose of these tables, average balances have been determined on the basis of daily balances, except for certain categories, for which balances have been determined less frequently. The Group does not believe that the information presented in these tables would be significantly different had such balances been determined on a daily basis.

Average assets

 
                                                           6 months ended 30.06.22 
--------------------------------------  ------------------------------------------------------------- 
                                              Average    Average             Gross yield 
                                         non-interest   interest                interest  Gross yield 
                                              earning    earning   Interest      earning        total 
                                              balance    balance     income      balance      balance 
                                             $million   $million   $million            %            % 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
Cash and balances at central banks             23,650     55,603        146         0.53         0.37 
Gross loans and advances to banks              28,854     41,945        326         1.57         0.93 
Gross loans and advances to customers          62,985    305,280      4,027         2.66         2.21 
Impairment provisions against 
 loans and advances to banks and 
 customers                                          -    (5,496)          -            -            - 
Investment securities                          32,943    168,003      1,286         1.54         1.29 
Property, plant and equipment 
 and intangible assets                          8,727          -          -            -            - 
Prepayments, accrued income and 
 other assets                                 130,842          -          -            -            - 
Investment associates and joint 
 ventures                                       2,196          -          -            -            - 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
Total average assets                          290,197    565,335      5,785         2.06         1.36 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
 
 
                                                           6 months ended 31.12.21 
--------------------------------------  ------------------------------------------------------------- 
                                              Average    Average             Gross yield 
                                         non-interest   interest                interest  Gross yield 
                                              earning    earning   Interest      earning        total 
                                              balance    balance     income      balance      balance 
                                             $million   $million   $million            %            % 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
Cash and balances at central banks             24,043     55,517         50         0.18         0.12 
Gross loans and advances to banks              21,869     45,294        243         1.06         0.72 
Gross loans and advances to customers          59,776    309,765      3,796         2.43         2.04 
Impairment provisions against 
 loans and advances to banks and 
 customers                                          -    (5,582)          -            -            - 
Investment securities                          32,884    156,571      1,037         1.31         1.09 
Property, plant and equipment 
 and intangible assets                          8,779          -          -            -            - 
Prepayments, accrued income and 
 other assets                                 109,490          -          -            -            - 
Investment associates and joint 
 ventures                                       2,392          -          -            -            - 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
Total average assets                          259,234    561,565      5,126         1.81         1.24 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
 
 
                                                           6 months ended 30.06.21 
--------------------------------------  ------------------------------------------------------------- 
                                              Average    Average             Gross yield 
                                         non-interest   interest                interest  Gross yield 
                                              earning    earning   Interest      earning        total 
                                              balance    balance     income      balance      balance 
                                             $million   $million   $million            %            % 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
Cash and balances at central banks             23,174     56,473         42         0.15         0.11 
Gross loans and advances to banks              22,809     46,623        247         1.07         0.72 
Gross loans and advances to customers          53,335    305,302      3,780         2.50         2.13 
Impairment provisions against 
 loans and advances to banks and 
 customers                                          -    (6,451)          -            -            - 
Investment securities                          31,605    155,268      1,053         1.37         1.14 
Property, plant and equipment 
 and intangible assets                          8,960          -          -            -            - 
Prepayments, accrued income and 
 other assets                                 113,672          -          -            -            - 
Investment associates and joint 
 ventures                                       2,267          -          -            -            - 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
Total average assets                          255,822    557,215      5,122         1.85         1.27 
--------------------------------------  -------------  ---------  ---------  -----------  ----------- 
 

Page 122

Average liabilities

 
                                                           6 months ended 30.06.22 
----------------------------------------  --------------------------------------------------------- 
                                                Average    Average             Rate paid 
                                           non-interest   interest              interest  Rate paid 
                                                bearing    bearing   Interest    bearing      total 
                                                balance    balance    expense    balance    balance 
                                               $million   $million   $million          %          % 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Deposits by banks                                18,293     29,193         92       0.64       0.39 
Customer accounts: 
  Current accounts and savings deposits          54,567    270,071        584       0.44       0.36 
  Time and other deposits                        63,898    149,866        854       1.15       0.81 
Debt securities in issue                          6,228     61,288        347       1.14       1.04 
Accruals, deferred income and 
 other liabilities                              132,958      1,127         23       4.12       0.03 
Subordinated liabilities and other 
 borrowed funds                                       -     15,559        247       3.20       3.20 
Non-controlling interests                           340          -          -          -          - 
Shareholders' funds                              49,493          -          -          -          - 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
                                                325,777    527,104      2,147       0.82       0.51 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
 
Adjustment for Financial Markets 
 funding costs                                                          (106) 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Financial guarantee fees on interest 
 earning assets                                                            47 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Total average liabilities and 
 shareholders' funds                            325,777    527,104      2,088       0.80       0.49 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
 
 
                                                           6 months ended 31.12.21 
----------------------------------------  --------------------------------------------------------- 
                                                Average    Average             Rate paid 
                                           non-interest   interest              interest  Rate paid 
                                               |bearing    bearing   Interest    bearing      total 
                                                balance    balance    expense    balance    balance 
                                               $million   $million   $million          %          % 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Deposits by banks                                19,731     28,218         62       0.44       0.26 
Customer accounts: 
  Current accounts and savings deposits          53,310    267,231        460       0.34       0.28 
  Time and other deposits                        55,727    147,441        615       0.83       0.60 
Debt securities in issue                          6,450     57,003        282       0.98       0.88 
Accruals, deferred income and 
 other liabilities                              112,614      1,206         26       4.28       0.05 
Subordinated liabilities and other 
 borrowed funds                                       -     16,666        251       2.99       2.99 
Non-controlling interests                           356          -          -          -          - 
Shareholders' funds                              51,533          -          -          -          - 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
                                                299,722    517,766      1,696       0.65       0.41 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
 
Adjustment for Financial Markets 
 funding costs                                                           (97) 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Financial guarantee fees on interest 
 earning assets                                                           156 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Total average liabilities and 
 shareholders' funds                            299,722    517,766      1,755       0.67       0.43 
----------------------------------------  -------------  ---------  ---------  ---------  --------- 
 
 
                                                            6 months ended 30.06.21 
-----------------------------------------  --------------------------------------------------------- 
                                                 Average    Average             Rate paid 
                                            non-interest   interest              interest  Rate paid 
                                                 bearing    bearing   Interest    bearing      total 
                                                 balance    balance    expense    balance    balance 
                                                $million   $million   $million          %          % 
-----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Deposits by banks                                 17,261     26,599         74       0.56       0.34 
Customer accounts: 
   Current accounts and savings deposits          48,934    257,233        388       0.30       0.26 
   Time and other deposits                        53,606    151,262        733       0.98       0.72 
Debt securities in issue                           6,129     61,232        284       0.94       0.85 
Accruals, deferred income and 
 other liabilities                               118,293      1,093         27       4.98       0.05 
Subordinated liabilities and other 
 borrowed funds                                        -     16,386        246       3.03       3.03 
Non-controlling interests1                           328          -          -          -          - 
Shareholders' funds                               51,088          -          -          -          - 
-----------------------------------------  -------------  ---------  ---------  ---------  --------- 
                                                 295,639    513,805      1,752       0.69       0.44 
-----------------------------------------  -------------  ---------  ---------  ---------  --------- 
 
Adjustment for Financial Markets 
 funding costs                                                            (52) 
-----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Financial guarantee fees on interest 
 earning assets                                                             47 
-----------------------------------------  -------------  ---------  ---------  ---------  --------- 
Total average liabilities and 
 shareholders' funds                             295,639    513,805      1,747       0.69       0.44 
-----------------------------------------  -------------  ---------  ---------  ---------  --------- 
 

Page 123

Additional items

A. Our Fair Pay Charter

Our Fair Pay Charter, introduced in 2018, sets out the principles we use to make remuneration decisions across the Group that are fair, transparent and competitive in order to support us in embedding a performance oriented, inclusive and innovative culture and in delivering a differentiated employee experience. Our Fair Pay Charter principles are set out in the Group's 2021 Annual Report together with a summary of our progress in implementing these across the Group, and our third external Fair Pay Report, published in February 2022, is available on our Group website.

B. Group share plans

Discretionary share plans

The Group has two discretionary share plans: the 2011 Standard Chartered Share Plan, approved by shareholders in May 2011, and the 2021 Standard Chartered Share Plan, approved by shareholders in May 2021. Awards made in 2022 were granted under the 2021 Standard Chartered Share Plan. The discretionary share plans are used to deliver various types of share awards:

-- Long-term incentive plan (LTIP) awards: granted with vesting subject to performance measures. Performance measures attached to awards granted previously include: total shareholder return (TSR); return on equity (RoE) with a common equity tier 1 (CET1) underpin; strategic measures; earnings per share (EPS) growth; and return on risk-weighted assets (RoRWA). Each measure is assessed independently over a three-year period. Awards granted from 2016 have an individual conduct gateway requirement that results in the award lapsing if not met

-- Deferred awards are used to deliver the deferred portion of variable remuneration, in line with both market practice and regulatory requirements. These awards vest in instalments on anniversaries of the award date specified at the time of grant. Deferred awards are not subject to any plan limit. This enables the Group to meet regulatory requirements relating to deferral levels, and is in line with market practice

-- Restricted share awards, made outside of the annual performance process as replacement buy-out awards to new joiners who forfeit awards on leaving their previous employers, vest in instalments on the anniversaries of the award date specified at the time of grant.

This enables the Group to meet regulatory requirements relating to buy-outs, and is in line with market practice. In line with similar plans operated by our competitors, restricted share awards are not subject to an annual limit and do not have any performance measures

Under the discretionary share plans, no grant price is payable to receive an award. New awards cannot be made under the 2011 Standard Chartered Share Plan. The remaining life of the 2021 Standard Chartered Share Plan during which new awards can be made is nine years.

All Employee 2013 Sharesave Plan

The 2013 Sharesave Plan was approved by shareholders in May 2013. Under the 2013 Sharesave Plan, employees may open a savings contract. Within a maturity period of six months after the third anniversary, employees may purchase ordinary shares in the Company at a discount of up to 20 per cent on the share price at the date of invitation (this is known as the 'option exercise price'). There are no performance measures attached to options granted under the 2013 Sharesave Plan and no grant price is payable to receive an option.

In some countries in which the Group operates, it is not possible to deliver shares under the 2013 Sharesave Plan, typically due to securities laws and regulatory restrictions. In these countries, where possible, the Group offers an equivalent cash-based plan to its employees. The 2013 Sharesave Plan was approved by shareholders in May 2013 and all future Sharesave invitations are made under this plan. The remaining life of the 2013 Sharesave Plan is less than one year since it expires in May 2023.

Page 124

Valuation of share awards

Details of the valuation models used in determining the fair values of share awards granted under the Group's share plans are detailed in the Group's 2021 Annual Report.

Reconciliation of share award movements for the period to 30 June 2022

 
                                                                                                 Weighted 
                                                                                                  average 
                                                                                                Sharesave 
                                                           Deferred/Restricted                   exercise 
                                                    LTIP1              shares1    Sharesave   price (GBP) 
--------------------------------------------  -----------  -------------------  -----------  ------------ 
Outstanding at 1 January 2022                  11,627,751           39,718,654   16,897,075          3.95 
Granted2                                        3,063,815           24,095,928            -             - 
Lapsed                                        (2,418,663)            (322,775)  (1,866,289)          4.42 
Exercised                                       (405,209)         (15,507,237)  (1,383,500)          5.11 
--------------------------------------------  -----------  -------------------  -----------  ------------ 
Outstanding at 30 June 2022                    11,867,694           47,984,570   13,647,286          3.77 
--------------------------------------------  -----------  -------------------  -----------  ------------ 
Exercisable as at 30 June 2022                          -            1,446,976       57,966          3.94 
--------------------------------------------  -----------  -------------------  -----------  ------------ 
                                                                                     3.14 - 
Range of exercise prices (GBP)3,4                       -                    -         5.13 
--------------------------------------------  -----------  -------------------  -----------  ------------ 
Intrinsic value of vested but not exercised 
 options ($ million)                                 0.00                10.88         0.16 
--------------------------------------------  -----------  -------------------  -----------  ------------ 
Weighted average contractual remaining 
 life (years)                                        8.31                 8.64         1.96 
--------------------------------------------  -----------  -------------------  -----------  ------------ 
Weighted average closing price of shares 
 immediately before the dates 
 on which options were exercised                      N/A                 5.43         4.63 
--------------------------------------------  -----------  -------------------  -----------  ------------ 
 

1 Employees do not contribute towards the cost of these awards, which are covered under the rules of the 2011 Standard Chartered Share Plan for grants prior to May 2021, and under the rules of the 2021 Standard Chartered Share Plan for grants from June 2021

2 23,434,127 (DRSA/RSA) granted on 14 March 2022, 77,479 (deferred / restricted shares) granted as notional dividend on 01 March 2022, 3,048,826 (LTIP) granted on 14 March 2022, 14,989 (LTIP) granted as notional dividend on 01 March 2022, 584,322 (deferred / restricted shares) granted on 20 June 2022

3 No discretionary awards (LTIP or deferred / restricted shares) have been granted in the form of options since June 2015. For historic awards granted as options and exercised in the period to 30 June 2022, the exercise price of deferred / restricted shares options was nil

4 All Sharesave awards are in the form of options. The exercise price of Sharesave options exercised was GBP3.67 for options granted in 2021, GBP3.14 for options granted in 2020, GBP4.98 for options granted in 2019 and GBP5.13 for options granted in 2018

5 No options were cancelled in the period

C. Group Chairman and independent non-executive directors' interests in ordinary shares as at 30 June 20221,2

 
                                             Shares         Shares 
                                       beneficially   beneficially 
                                            held as        held as 
                                                 at             at 
                                        31 December        30 June 
                                               2021           2022 
------------------------------------  -------------  ------------- 
Group Chairman 
J Viñals                                30,000         30,000 
------------------------------------  -------------  ------------- 
Independent non-executive directors 
S M Apte3                                         -          2,000 
D P Conner                                   10,000         10,000 
B E Grote                                    90,041         90,041 
C Hodgson, CBE                                2,571          2,571 
G Huey Evans, CBE                             2,615          2,615 
N Kheraj4                                   150,571              - 
M Ramos                                       2,000          2,000 
P G Rivett                                    2,128          2,128 
D Tang                                        2,000          2,000 
C Tong                                        2,000          2,000 
J M Whitbread                                 3,615          3,615 
------------------------------------  -------------  ------------- 
 

1. Directors are required to hold shares with a nominal value of $1,000. All the directors have met this requirement

2. The beneficial interests of directors and their related parties in the ordinary shares of the Company are set out above. The directors do not have any non-beneficial interests in the Company's shares. None of the directors used ordinary shares as collateral for any loans. No director had either i) an interest in the Company's preference shares or loan stocks of any subsidiary or associated undertaking of the Group or ii) any corporate interests in the Company's ordinary shares. All figures

as at 30 June 2022

3. Shirish Apte was appointed to the Board on 4 May 2022

4. Naguib Kheraj retired from the Board on 30 April 2022

Page 125

D. Executive directors' interests in ordinary shares as at 30 June 2022

Scheme interests awarded, exercised and lapsed during the period

Employees, including executive directors, are not permitted to engage in any personal investment strategies with regards to their Company shares, including hedging against the share price of Company shares. The main features of the outstanding shares and awards are summarised below:

 
          Performance            Accrues notional   No. of                       Post-vest regulatory  Performance 
Award      measures               dividends?1        tranches  Tranche splits     retention period2     outcome 
--------  ---------------------  -----------------  ---------  ----------------  --------------------  --------------- 
                                                                                 6 months on 
                                                               50% tranche        50% of the 
2016-18   33% - RoE              Yes                5           1                 award                27% 
                                                                12.5% tranches 
  33% - TSR                                                      2-5 
  33% - Strategic 
 ----------------------------------------  -------  ---------  ----------------  --------------------  --------------- 
                                                                                 6 months on 
                                                                                  50% of the 
2017-19                           Yes               5          5 equal tranches   award                38% 
-------------------------------   ----------------  ---------  ----------------  --------------------  --------------- 
2018-20                           No                5                            12 months             26% 
-------------------------------   ----------------  ---------  ----------------  --------------------  --------------- 
          33% - RoTE 
           33% - TSR 
2019-21    33% - Strategic       No                 5                            12 months             23% 
--------  ---------------------  -----------------  ---------                    --------------------  --------------- 
2020-22                           No                5                            12 months             To be assessed 
                                                                                                        at end of 2022 
-------------------------------   ----------------  ---------                    --------------------  --------------- 
2021-23   30% - RoTE             No                 5                            12 months             To be assessed 
           30% - TSR                                                                                    at end of 2023 
           15% - Sustainability 
           25% - Strategic 
--------  ---------------------  -----------------  ---------                    --------------------  --------------- 
2022-24   30% - RoTE             No                 5                            12 months             To be assessed 
           30% - TSR                                                                                    at end of 2024 
           15% - Sustainability 
           25% - Strategic 
--------  ---------------------  -----------------  ---------  ----------------  --------------------  --------------- 
 

5. 2016-18 and 2017-19 LTIP awards may receive dividend equivalent shares based on dividends declared between grant and vest. From 1 January 2017 remuneration regulations for European banks prohibited the award of dividend equivalent shares. Therefore, the number of shares awarded in respect of the 2018-20, 2019-21, 2020-22 and 2021-23 LTIP awards took into account the lack of dividend equivalents (calculated by reference to market consensus dividend yield) such that the

overall value of the award was maintained

6. As executive directors are material risk takers, regulatory retention periods apply to net shares delivered. The requirements changed over the years. Where the retention was not required on the entire award this was because the total share-linked remuneration for the executive directors in the relevant performance years exceeded the regulatory requirement for share-linked remuneration.

Page 126

The following table shows the changes in share interests.

 
                                                Changes in interests during the period 1 January 
                                                                 to 30 June 2022 
-------------  ------  ----------  -------------------------------------------------------------------------- 
                Share 
                award                                                               Performance 
                price       As of            Dividends                       As of       period     Vesting 
                (GBP)   1 January  Awarded1   awarded2  Vested3   Lapsed   30 June          end        date 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
B Winters 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         11 Mar 
                           33,506         -      2,517   36,023        -         -         2019  4 May 2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
2016-18 LTIP    5.560      33,507         -          -        -        -    33,507               4 May 2023 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         13 Mar      13 Mar 
                           45,049         -      3,380   48,428        -         -         2020        2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     13 Mar 
                           45,049         -          -        -        -    45,049                     2023 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     13 Mar 
2017-19 LTIP    7.450      45,049         -          -        -        -    45,049                     2024 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           28,178         -          -   28,178        -         -   9 Mar 2021  9 Mar 2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           28,178         -          -        -        -    28,178               9 Mar 2023 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           28,178         -          -        -        -    28,178               9 Mar 2024 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
2018-20 LTIP    7.782      28,179         -          -        -        -    28,179               9 Mar 2025 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         11 Mar      11 Mar 
                          133,065         -          -   30,604  102,461         -         2022        2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     11 Mar 
                          133,065         -          -        -  102,461    30,604                     2023 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     11 Mar 
                          133,065         -          -        -  102,461    30,604                     2024 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     11 Mar 
                          133,065         -          -        -  102,461    30,604                     2025 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     11 Mar 
2019-21 LTIP    6.105     133,067         -          -        -  102,462    30,605                     2026 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                          161,095         -          -        -        -   161,095   9 Mar 2023  9 Mar 2023 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                          161,095         -          -        -        -   161,095               9 Mar 2024 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                          161,095         -          -        -        -   161,095               9 Mar 2025 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                          161,095         -          -        -        -   161,095               9 Mar 2026 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
2020-22 LTIP    5.196     161,095         -          -        -        -   161,095               9 Mar 2027 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         15 Mar      15 Mar 
                          150,621         -          -        -        -   150,621         2024        2024 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     15 Mar 
                          150,621         -          -        -        -   150,621                     2025 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     15 Mar 
                          150,621         -          -        -        -   150,621                     2026 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     15 Mar 
                          150,621         -          -        -        -   150,621                     2027 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     15 Mar 
2021-23 LTIP    4.901     150,621         -          -        -        -   150,621                     2028 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         14 Mar      14 Mar 
                                -   151,386          -        -        -   151,386         2025        2026 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     14 Mar 
                                -   151,386          -        -        -   151,386                     2027 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     14 Mar 
                                -   151,386          -        -        -   151,386                     2028 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     14 Mar 
                                -   151,386          -        -        -   151,386                     2029 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     14 Mar 
2022-24 LTIP    4.876           -   151,388          -        -        -   151,388                     2030 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
A Halford 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         11 Mar 
                           20,008         -      1,502   21,510        -         -         2019  4 May 2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
2016-18 LTIP    5.560      20,009         -          -        -        -    20,009               4 May 2023 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         13 Mar      13 Mar 
                           27,888         -      2,094   29,982        -         -         2020        2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     13 Mar 
                           27,888         -          -        -        -    27,888                     2023 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     13 Mar 
2017-19 LTIP    7.450      27,890         -          -        -        -    27,890                     2024 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           17,448         -          -   17,448        -         -   9 Mar 2021  9 Mar 2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           17,448         -          -        -        -    17,448               9 Mar 2023 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           17,448         -          -        -        -    17,448               9 Mar 2024 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
2018-20 LTIP    7.782      17,448         -          -        -        -    17,448               9 Mar 2025 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         11 Mar      11 Mar 
                           85,094         -          -   19,571   65,523         -         2022        2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     11 Mar 
                           85,094         -          -        -   65,523    19,571                     2023 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     11 Mar 
                           85,094         -          -        -   65,523    19,571                     2024 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     11 Mar 
                           85,094         -          -        -   65,523    19,571                     2025 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     11 Mar 
2019-21 LTIP    6.105      85,096         -          -        -   65,524    19,572                     2026 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           99,976         -          -        -        -    99,976   9 Mar 2023  9 Mar 2023 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           99,976         -          -        -        -    99,976               9 Mar 2024 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           99,976         -          -        -        -    99,976               9 Mar 2025 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                           99,976         -          -        -        -    99,976               9 Mar 2026 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
2020-22 LTIP    5.196      99,977         -          -        -        -    99,977               9 Mar 2027 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         15 Mar      15 Mar 
                           96,283         -          -        -        -    96,283         2024        2024 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     15 Mar 
                           96,283         -          -        -        -    96,283                     2025 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     15 Mar 
                           96,283         -          -        -        -    96,283                     2026 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     15 Mar 
                           96,283         -          -        -        -    96,283                     2027 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     15 Mar 
2021-23 LTIP    4.901      96,283         -          -        -        -    96,283                     2028 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                         14 Mar      14 Mar 
                                -    96,772          -        -        -    96,772         2025        2026 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     14 Mar 
                                -    96,772          -        -        -    96,772                     2027 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     14 Mar 
                                -    96,772          -        -        -    96,772                     2028 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     14 Mar 
                                -    96,772          -        -        -    96,772                     2029 
                       ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
                                                                                                     14 Mar 
2022-24 LTIP    4.876           -    96,773          -        -        -    96,773                     2030 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
Sharesave       4.980       1,807         -          -        -        -     1,807            -  1 Dec 2022 
-------------  ------  ----------  --------  ---------  -------  -------  --------  -----------  ---------- 
 

Page 127

1. For the 2022-24 LTIP awards granted to Bill Winters and Andy Halford on 14 March 2022, the values granted were: Bill Winters: GBP3.1 million; Andy Halford GBP2.0 million.

The number of shares awarded in respect of the LTIP took into account the lack of dividend equivalents (calculated by reference to market consensus dividend yield) such that the overall value of the award was maintained. Performance measures apply to 2022-24 LTIP awards. The closing price on the day before grant was GBP4.876.

2. Dividend equivalent shares may be awarded on vesting for awards granted prior to 1 January 2018. On 31 March 2020 Standard Chartered announced that in response to the request from the PRA and as a consequence of the unprecedented challenges facing the world due to the COVID-19 pandemic, the Board decided to withdraw the recommendation to pay a final dividend for 2019. Dividend equivalent shares allocated to the 2016-18 LTIP and 2017-19 awards vesting in 2022 did not include any shares relating to the cancelled dividend.

3. On 10 March 2022, 28,178 shares (before tax) were delivered to Bill Winters from the vesting element of the 2018-20 LTIP award and 17,448 shares (before tax) were delivered to Andy Halford from the vesting element of the 2018-20 LTIP award. The closing share price on the day before the shares were delivered was GBP4.931. On 14 March 2022, 48,428 shares (before tax) were delivered to Bill Winters from the vesting element of the 2017-19 LTIP award and 29,982 shares (before tax) were delivered to Andy Halford from the vesting element of the 2017-19 LTIP award. The closing share price on the day before the shares were delivered was GBP4.876. On 21 March 2022, 30,604 shares (before tax) were delivered to Bill Winters from the vesting element of the 2019-21 LTIP award and 19,571 shares (before tax) were delivered to Andy Halford from the vesting element of the 2019-21 LTIP award. The closing share price on the day before the delivery was GBP5.064. On 6 May 2022, Bill Winters 36,023 shares (before tax) were delivered to Bill Winters from the vesting element of the 2016-18 LTIP award and 21,510 shares (before tax) were delivered to Andy Halford from the vesting element of the 2016-18 LTIP award. The closing share price on the day before the delivery was GBP5.65.

4. The unvested LTIP awards held by Bill Winters and Andy Halford are conditional rights. They do not have to pay towards these awards. Under these awards, shares are delivered on vesting or as soon as practicable thereafter.

5. The unvested Sharesave option held by Andy Halford is an option granted on 1 October 2019 under the 2013 Plan - to exercise this option, Andy has to pay an exercise price of GBP4.98 per share, which has been discounted by 20 per cent

As at 30 June 2022, none of the directors had registered an interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations that was required to be recorded pursuant to section 352 of the Securities and Futures Ordinance, or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

Shareholdings and share interests

The following table summarises the executive directors' shareholdings and share interests.

 
                                                                                              Value of 
                                    Unvested                                                    shares 
                                share awards                                                  counting        Unvested 
                                 not subject                                                   towards    share awards 
                                          to   Total shares                               shareholding         subject 
                                 performance       counting                                requirement  to performance 
                       Shares       measures        towards                                       as a        measures 
                         held        (net of   shareholding  Shareholding                   percentage         (before 
            beneficially1,2,3          tax)4    requirement   requirement       Salary2     of salary1            tax) 
----------  -----------------  -------------  -------------  ------------  ------------  -------------  -------------- 
B Winters           2,309,799        171,064      2,480,863   250% salary  GBP2,434,000           631%       2,315,512 
----------  -----------------  -------------  -------------  ------------  ------------  -------------  -------------- 
A Halford             985,216        108,627      1,093,843   200% salary  GBP1,556,000           435%       1,465,157 
----------  -----------------  -------------  -------------  ------------  ------------  -------------  -------------- 
 

1. All figures are as of 30 June 2022 unless stated otherwise. The closing share price on 30 June 2022 was GBP6.186. No director had either: (i) an interest in Standard

Chartered PLC's preference shares or loan stocks of any subsidiary or associated undertaking of the Group; or (ii) any corporate interested in Standard Chartered PLC's ordinary shares

2. The beneficial interests of directors and connected persons in the ordinary shares of the Company are set out above. The executive directors so not have any non-beneficial interest in the Company's shares. Neither of the executive directors used ordinary shares as collateral for any loans

3. The salary and shares held beneficially include shares awarded to deliver the executive directors' salary shares

4. 23 per cent of the 2019-21 LTIP award is no longer subject to performance measures due to achievement against 2019-21 strategic measures

5. As Bill and Andy are both UK taxpayers: zero per cent tax is assumed to apply to Sharesave (as Sharesave is a UK tax qualified share plan) and 48.25 per cent tax

is assumed to apply to other unvested share awards (marginal combined PAYE rate of income tax at 45 per cent and employee social security contributions at

3.25 per cent) - rates may change

E. Share price information

The middle market price of an ordinary share at the close of business on 30 June 2022 was 618.6 pence. The share price range during the first half of 2022 was 450.4 pence to 638.6 pence (based on the closing middle market prices).

F. Substantial shareholders

The Company and its shareholders have been granted partial exemption from the disclosure requirements under Part XV of the Securities and Futures Ordinance (SFO). As a result of this exemption, shareholders no longer have an obligation under Part XV of the SFO (other than Divisions 5, 11 and 12 thereof) to notify the Company of substantial shareholding interests, and the Company is no longer required to maintain a register of interests of substantial shareholders under section 336 of the SFO. The Company is, however, required to file with The Stock Exchange of Hong Kong Limited any disclosure of interests made in the UK.

G. Code for Financial Reporting Disclosure

The UK Finance Code for Financial Reporting Disclosure sets out five disclosure principles together with supporting guidance. The principles are that UK banks will: provide high-quality, meaningful and decision useful disclosures; review and enhance their financial instrument disclosures for key areas of interest; assess the applicability and relevance of good practice recommendations to their disclosures, acknowledging the importance of such guidance; seek to enhance the comparability of financial statement disclosures across the UK banking sector; and clearly differentiate in their annual reports between information that is audited and information that is unaudited.

The Group's interim financial statements for the six months ended 30 June 2022 have been prepared in accordance with the Code's principles.

H. Employees

The details regarding our remuneration policies, bonus schemes and training schemes have not materially changed from our 2021 Annual Report and Accounts and we will be updating on these in our 2022 Annual Report.

Page 128

Shareholder information

Dividend and interest payment dates

 
Ordinary shares                       2022 interim dividend (cash only) 
------------------------------------  --------------------------------- 
Results and dividend announced                             29 July 2022 
------------------------------------  --------------------------------- 
Ex-dividend date                            11 (UK) 10 (HK) August 2022 
------------------------------------  --------------------------------- 
Record date                                              12 August 2022 
------------------------------------  --------------------------------- 
Last date to amend currency election 
 instructions for cash dividend*                      19 September 2022 
------------------------------------  --------------------------------- 
Dividend payment date                                   14 October 2022 
------------------------------------  --------------------------------- 
 

*in either US dollars, sterling, or Hong Kong dollars

 
                                    2022 final dividend (provisional 
                                                               only) 
---------------------------------  --------------------------------- 
Results and dividend announcement 
 date                                               16 February 2023 
 
 
Preference shares                              Second half-yearly dividend 
-------------------------------------------  ----------------------------- 
7 3/ 8 per cent Non-Cumulative Irredeemable 
 preference shares of GBP1 each                             1 October 2022 
8 1/4 per cent Non-Cumulative Irredeemable 
 preference shares of GBP1 each                             1 October 2022 
-------------------------------------------  ----------------------------- 
6.409 per cent Non-Cumulative preference 
 shares of $5 each                           30 July 2022, 30 October 2022 
-------------------------------------------  ----------------------------- 
7.014 per cent Non-Cumulative preference 
 shares of $5 each                                            30 July 2022 
-------------------------------------------  ----------------------------- 
 

Previous dividend payments (unadjusted for the impact of the 2015/2010/2008 rights issues)

 
                                                                                            Cost of one new 
Dividend                                                                                     ordinary share 
 and financial                                                                               under share dividend 
 year           Payment date          Dividend per ordinary share                            scheme 
--------------  --------------------  ----------------------------------------------------  --------------------- 
Interim 2008    9 October 2008        25.67c/13.96133p/HK$1.995046                          GBP14.00/$26.0148 
Final 2008      15 May 2009           42.32c/28.4693p/HK$3.279597                           GBP8.342/$11.7405 
Interim 2009    8 October 2009        21.23c/13.25177p/HK$1.645304                          GBP13.876/$22.799 
Final 2009      13 May 2010           44.80c/29.54233p/HK$3.478306                          GBP17.351/$26.252 
Interim 2010    5 October 2010        23.35c/14.71618p/HK$1.811274/INR0.9841241             GBP17.394/$27.190 
Final 2010      11 May 2011           46.65c/28.272513p/HK$3.623404/INR1.99751701           GBP15.994/$25.649 
Interim 2011    7 October 2011        24.75c/15.81958125p/HK$1.928909813/INR1.137971251     GBP14.127/$23.140 
Final 2011      15 May 2012           51.25c/31.63032125p/HK$3.9776083375/INR2.66670151     GBP15.723/$24.634 
Interim 2012    11 October 2012       27.23c/16.799630190p/HK$2.111362463/INR1.3498039501   GBP13.417/$21.041 
Final 2012      14 May 2013           56.77c/36.5649893p/HK$4.4048756997/INR2.9762835751    GBP17.40/$26.28792 
Interim 2013    17 October 2013       28.80c/17.8880256p/HK$2.233204992/INR1.68131          GBP15.362/$24.07379 
Final 2013      14 May 2014           57.20c/33.9211444p/HK$4.43464736/INR3.3546261         GBP11.949/$19.815 
Interim 2014    20 October 2014       28.80c/17.891107200p/HK$2.2340016000/INR1.6718425601  GBP12.151/$20.207 
Final 2014      14 May 2015           57.20c/37.16485p/HK$4.43329/INR3.5140591              GBP9.797/$14.374 
Interim 2015    19 October 2015       14.40c/9.3979152p/HK$1.115985456/INR0.861393721       GBP8.5226/$13.34383 
Final 2015      No dividend declared  N/A                                                   N/A 
Interim 2016    No dividend declared  N/A                                                   N/A 
Final 2016      No dividend declared  N/A                                                   N/A 
Interim 2017    No dividend declared  N/A                                                   N/A 
Final 2017      17 May 2018           11.00c/7.88046p/HK$0.86293/INR0.6536433401            GBP7.7600/$10.83451 
Interim 2018    22 October 2018       6.00c/4.59747p/HK$0.46978/INR0.36961751               GBP6.7104/$8.51952 
Final 2018      16 May 2019           15.00c/11.569905p/HK$1.176260/INR0.9576916501         N/A 
Interim 2019    21 October 2019       7.00c/5.676776p/HK$0.548723/INR0.4250286001           N/A 
Final 2019      Dividend withdrawn    N/A                                                   N/A 
Interim 2020    No dividend declared  N/A                                                   N/A 
Final 2020      25 February 2021      9.00c/6.472413p/HK$0.698501                           N/A 
Interim 2021    22 October 2021       3.00c/2.204877p/HK$0.233592                           N/A 
Final 2021      12 May 2022           9.00c/6.894144p/HK$0.705772                           N/A 
--------------  --------------------  ----------------------------------------------------  --------------------- 
 

1 The INR dividend was per Indian Depository Receipt. In March 2020, the Group announced the termination of the IDR programme. The IDR programme was formally delisted from the BSE Limited (formerly the Bombay Stock Exchange) and National Stock Exchange of India Limited with effect from 22 July 2020.

Further details regarding dividends can be found on our website at sc.com/shareholders

Page 129

ShareCare

ShareCare is available to shareholders on the Company's UK register who have a UK address and bank account. It allows you to hold your Standard Chartered PLC shares in a nominee account. Your shares will be held in electronic form so you will no longer have to worry about keeping your share certificates safe. If you join ShareCare, you will still be invited to attend the Company's AGM and you will receive any dividend paid at the same time as everyone else. ShareCare is free to join and there are no annual fees to pay. If you would like to receive more information, please contact the shareholder helpline on 0370 702 0138.

Donating shares to ShareGift

Shareholders who have a small number of shares often find it uneconomical to sell them. An alternative is to consider donating them to the charity ShareGift (registered charity 1052686), which collects donations of unwanted shares until there are enough to sell and uses the proceeds to support UK charities. There is no implication for capital gains tax (no gain or loss) when you donate shares to charity, and UK taxpayers may be able to claim income tax relief on the value of their donation. Further information can be obtained from the Company's registrars or from ShareGift on 020 7930 3737 or from sharegift.org.

Bankers' Automated Clearing System (BACS)

Dividends can be paid straight into your bank or building society account. Please register online at investorcentre.co.uk or contact our registrar for a mandate form.

Registrars and shareholder enquiries

If you have any enquiries relating to your shareholding and you hold your shares on the UK register, please contact our registrar Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ or call the shareholder helpline number on 0370 702 0138.

If you hold your shares on the Hong Kong branch register and you have enquiries, please contact Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong. You can check your shareholding at: computershare.com/hk/en.

Chinese translation

If you would like a Chinese version of this Half Year Report, please contact: Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong.

, : 183 17M

Shareholders on the Hong Kong branch register who have asked to receive corporate communications in either Chinese or English can change this election by contacting Computershare. If there is a dispute between any translation and the English version of this Half Year Report, the English text shall prevail.

Electronic communications

If you hold your shares on the UK register and in future you would like to receive the Half Year Report electronically rather than by post, please register online at: investorcentre.co.uk. Then click on 'register' and follow the instructions. You will need to have your Shareholder or ShareCare reference number when you log on. You can find this on your share certificate or ShareCare statement. Once registered, you can also submit your proxy vote and dividend election electronically and change your bank mandate or address information.

Page 130

Important notices

Forward-looking statements

This document may contain 'forward-looking statements' that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'may', 'could', 'will', 'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek', 'continue' or other words of similar meaning.

By their very nature, forward-looking statements are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. The factors that could cause actual results to differ materially from those described in the forward-looking statements include (but are not limited to): changes in global, political, economic, business, competitive and market forces or conditions; future exchange and interest rates; changes in environmental, social or physical risks; legislative, regulatory and policy developments; the development of standards and interpretations; the ability of the Group to mitigate the impact of climate

change effectively; risks arising out of health crisis and pandemics; changes in tax rates, future business combinations or dispositions; and other factors specific to the Group. Any forward-looking statement contained in this document is based on past or current trends and/or activities of the Group and should not be taken as a representation that such trends or activities will continue in the future.

No statement in this document is intended to be a profit forecast or to imply that the earnings of the Group for the current year or future years will necessarily match or exceed the historical or published earnings of the Group. Each forward-looking statement speaks only as of the date of the particular statement. Except as required by any applicable laws or regulations, the Group expressly disclaims any obligation to revise or update any forward-looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.

Financial instruments

Nothing in this document shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation or advice in respect of any securities or other financial instruments or any other matter.

Caution regarding climate and environment related information

Some of the climate and environment related information in this document is subject to certain limitations, and therefore the reader should treat the information provided, as well as conclusions, projections and assumptions drawn from such information, with caution. The information may be limited due to a number of factors, which include (but are not limited to): a lack of reliable data; a lack of standardisation of data; and future uncertainty. The information includes externally sourced data that may not have been verified. Furthermore, some of the data, models and methodologies used to create the information is subject to adjustment which is beyond our control, and the information is subject to change without notice. This disclaimer does not apply to the Group's condensed consolidated interim financial statements and notes as set out in Note 1 - Statement of compliance.

Page 131

Glossary

Absolute financed emissions

A measurement of our attributed share of our clients' greenhouse gas emissions.

AT1 or Additional Tier 1 capital

Additional Tier 1 capital consists of instruments other than Common Equity Tier 1 that meet the Capital Requirements Regulation (as it forms part of UK domestic law) criteria for inclusion in Tier 1 capital.

Additional value adjustment

See 'Prudent valuation adjustment'.

Advanced Internal Rating Based (AIRB) approach

The AIRB approach under the Basel framework is used to calculate credit risk capital based on the Group's own estimates of prudential parameters.

Alternative performance measures

A financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

ASEAN

Association of South East Asian Nations (ASEAN) which includes the Group's operations in Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

AUM or Assets under management

Total market value of assets such as deposits, securities and funds held by the Group on behalf of the clients.

Basel II

The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in June 2006 in the form of the International Convergence of Capital Measurement and Capital Standards.

Basel III

The global regulatory standards on bank capital adequacy and liquidity, originally issued in December 2010 and updated in June 2011. In December 2017, the BCBS published a document setting out the finalisation of the Basel III framework. The latest requirements issued in December 2017 will be implemented from 2022.

BCBS or Basel Committee on Banking Supervision

A forum on banking supervisory matters which develops global supervisory standards for the banking industry. Its members are officials from 45 central banks or prudential supervisors from 28 countries and territories.

Basic earnings per share (EPS)

Represents earnings divided by the basic weighted average number of shares.

Basis point (bps)

One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent.

Capital-lite income

Income derived from products with low RWA consumption or products which are non-funding in nature.

Page 132

CRD or Capital Requirements Directive

A capital adequacy legislative package adopted by the PRA. CRD comprises the Capital Requirements Directive and the UK onshored Capital Requirements Regulation (CRR). The package implements the Basel III framework together with transitional arrangements for some of its requirements. CRD IV came into force on 1 January 2014. The EU CRR II and CRD V amending the existing package came into force in June 2019 with most changes starting to apply from 28 June 2021. Only those parts of the EU CRR II that applied on or before 31 December 2020, when the UK was a member of the EU, have been implemented. The PRA recently finalised the UK's version of the CRR II for implementation into the PRA Rulebook on 1 January 2022.

Capital resources

Sum of Tier 1 and Tier 2 capital after regulatory adjustments.

CGU or Cash-generating unit

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Cash shortfall

The difference between the cash flows that are due in accordance with the contractual terms of the instrument and the cash flows that the Group expects to receive over the contractual life of the instrument.

Clawback

An amount an individual is required to pay back to the Group, which has to be returned to the Group under certain circumstances.

Commercial real estate

Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multi-family housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets.

CET1 or Common Equity Tier 1 capital

Common Equity Tier 1 capital consists of the common shares issued by the Group and related share premium, retained earnings, accumulated other comprehensive income and other disclosed reserves, eligible non-controlling interests and regulatory adjustments required in the calculation of Common Equity Tier 1.

CET1 ratio

A measure of the Group's CET1 capital as a percentage of risk-weighted assets.

Contractual maturity

Contractual maturity refers to the final payment date of a loan or other financial instrument, at which point all the remaining outstanding principal and interest is due to be paid.

Countercyclical capital buffer

The countercyclical capital buffer (CCyB) is part of a set of macroprudential instruments, designed to help counter procyclicality in the financial system. CCyB as defined in the Basel III standard provides for an additional capital requirement of up to 2.5 per cent of risk-weighted assets in a given jurisdiction. The Bank of England's Financial Policy Committee has the power to set the CCyB rate for the United Kingdom. Each bank must calculate its 'institution-specific' CCyB rate, defined as the weighted average of the CCyB rates in effect across the jurisdictions in which it has credit exposures. The institution-specific CCyB rate is then applied to a bank's total risk-weighted assets.

Counterparty credit risk

The risk that a counterparty defaults before satisfying its obligations under a derivative, a securities financing transaction (SFT) or a similar contract.

Page 133

CCF or Credit conversion factor

An estimate of the amount the Group expects a customer to have drawn further on a facility limit at the point of default. This is either prescribed by CRR or modelled by the bank.

CDS or Credit default swaps

A credit derivative is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.

Credit institutions

An institution whose business is to receive deposits or other repayable funds from the public and to grant credits for its

own account.

Credit risk mitigation

Credit risk mitigation is a process to mitigate potential credit losses from any given account, customer or portfolio by using a range of tools such as collateral, netting agreements, credit insurance, credit derivatives and guarantees.

CVA or Credit valuation adjustments

An adjustment to the fair value of derivative contracts that reflects the possibility that the counterparty may default such that the Group would not receive the full market value of the contracts.

Customer accounts

Money deposited by all individuals and companies which are not credit institutions including securities sold under

repurchase agreement (see repo/reverse repo). Such funds are recorded as liabilities in the Group's balance sheet under customer accounts.

Days past due

One or more days that interest and/or principal payments are overdue based on the contractual terms.

DVA or Debit valuation adjustment

An adjustment to the fair value of derivative contracts that reflects the possibility that the Group may default and not pay the full market value of contracts.

Debt securities

Debt securities are assets on the Group's balance sheet and represent certificates of indebtedness of credit institutions, public bodies or other undertakings excluding those issued by central banks.

Debt securities in issue

Debt securities in issue are transferable certificates of indebtedness of the Group to the bearer of the certificate. These are liabilities of the Group and include certificates of deposits.

Default

Financial assets in default represent those that are at least 90 days past due in respect of principal or interest and/or where the assets are otherwise considered to be unlikely to pay, including those that are credit-impaired.

Deferred tax asset

Income taxes recoverable in future periods in respect of deductible temporary differences between the accounting and tax base of an asset or liability that will result in tax deductible amounts in future periods, the carry-forward of tax losses or the carry-forward of unused tax credits.

Deferred tax liability

Income taxes payable in future periods in respect of taxable temporary differences between the accounting and tax base of an asset or liability that will result in taxable amounts in future periods.

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Defined benefit obligation

The present value of expected future payments required to settle the obligations of a defined benefit scheme resulting from employee service.

Defined benefit scheme

Pension or other post-retirement benefit scheme other than a defined contribution scheme.

Defined contribution scheme

A pension or other post-retirement benefit scheme where the employer's obligation is limited to its contributions to the fund.

Delinquency

A debt or other financial obligation is considered to be in a state of delinquency when payments are overdue. Loans and advances are considered to be delinquent when consecutive payments are missed. Also known as arrears.

Deposits by banks

Deposits by banks comprise amounts owed to other domestic or foreign credit institutions by the Group including securities sold under repo.

Diluted earnings per share (EPS)

Represents earnings divided by the weighted average number of shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

Dividend per share

Represents the entitlement of each shareholder in the share of the profits of the Company. Calculated in the lowest unit of currency in which the shares are quoted.

Early alert, purely and non-purely precautionary

A borrower's account which exhibits risks or potential weaknesses of a material nature requiring closer monitoring, supervision, or attention by management. Weaknesses in such a borrower's account, if left uncorrected, could result in deterioration of repayment prospects and the likelihood of being downgraded to credit grade 12 or worse. When an account is on early alert, it is classified as either purely precautionary or non-purely precautionary. A purely precautionary account is one that exhibits early alert characteristics, but these do not present any imminent credit concern. If the symptoms present an imminent credit concern, an account will be considered for classification as non-purely precautionary.

Effective tax rate

The tax on profit/(losses) on ordinary activities as a percentage of profit/ (loss) on ordinary activities before taxation.

Encumbered assets

On-balance sheet assets pledged or used as collateral in respect of certain of the Group's liabilities.

EU or European Union

The European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe.

Eurozone

Represents the 19 EU countries that have adopted the euro as their common currency.

ECL or Expected credit loss

Represents the present value of expected cash shortfalls over the residual term of a financial asset, undrawn commitment or financial guarantee.

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Expected loss

The Group measure of anticipated loss for exposures captured under an internal ratings-based credit risk approach for capital adequacy calculations. It is measured as the Group-modelled view of anticipated loss based on probability of default, loss given default and exposure at default, with a one-year time horizon.

EAD or Exposure at default

The estimation of the extent to which the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty's default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit.

Exposures

Credit exposures represent the amount lent to a customer, together with any undrawn commitments.

ECAI or External Credit Assessment Institution

External credit ratings are used to assign risk-weights under the standardised approach for sovereigns, corporates and institutions. The external ratings are from credit rating agencies that are registered or certified in accordance with the credit rating agencies regulation or from a central bank issuing credit ratings which is exempt from the application of this regulation.

ESG

Environmental, Social and Governance.

FCA or Financial Conduct Authority

The Financial Conduct Authority regulates the conduct of financial firms and, for certain firms, prudential standards in the UK. It has a strategic objective to ensure that the relevant markets function well.

Forbearance

Forbearance takes place when a concession is made to the contractual terms of a loan in response to an obligor's financial difficulties. The Group classifies such modified loans as either 'Forborne - not impaired loans' or 'Loans subject to forbearance - impaired'. Once a loan is categorised as either of these, it will remain in one of these two categories until the loan matures or satisfies the 'curing' conditions described in Note 8 to the financial statements.

Forborne - not impaired loans

Loans where the contractual terms have been modified due to financial difficulties of the borrower, but the loan is not considered to be impaired. See 'Forbearance'.

Funded/unfunded exposures

Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where a commitment to provide future funding is made but funds have been released/ not released.

FVA or Funding valuation adjustments

FVA reflects an adjustment to fair value in respect of derivative contracts that reflects the funding costs that the market participant would incorporate when determining an exit price.

G-SIBs or Global Systemically Important Banks

Global banking financial institutions whose size, complexity and systemic interconnectedness mean that their distress or failure would cause significant disruption to the wider financial system and economic activity. The list of G-SIBs is assessed under a framework established by the Financial Stability Board (FSB) and the BCBS. In the UK, the G-SIB framework is implemented via the CRD and G-SIBs are referred to as Global Systemically Important Institutions (G-SIIs).

G-SIB buffer

A CET1 capital buffer which results from designation as a G-SIB. The G-SIB buffer is between 1 per cent and 3.5 per cent, depending on the allocation to one of five buckets based on the annual scoring. In the UK, the G-SIB buffer is implemented via the CRD as Global Systemically Important Institutions (G-SII) buffer requirement.

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Green and Sustainable Product Framework

Sets out underlying eligible qualifying themes and activities that may be considered ESG. This has been developed with the support of external experts, has been informed by industry and supervisory principles and standards such as the Green Bond Principles and EU Taxonomy for sustainable activities.

Hong Kong regional hub

Standard Chartered Bank (Hong Kong) Limited and its subsidiaries including the primary operating entities in China, Korea and Taiwan. Standard Chartered PLC is the ultimate parent company of Standard Chartered Bank (Hong Kong) Limited.

Interest rate risk

The risk of an adverse impact on the Group's income statement due to changes in interest rates.

Internal model approach

The approach used to calculate market risk capital and RWA with an internal market risk model approved by the PRA under the terms of CRD/CRR.

IRB or internal ratings-based approach

Risk-weighting methodology in accordance with the Basel Capital Accord where capital requirements are based on a firm's own estimates of prudential parameters.

IAS or International Accounting Standard

A standard that forms part of the International Financial Reporting Standards framework.

IASB or International Accounting Standards Board

An independent standard-setting body responsible for the development and publication of IFRS, and approving interpretations of IFRS standards that are recommended by the IFRS Interpretations Committee (IFRIC).

IFRS or International Financial Reporting Standards

A set of international accounting standards developed and issued by the International Accounting Standards Board, consisting of principles-based guidance contained within IFRSs and IASs. All companies that have issued publicly traded securities in the EU are required to prepare annual and interim reports under IFRS and IAS standards that have been endorsed by the EU.

IFRIC

The IFRS Interpretations Committee supports the IASB in providing authoritative guidance on the accounting treatment of issues not specifically dealt with by existing IFRSs and IASs.

Investment grade

A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB.

Leverage ratio

A ratio that compares Tier 1 capital to total exposures, including certain exposures held off-balance sheet as adjusted by stipulated credit conversion factors. Intended to be a simple, non-risk-based backstop measure.

Liquidation portfolio

A portfolio of assets which is beyond our current risk appetite metrics and is held for liquidation.

LCR or Liquidity coverage ratio

The ratio of the stock of high-quality liquid assets to expected net cash outflows over the following 30 days. High-quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible.

Loan exposure

Loans and advances to customers reported on the balance sheet held at amortised cost or FVOCI, non-cancellable credit commitments and cancellable credit commitments for credit cards and overdraft facilities.

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Loans and advances to customers

This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument.

Loans and advances to banks

Amounts loaned to credit institutions including securities bought under Reverse repo.

LTV or loan-to-value ratio

A calculation which expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. The loan-to-value ratio is used in determining the appropriate level of risk for the loan and therefore the correct price of the loan to the borrower.

Loans past due

Loans on which payments have been due for up to a maximum of 90 days including those on which partial payments are being made.

Loans subject to forbearance - impaired

Loans where the terms have been renegotiated on terms not consistent with current market levels due to financial difficulties of the borrower. Loans in this category are necessarily impaired. See 'Forbearance'.

LGD or Loss given default

The percentage of an exposure that a lender expects to lose in the event of obligor default.

Loss rate

Uses an adjusted gross charge-off rate, developed using monthly write-off and recoveries over the preceding 12 months and total outstanding balances.

Low returning clients

See 'Perennial sub-optimal clients'.

Malus

An arrangement that permits the Group to prevent vesting of all or part of the amount of an unvested variable remuneration award, due to a specific crystallised risk, behaviour, conduct or adverse performance outcome.

Master netting agreement

An agreement between two counterparties that have multiple derivative contracts with each other that provides for the net settlement of all contracts through a single payment, in a single currency, in the event of default on, or termination of, any one contract.

Mezzanine capital

Financing that combines debt and equity characteristics. For example, a loan that also confers some profit participation to the lender.

MREL or minimum requirement for own funds and eligible liabilities

A requirement under the Bank Recovery and Resolution Directive for EU resolution authorities to set a minimum requirement for own funds and eligible liabilities for banks, implementing the FSB's Total Loss Absorbing Capacity (TLAC) standard. MREL is intended to ensure that there is sufficient equity and specific types of liabilities to facilitate an orderly resolution that minimises any impact on financial stability and ensures the continuity of critical functions and avoids exposing taxpayers to loss.

Net asset value (NAV) per share

Ratio of net assets (total assets less total liabilities) to the number of ordinary shares outstanding at the end of a reporting period.

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Net exposure

The aggregate of loans and advances to customers/loans and advances to banks after impairment provisions, restricted balances with central banks, derivatives (net of master netting agreements), investment debt and equity securities, and letters of credit and guarantees.

Net zero

The commitment to reaching net zero carbon emissions from our operations by 2025 and from our financing by 2050.

NII or Net interest income

The difference between interest received on assets and interest paid on liabilities.

NSFR or Net stable funding ratio

The ratio of available stable funding to required stable funding over a one-year time horizon, assuming a stressed scenario. It is a longer-term liquidity measure designed to restrain the amount of wholesale borrowing and encourage stable funding over a one-year time horizon.

NPLs or non-performing loans

An NPL is any loan that is more than 90 days past due or is otherwise individually impaired. This excludes Retail loans renegotiated at or after 90 days past due, but on which there has been no default in interest or principal payments for more than 180 days since renegotiation, and against which no loss of principal is expected.

Non-linearity

Non-linearity of expected credit loss occurs when the average of expected credit loss for a portfolio is higher than the base case (median) due to the fact that a bad economic environment could have a larger impact on ECL calculation than a good economic environment.

Normalised items

See 'Underlying/Normalised'.

Operating expenses

Staff and premises costs, general and administrative expenses, depreciation and amortisation. Underlying operating expenses exclude expenses as described in 'Underlying earnings'. A reconciliation between underlying and statutory earnings is contained in Note 2 to the financial statements.

Operating income or operating profit

Net interest, net fee and net trading income, as well as other operating income. Underlying operating income represents the income line items above, on an underlying basis. See 'Underlying earnings'.

OTC or Over-the-counter derivatives

A bilateral transaction (e.g. derivatives) that is not exchange traded and that is valued using valuation models.

OCA or Own credit adjustment

An adjustment to the Group's issued debt designated at fair value through profit or loss that reflects the possibility that the Group may default and not pay the full market value of the contracts.

Perennial sub-optimal clients

Clients that have returned below 3 per cent return on risk-weighted assets for the last three years.

Physical risks

The risk of increased extreme weather events including flood, drought and sea level rise.

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Pillar 1

The first pillar of the three pillars of the Basel framework which provides the approach to calculation of the minimum

capital requirements for credit, market and operational risk. Minimum capital requirements are 8 per cent of the Group's risk-weighted assets.

Pillar 2

The second pillar of the three pillars of the Basel framework which requires banks to undertake a comprehensive assessment of their risks that are not already covered by Pillar 1 and to determine the appropriate amounts of capital to be held against these risks where other suitable mitigants are not available.

Pillar 3

The third pillar of the three pillars of the Basel framework which aims to provide a consistent and comprehensive disclosure framework that enhances comparability between banks and further promotes improvements in risk practices.

Priority Banking

Priority Banking customers are individuals who have met certain criteria for deposits, AUM, mortgage loans or monthly payroll. Criteria varies by country.

Private equity investments

Equity securities in operating companies generally not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.

PD or Probability of default

PD is an internal estimate for each borrower grade of the likelihood that an obligor will default on an obligation over a given time horizon.

Probability weighted

Obtained by considering the values the metric can assume, weighted by the probability of each value occurring.

Profit (loss) attributable to ordinary shareholders

Profit (loss) for the year after non-controlling interests and dividends declared in respect of preference shares classified as equity.

PVA or Prudent valuation adjustment

An adjustment to CET1 capital to reflect the difference between fair value and prudent value positions, where the application of prudence results in a lower absolute carrying value than recognised in the financial statements.

PRA or Prudential Regulation Authority

The Prudential Regulation Authority is the statutory body responsible for the prudential supervision of banks, building societies, credit unions, insurers and a small number of significant investment firms in the UK. The PRA is a part of the

Bank of England.

Regulatory or Prudential consolidation

The regulatory consolidation of Standard Chartered PLC differs from the statutory consolidation in that it only includes undertakings that are credit institutions, investment firms, other financial institutions, and ancillary service undertakings. Subsidiaries continue to be fully consolidated, whilst participations in undertakings that principally engage in these financial services activities are proportionally consolidated. These participations are considered associates for statutory accounting purposes. Insurance or corporate entities are excluded from the scope of prudential consolidation and recognised on an equity accounted basis.

140

Repo/reverse repo

A repurchase agreement or repo is a short-term funding agreement, which allows a borrower to sell a financial asset, such as asset-backed securities or government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future), it is a reverse repurchase agreement or reverse repo.

Residential mortgage

A loan to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a home loan.

RoRWA or Return on risk-weighted assets

Profit before tax for year as a percentage of RWA. Profit may be statutory or underlying and is specified where used. See 'RWA' and 'Underlying earnings'.

Revenue-based carbon intensity

A measurement of the quantity of greenhouse gases emitted by our clients per USD of their revenue.

RWA or Risk-weighted assets

A measure of a bank's assets adjusted for their associated risks, expressed as a percentage of an exposure value in accordance with the applicable standardised or IRB approach provisions.

Risks-not-in-VaR (RNIV)

A framework for identifying and quantifying marginal types of market risk that are not captured in the Value at Risk (VaR) measure for any reason, such as being a far-tail risk or the necessary historical market data not being available.

Roll rate

Uses a matrix that gives average loan migration rate from delinquency states from period to period. A matrix multiplication is then performed to generate the final PDs by delinquency bucket over different time horizons.

Scope 1 emissions

Arise from the consumption of energy from direct sources during the use of property occupied by the Group. On-site combustion of fuels such as diesel, liquefied petroleum gas and natural gas is recorded using meters or, where metering is not available, collated from fuel vendor invoices. Emissions from the combustion of fuel in Group-operated transportation devices, as well as fugitive emissions, are excluded as being immaterial.

Scope 2 emissions

Arise from the consumption of indirect sources of energy during the use of property occupied by the Group. Energy generated off-site in the form of purchased electricity, heat, steam or cooling is collected as kilowatt hours consumed using meters or, where metering is not available, collated from vendor invoices. For leased properties we include all indirect and direct sources of energy consumed by building services (amongst other activities) within the space occupied by the Group. This can include base building services under landlord control but over which we typically hold a reasonable degree of influence. All data centre facilities with conditioning systems and hardware remaining under the operational control of the Group are included in the reporting. This does not include energy used at outsourced data centre facilities which are captured under Scope 3.

Scope 3 emissions

Occur as a consequence of the Group's activities but arising from sources not controlled by the Group. Business air travel data is collected as person kilometres travelled by seating class by employees of the Group. Data are drawn from country operations that have processes in place to gather accurate employee air travel data from travel management companies. Flights are categorised as short, medium or long haul trips. Emissions from other potential Scope 3 sources such as electricity transmission and distribution line losses are not currently accounted for on the basis that they cannot be calculated with an acceptable level of reliability or consistency. The Group does, however, capture Scope 3 emissions from outsourced data centres managed by third parties.

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Secured (fully and partially)

A secured loan is a loan in which the borrower pledges an asset as collateral for a loan which, in the event that the borrower defaults, the Group is able to take possession of. All secured loans are considered fully secured if the fair value of the collateral is equal to or greater than the loan at the time of origination. All other secured loans are considered to be partly secured.

Securitisation

Securitisation is a process by which credit exposures are aggregated into a pool, which is used to back new securities. Under traditional securitisation transactions, assets are sold to a structured entity which then issues new securities to investors at different levels of seniority (credit tranching). This allows the credit quality of the assets to be separated from the credit rating of the originating institution and transfers risk to external investors in a way that meets their risk appetite. Under synthetic securitisation transactions, the transfer of risk is achieved by the use of credit derivatives or guarantees, and the exposures being securitised remain exposures of the originating institution.

Senior debt

Debt that takes priority over other unsecured or otherwise more 'junior' debt owed by the issuer. Senior debt has greater seniority in the issuer's capital structure than subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment.

SICR or Significant increase in credit risk

Assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at origination (after considering the passage of time).

Solo

The solo regulatory group as defined in the Prudential Regulation Authority waiver letter dated 10 August 2020 differs from Standard Chartered Bank Company in that it includes the full consolidation of nine subsidiaries, namely Standard Chartered Holdings (International) B.V., Standard Chartered MB Holdings B.V., Standard Chartered UK Holdings Limited, Standard Chartered Grindlays PTY Limited, SCMB Overseas Limited, Standard Chartered Capital Management (Jersey) LLC, Cerulean Investments L.P., SC Ventures Innovation Investment L.P. and SC Ventures G.P. Limited.

Sovereign exposures

Exposures to central governments and central government departments, central banks and entities owned or guaranteed by the aforementioned. Sovereign exposures, as defined by the European Banking Authority, include only exposures to central governments.

Stage 1

Assets have not experienced a significant increase in credit risk since origination and impairment recognised on the basis of 12 months expected credit losses.

Stage 2

Assets have experienced a significant increase in credit risk since origination and impairment is recognised on the basis of lifetime expected credit losses.

Stage 3

Assets that are in default and considered credit-impaired (non-performing loans).

Standardised approach

In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment

Institutions (ECAI) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the

operational capital requirement by the application of a supervisory defined percentage charge to the gross income

of eight specified business lines.

Page 142

Structured note

An investment tool which pays a return linked to the value or level of a specified asset or index and sometimes offers

capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities

and foreign currency.

Subordinated liabilities

Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.

Sustainability Aspirations

A series of targets and metrics by which we aim to promote social and economic development, and deliver sustainable outcomes in the areas in which we can make the most material contribution to the delivery of the UN Sustainable Development Goals.

Sustainable Finance assets

Assets from clients whose activities are aligned with the Green and Sustainable Product Framework and/or from transactions for which the use of proceeds will be utilised directly to contribute towards eligible themes and activities set out within the Green and Sustainable Product Framework.

Sustainable Finance revenue

Revenue from clients whose activities are aligned with the Green and Sustainable Product Framework and/or from transactions for which proceeds will be utilised directly to contribute towards eligible themes and activities set out within the Green and Sustainable Product Framework and/or from approved 'labelled' transactions such as any transaction referred to as "green", "social", "sustainable", "SDG (sustainable development goal) aligned", "ESG", "transition", "COVID-19 facility" or "COVID-19 response" which have been approved by the Sustainable Finance Governance Committee.

Tier 1 capital

The sum of Common Equity Tier 1 capital and Additional Tier 1 capital.

Tier 1 capital ratio

Tier 1 capital as a percentage of risk-weighted assets.

Tier 2 capital

Tier 2 capital comprises qualifying subordinated liabilities and related share premium accounts.

TLAC or Total loss absorbing capacity

An international standard for TLAC issued by the FSB, which requires G-SIBs to have sufficient loss-absorbing and recapitalisation capacity available in resolution, to minimise impacts on financial stability, maintain the continuity of

critical functions and avoid exposing public funds to loss.

Transition risks

The risk of changes to market dynamics or sectoral economics due to governments' response to climate change.

UK bank levy

A levy that applies to certain UK banks and the UK operations of foreign banks. The levy is payable each year based on a percentage of the chargeable equities and liabilities on the Group's UK tax resident entities' balance sheets. Key exclusions from chargeable equities and liabilities include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liabilities subject to netting.

Unbiased

Not overly optimistic or pessimistic, represents information that is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to increase the probability that the financial information will be received favourably or unfavourably by users.

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Unlikely to pay

Indications of unlikeliness to pay shall include placing the credit obligation on non-accrued status; the recognition of a specific credit adjustment resulting from a significant perceived decline in credit quality subsequent to the Group taking on the exposure; selling the credit obligation at a material credit-related economic loss; the Group consenting to a distressed restructuring of the credit obligation where this is likely to result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or, where relevant fees; filing for the obligor's bankruptcy or a similar order in respect of an obligor's credit obligation to the Group; the obligor has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of a credit obligation to the Group.

VaR or Value at Risk

A quantitative measure of market risk estimating the potential loss that will not be exceeded in a set time period at a set statistical confidence level.

ViU or Value-in-Use

The present value of the future expected cash flows expected to be derived from an asset or CGU.

Write-downs

After an advance has been identified as impaired and is subject to an impairment provision, the stage may be reached whereby it is concluded that there is no realistic prospect of further recovery. Write-downs will occur when, and to the extent that, the whole or part of a debt is considered irrecoverable.

XVA

The term used to incorporate credit, debit and funding valuation adjustments to the fair value of derivative financial instruments. See 'CVA', 'DVA' and 'FVA'.

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CONTACT INFORMATION

Global headquarters

Standard Chartered Group

1 Basinghall Avenue

London, EC2V 5DD

United Kingdom

telephone: +44 (0)20 7885 8888

facsimile: +44 (0)20 7885 9999

Shareholder enquiries

ShareCare information

website: sc.com/shareholders

helpline: 0370 702 0138

ShareGift information

website: ShareGift.org

helpline: +44 (0)20 7930 3737

Registrar information

UK

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol, BS99 6ZZ

Helpline: 0370 702 0138

Hong Kong

Computershare Hong Kong Investor Services Limited

17M Floor, Hopewell Centre

183 Queen's Road East

Wan Chai

Hong Kong

website: computershare.com/hk/investors

Chinese translation

Computershare Hong Kong Investor Services Limited

17M Floor, Hopewell Centre

183 Queen's Road East

Wan Chai

Hong Kong

Register for electronic communications

website: investorcentre.co.uk

For further information, please contact:

Gregg Powell, Head of Investor Relations

+852 2820 3050

LSE Stock code: STAN.LN

HKSE Stock code: 02888

Page 145

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