Half-year Report - Part 2 of 3

RNS Number : 2725H

HSBC Holdings PLC

02 August 2021

Financial summary
	Page
Use of alternative performance measures	27
Adjusted performance	27
Significant items	27
Foreign currency translation differences	27
Summary consolidated income statement	28
Income statement commentary	29
Net interest income	29
Tax expense	32
Summary consolidated balance sheet	33
Balance sheet commentary compared with 31 December 2020	34

Use of alternative performance measures

Our reported results are prepared in accordance with IFRSs as detailed in the interim condensed financial statements starting on page 99.

To measure our performance, we supplement our IFRSs figures with non-IFRSs measures, which constitute alternative performance measures under European Securities and Markets Authority guidance and non-GAAP financial measures defined in and presented in accordance with US Securities and Exchange Commission rules and regulations. These measures include those derived from our reported results that eliminate factors that distort period-on-period comparisons. The 'adjusted performance' measure used throughout this report is described below. Definitions and calculations of other alternative performance measures are included in our 'Reconciliation of alternative performance measures' on page 52. All alternative performance measures are reconciled to the closest reported performance measure.

The global business segmental results are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments' as detailed in Note 5: 'Segmental analysis' on page 107.

Adjusted performance

Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which distort period-on-period comparisons.

We consider adjusted performance provides useful information for investors by aligning internal and external reporting, identifying and quantifying items management believes to be significant, and providing insight into how management assesses period-on-period performance.

Significant items

'Significant items' refers collectively to the items that management and investors would ordinarily identify and consider separately to improve the understanding of the underlying trends in the business.

The tables on pages 35 to 37 and pages 44 to 49 detail the effects of significant items on each of our global business segments, geographical regions and selected countries/territories in 1H21, 1H20 and 2H20.

Foreign currency translation differences

Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2021.

We exclude them to derive constant currency data, allowing us to assess balance sheet and income statement performance on a like-for-like basis and to better understand the underlying trends in the business.

Foreign currency translation differences

Foreign currency translation differences for the half-year to 30 June 2021 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:

• the income statements for the half-years to 30 June 2020 and

31 December 2020 at the average rates of exchange for the half-year to 30 June 2021; and

• the balance sheets at 30 June 2020 and 31 December 2020 at the prevailing rates of exchange on 30 June 2021.

No adjustment has been made to the exchange rates used to translate foreign currency-denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. The constant currency data of HSBC's Argentina subsidiaries have not been adjusted further for the impacts of hyperinflation. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC's operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.

Summary consolidated income statement

	Half-year to
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$m	$m	$m
Net interest income	13,098	14,509	13,069
Net fee income	6,674	5,926	5,948
Net income from financial instruments held for trading or managed on a fair value basis	4,184	5,768	3,814
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss	2,795	(1,290)	3,371
Change in fair value of designated debt and related derivatives¹	(67)	197	34
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	548	80	375
Gains less losses from financial investments	433	466	187
Net insurance premium income	5,663	5,020	5,073
Other operating income	155	471	56
Total operating income	33,483	31,147	31,927
Net insurance claims and benefits paid and movement in liabilities to policyholders	(7,932)	(4,402)	(8,243)
Net operating income before change in expected credit losses and other credit impairment charges²	25,551	26,745	23,684
Change in expected credit losses and other credit impairment charges	719	(6,858)	(1,959)
Net operating income	26,270	19,887	21,725
Total operating expenses excluding impairment of goodwill and other intangible assets	(17,045)	(15,239)	(17,805)
Impairment of goodwill and other intangible assets	(42)	(1,288)	(100)
Operating profit	9,183	3,360	3,820
Share of profit in associates and joint ventures	1,656	958	639
Profit before tax	10,839	4,318	4,459
Tax expense	(2,417)	(1,193)	(1,485)
Profit for the period	8,422	3,125	2,974
Attributable to:
- ordinary shareholders of the parent company	7,276	1,977	1,921
- preference shareholders of the parent company	7	45	45
- other equity holders	666	617	624
- non-controlling interests	473	486	384
Profit for the period	8,422	3,125	2,974
	$	$	$
Basic earnings per share	0.36	0.10	0.10
Diluted earnings per share	0.36	0.10	0.09
Dividend per ordinary share (paid in the period)³	0.15	-	-
	%	%	%
Post-tax return on average total assets (annualised)	0.6	0.2	0.2
Return on average ordinary shareholders' equity (annualised)	8.4	2.4	2.3
Return on average tangible equity (annualised)⁴	9.4	3.8	2.4

1 The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.

2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

3 Interim dividend of $0.15 per ordinary share in respect of the financial year ending 31 December 2020, paid in April 2021.

4 Half-year to 31 December 2020 is calculated on a full-year basis and not a 2H20 basis.

Income statement commentary

For further financial performance data of our global business segments, see pages 35 to 41. For further financial performance data by geographical regions and selected countries/territories, see pages 42 to 51.

Net interest income

	Half-year to		Quarter to
	30 Jun	30 Jun	30 Jun	31 March	30 Jun
	2021	2020	2021	2021	2020
	$m	$m	$m	$m	$m
Interest income	17,960	23,000	8,975	8,985	10,372
Interest expense	(4,862)	(8,491)	(2,391)	(2,471)	(3,475)
Net interest income	13,098	14,509	6,584	6,514	6,897
Average interest-earning assets	2,188,991	2,034,939	2,198,953	2,178,918	2,078,178
	%	%	%	%	%
Gross interest yield¹	1.65	2.27	1.64	1.67	2.01
Less: gross interest payable¹	(0.54)	(1.00)	(0.53)	(0.56)	(0.81)
Net interest spread²	1.11	1.27	1.11	1.11	1.20
Net interest margin³	1.21	1.43	1.20	1.21	1.33

1 Gross interest yield is the average annualised interest rate earned on average interest-earning assets ('AIEA'). Gross interest payable is the average annualised interest cost as a percentage of average interest-bearing liabilities.

2 Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate payable on average interest-bearing funds.

3 Net interest margin is net interest income expressed as an annualised percentage of AIEA.

Summary of interest income by type of asset
	Half-year to						Full-year to
	30 Jun 2021			30 Jun 2020			31 Dec 2020
	Average balance	Interest income	Yield	Average balance	Interest income	Yield	Average balance	Interest income	Yield
	$m	$m	%	$m	$m	%	$m	$m	%
Short-term funds and loans and advances to banks	421,521	507	0.24	255,559	760	0.60	298,255	1,264	0.42
Loans and advances to customers	1,063,974	13,005	2.46	1,041,931	15,978	3.08	1,046,795	29,391	2.81
Reverse repurchase agreements - non-trading	201,428	486	0.49	222,151	1,292	1.17	221,901	1,819	0.82
Financial investments	448,587	3,391	1.52	451,344	4,451	1.98	463,542	8,143	1.76
Other interest-earning assets	53,481	571	2.15	63,954	519	1.63	62,407	1,139	1.83
Total interest-earning assets	2,188,991	17,960	1.65	2,034,939	23,000	2.27	2,092,900	41,756	2.00

Summary of interest expense by type of liability
	Half-year to						Full-year to
	30 Jun 2021			30 Jun 2020			31 Dec 2020
	Average balance	Interest expense	Cost	Average balance	Interest expense	Cost	Average balance	Interest expense	Cost
	$m	$m	%	$m	$m	%	$m	$m	%
Deposits by banks¹	73,402	107	0.29	61,765	226	0.74	65,536	330	0.50
Customer accounts²	1,355,092	2,020	0.30	1,203,640	4,069	0.68	1,254,249	6,478	0.52
Repurchase agreements - non-trading	108,165	166	0.31	139,498	754	1.09	125,376	963	0.77
Debt securities in issue - non-trading	199,058	1,864	1.89	223,255	2,720	2.45	219,610	4,944	2.25
Other interest-bearing liabilities	68,376	705	2.08	77,256	722	1.88	76,395	1,463	1.92
Total interest-bearing liabilities	1,804,093	4,862	0.54	1,705,414	8,491	1.00	1,741,166	14,178	0.81

1 Including interest-bearing bank deposits only.

2 Including interest-bearing customer accounts only.

Net interest income ('NII') for 1H21 was $13.1bn, a decrease of $1.4bn or 9.7% compared with 1H20. This reflected lower average market interest rates across the major currencies and in particular in Asia compared with 1H20, partly offset by interest income associated with the increase in average interest-earning assets ('AIEA') of $154.1bn or 7.6%.

Excluding the effects of foreign currency translation differences, NII decreased by $2bn or 13.1%.

NII for the second quarter of 2021 was $6.6bn, down 4.5% compared with the previous year, and up 1.1% compared with the previous quarter. The year-on-year decrease was driven by the impact of lower market interest rates, which was partly offset by higher NII from growth in short-term funds and loans to banks as well as mortgages. The increase compared with the previous quarter was driven by the additional day in the second quarter. The NII adjusted for the day-count differences remained materially unchanged.

Net interest margin ('NIM') of 1.21% was 22 basis points ('bps') lower compared with 1H20, as the reduction in the yield on AIEA of 62bps was partly offset by the fall in the funding cost of average interest-bearing liabilities of 46bps. The decrease in NIM in 1H21 included the adverse effects of foreign currency translation differences on AIEA. Excluding this, NIM fell by 21bps.

NIM for the second quarter of 2021 was 1.20%, down 13bps year-on-year, and down 1bps compared with the previous quarter. The year-on-year decrease was predominantly driven by lower market interest rates. The decrease compared with the previous quarter was due to a change in asset mix towards lower yielding assets.

Interest income of $18bn decreased by $5bn or 22%, primarily due to the lower average interest rates compared with 1H20 as the yield on AIEA fell 62bps. This was partly offset by income from balance sheet growth, predominantly in Europe and Asia, and driven by higher balances in short-term funds and loans to banks and mortgages, which increased by $166bn and $42.7bn,

respectively. The decrease in interest income included $0.8bn from the favourable effects of foreign currency translation. Excluding these, interest income decreased by $5.8bn.

Interest income of $9bn in the second quarter of 2021 was down $1.4bn year-on-year and materially unchanged compared with the previous quarter. The year-on-year decrease was predominantly driven by the impact of lower market interest rates, although partly offset by growth in short-term funds and loans to banks and mortgages.

Interest expense of $4.9bn decreased by $3.6bn or 43% compared with 1H20. This reflected the decrease in funding costs of 46bps, mainly arising from lower interest rates paid on interest-bearing liabilities. This was partly offset by higher interest expense due to a rise in balances in interest-bearing customer accounts, which increased by $151.5bn.

The decrease in interest expense included the adverse effects of foreign currency translation differences of $0.3bn. Excluding this, interest expense decreased by $3.9bn.

Interest expense of $2.4bn in the second quarter of 2021 was down $1.1bn compared with the previous year, and down $0.1bn compared with the previous quarter. The year-on-year decrease was predominantly driven by the impact of lower market interest rates, partly offset by growth in customer accounts. The decrease compared with the previous quarter was mainly driven by reduced volumes in issued debt.

Net fee income of $6.7bn was $0.7bn higher than in 1H20, and included favourable foreign currency translation differences of $0.2bn. The remaining increase primarily reflected higher net fee income in all of our global businesses.

In WPB, the growth in fee income was mainly in Wealth, as improved market sentiment resulted in increased customer demand, particularly in the first quarter of 2021. This increase included higher fee income from unit trusts in Asia, from funds under management in Hong Kong, the UK and France, and from broking in Hong Kong.

In GBM, higher fee income was from growth in account services, which included higher activity from transaction banking clients. Fee income also increased in credit facilities, broking income, global custody and corporate finance, reflecting a higher level of client activity compared with 1H20.

In CMB, fee income increased from remittances and credit facilities, as well as from trade products, as global trade volumes recovered during 2021.

Net income from financial instruments held for trading or managed on a fair value basis of $4.2bn was $1.6bn lower and included adverse fair value movements on non-qualifying hedges of $0.4bn and adverse debit value adjustments of $0.1bn.

The remaining reduction was in GBM, as 1H20 benefited from higher market volatility supporting a particularly strong performance within Global Foreign Exchange and Global Debt Markets.

Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss was a net income of $2.8bn, primarily due to favourable equity market performances in France and Hong Kong. This compared with a net loss of $1.3bn in 1H20, which reflected unfavourable market performances following the Covid-19 outbreak.

This favourable movement resulted in a corresponding movement in liabilities to policyholders and the present value of in-force long-term insurance business ('PVIF') (see 'Other operating income' below). This reflected the extent to which the policyholders and shareholders respectively participate in the investment performance of the associated asset portfolios.

Change in fair value of designated debt and related derivatives of $0.1bn was $0.3bn adverse compared with 1H20. The movements were driven by the fall in interest rates between the periods, notably in US dollars and pounds sterling.

The majority of our financial liabilities designated at fair value are fixed-rate, long-term debt issuances and are managed in conjunction with interest rate swaps as part of our interest rate management strategy.

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss of $0.5bn were $0.5bn higher compared with 1H20. This primarily reflected the impact of adverse movements in equity markets in 1H20 following the Covid-19 outbreak. The 1H21 period benefited from favourable equity market movements.

Gains less losses from financial investments of $0.4bn were broadly unchanged from 1H20, as gains on the disposal of debt securities remained stable.

Net insurance premium income of $5.7bn was $0.6bn higher than in 1H20, reflecting higher sales volumes, particularly in France and Singapore.

Other operating income of $0.2bn decreased by $0.3bn compared with 1H20, primarily due to lower net favourable changes in PVIF compared with 1H20 (down $0.4bn).

The change in PVIF included a net reduction of $0.5bn from assumption changes and experience variances, primarily in
Hong Kong and Singapore, partly offset in France where improved economic conditions resulted in a positive impact on PVIF assumptions. The net reduction due to assumption changes was partly offset by a $0.1bn increase in the value of new business written, primarily in Hong Kong.

PVIF is presented in accordance with IFRS 4. As set out in our Annual Report and Accounts 2020, IFRS 17 'Insurance Contracts' is effective from 1 January 2023. Under IFRS 17, there will be no PVIF asset recognised. Instead, the estimated future profit will be included in the measurement of the insurance contract liability as the contractual service margin and gradually recognised in revenue as services are provided over the duration of the insurance contract.

The net reduction in PVIF was partly offset by the non-recurrence of revaluation losses on investment properties in Hong Kong in 1H20.

Net insurance claims and benefits paid and movement in liabilities to policyholders of $7.9bn were $3.5bn higher, primarily due to higher returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk in France and Hong Kong, and from higher sales volumes in France and Singapore.

Change in expected credit losses and other credit impairment charges ('ECL') were a net release of $0.7bn in 1H21, compared with a charge of $6.9bn in 1H20. The net release in 1H21 reflected an improvement in the economic outlook, notably in the UK. This compared with the significant build-up of stage 1 and stage 2 allowances in 1H20 due to the worsening economic outlook at the onset of the Covid-19 outbreak. The reduction in ECL also reflected low levels of stage 3 charges, as well as the non-recurrence of a significant charge in 1H20 related to a corporate exposure in Singapore.

Given current consensus economic and default experience, ECL charges for 2021 are expected to be materially lower than our medium-term range of 30bps to 40bps of average loans and possibly a net release for the year. Uncertainty remains as countries emerge from the pandemic at different speeds, government support measures unwind and new virus strains test the efficacy of vaccination programmes. We expect further net releases of ECL in the first half of 2022.

For further details on the calculation of ECL, including the measurement uncertainties and significant judgements applied to such calculations, the impact of alternative/additional scenarios and post model-adjustments, see pages 62 to 70.

Operating expenses - significant items and currency translation
	Half-year to
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$m	$m	$m
Significant items	865	1,709	1,425
- customer redress programmes	17	50	(104)
- impairment of goodwill and other intangibles	-	1,025	65
- past service costs of guaranteed minimum pension benefits equalisation	-	-	17
- restructuring and other related costs¹	848	505	1,403
- settlements and provisions in connection with legal and regulatory matters	-	5	7
- currency translation on significant items		124	37
Currency translation		(887)	(471)
Total	865	822	954

1 Includes impairment of software intangible assets of $173m in the six months to 30 June 2020 and impairment of tangible assets of $197m in the six months to 31 December 2020.

Staff numbers (full-time equivalents)
	At
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
Global businesses
Wealth and Personal Banking	132,616	140,040	135,727
Commercial Banking	43,241	44,506	43,221
Global Banking and Markets	46,326	47,811	46,729
Corporate Centre	367	407	382
Total staff numbers	222,550	232,764	226,059

Operating expenses of $17.1bn were $0.6bn or 3% higher than in 1H20. This primarily reflected higher performance-related pay of $0.9bn, which is accrued based on the profile of our expected profit performance. In addition, investment in technology, including investments in our digital capabilities, increased by $0.3bn. Our Asia wealth investment also rose by $0.1bn. These increases were partly offset by a $0.9bn impact of our cost-saving initiatives.

The increase in operating expenses also included adverse foreign currency translation differences of $0.9bn and an increase in restructuring and other related costs of $0.3bn, of which $0.1bn related to severance payments. However, these items were broadly offset by the non-recurrence of a $1.2bn impairment of intangible assets in Europe in 1H20, of which $0.2bn was within restructuring and other related costs.

The number of employees expressed in full-time equivalent staff ('FTEs') at 30 June 2021 was 222,550, a decrease of 3,509 from 31 December 2020. Additionally, the number of contractors at 30 June 2021 was 7,401, an increase of 1,709 from 31 December 2020, primarily reflecting increases associated with our growth and transformation initiatives.

Share of profit in associates and joint ventures of $1.7bn was $0.7bn or 73% higher, primarily reflecting an increased share of profit from Bank of Communications Co., Limited ('BoCom') and a recovery in asset valuations of a UK associate relative to 1H20. In addition, our share of profit from The Saudi British Bank ('SABB') increased.

In relation to BoCom, we continue to be subject to a risk of impairment in the carrying value of our investment. For further details of our impairment review process, see Note 10 on the interim condensed financial statements.

Tax expense

The effective tax rate for 1H21 of 22.3% was lower than the 27.6% for 1H20. The effective tax rate for 1H21 was increased by 1.7% due to the remeasurement of UK deferred tax balances following substantive enactment of legislation to increase the UK main rate of corporation tax from 19% to 25% with effect from 1 April 2023. The effective tax rate for 1H20 was high, mainly due to the non-recognition of deferred tax on losses in the UK.

Summary consolidated balance sheet
	At
	30 Jun	31 Dec
	2021	2020
	$m	$m
Assets
Cash and balances at central banks	393,559	304,481
Trading assets	260,250	231,990
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	49,120	45,553
Derivatives	209,516	307,726
Loans and advances to banks	86,886	81,616
Loans and advances to customers¹	1,059,511	1,037,987
Reverse repurchase agreements - non-trading	201,714	230,628
Financial investments	434,576	490,693
Other assets	280,873	253,490
Total assets	2,976,005	2,984,164
Liabilities and equity
Liabilities
Deposits by banks	100,448	82,080
Customer accounts	1,669,091	1,642,780
Repurchase agreements - non-trading	112,798	111,901
Trading liabilities	89,637	75,266
Financial liabilities designated at fair value	151,686	157,439
Derivatives	200,156	303,001
Debt securities in issue	84,218	95,492
Liabilities under insurance contracts	110,572	107,191
Other liabilities	250,635	204,019
Total liabilities	2,769,241	2,779,169
Equity
Total shareholders' equity	198,218	196,443
Non-controlling interests	8,546	8,552
Total equity	206,764	204,995
Total liabilities and equity	2,976,005	2,984,164

1 Net of impairment allowances.

Selected financial information
	At
	30 Jun	31 Dec
	2021	2020
	$m	$m
Called up share capital	10,376	10,347
Capital resources¹	181,122	184,423
Undated subordinated loan capital	1,969	1,970
Preferred securities and dated subordinated loan capital²	29,349	30,721
Risk-weighted assets	862,292	857,520
Total shareholders' equity	198,218	196,443
Less: preference shares and other equity instruments	(22,414)	(22,414)
Total ordinary shareholders' equity	175,804	174,029
Less: goodwill and intangible assets (net of tax)	(17,819)	(17,606)
Tangible ordinary shareholders' equity	157,985	156,423
Financial statistics
Loans and advances to customers as a percentage of customer accounts	63.5%	63.2%
Average total shareholders' equity to average total assets	6.56%	6.46%
Net asset value per ordinary share at period end ($)³	8.69	8.62
Tangible net asset value per ordinary share at period end ($)	7.81	7.75
Tangible net asset value per fully diluted ordinary share at period end ($)	7.78	7.72
Number of $0.50 ordinary shares in issue (millions)	20,751	20,694
Basic number of $0.50 ordinary shares outstanding (millions)	20,223	20,184
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)	20,315	20,272
Closing foreign exchange translation rates to $:
$1: £	0.724	0.732
$1: €	0.843	0.816

1 Capital resources are regulatory capital, the calculation of which is set out on page 87.

2 Including perpetual preferred securities.

3 The definition of net asset value per ordinary share is total shareholders' equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue, excluding own shares held by the company, including those purchased and held in treasury.

A more detailed consolidated balance sheet is contained in the interim condensed financial statements on page 101.

Balance sheet commentary compared with 31 December 2020

At 30 June 2021, our total assets were $3.0tn, broadly in line with 31 December 2020.

Our asset base included offsetting movements, with lower derivative asset balances due to adverse revaluation movements on interest rate contracts. In addition, there were decreases in financial investments and reverse repurchase agreements as we redeployed our commercial surplus into cash and balances at central banks. Other assets also increased due to the seasonal reduction in settlement accounts at 31 December 2020, as clients settled trades prior to the year end.

Our ratio of loans and advances to customers to customer accounts of 63% was in line with 31 December 2020.

Assets

Cash and balances at central banks increased by $89bn or 29%, mainly in the UK, France and the US, as we redeployed our commercial surplus to cash to increase liquidity for our clients and as a result of deposit inflows.

Trading assets increased by $28bn or 12%, notably from an increase in equity securities held, particularly in the UK, Hong Kong and the US, largely driven by client demand.

Derivative assets decreased by $98bn or 32%, primarily in the UK and France, reflecting adverse revaluation movements on interest rate contracts due to higher long-term yield curve rates in most major markets. Foreign exchange contracts also decreased as a result of foreign exchange rate movements and lower client demand. The decrease in derivative assets was consistent with the decrease in derivative liabilities, as the underlying risk is broadly matched.

Loans and advances to customers of $1.1tn were $22bn higher, which included adverse foreign currency translation differences of $1bn. On a constant currency basis, customer lending balances were $23bn higher.

The commentary below is on a constant currency basis.

Customer lending increased in WPB by $22bn to $491bn, which included a $9bn increase in Hong Kong as customers borrowed to fund investments in initial public offerings. This was partly offset by $2.6bn of loans and advances to customers being reclassified to assets held for sale, which is reported in 'other assets', reflecting the strategic initiative to exit the mass market retail banking business in the US. The remaining increase reflected higher mortgage balances, notably in the UK (up $5bn), Hong Kong (up $3bn) and Canada (up $2bn) as activity in housing markets globally continued to increase. There was also an increase in secured lending in Hong Kong Private Banking (up $3bn).

In CMB, customer lending of $351bn was $8bn higher, reflecting a recovery in trade volumes in 2021 and from increased term lending in Asia, partly offset by a reduction in other term balances in the UK.

In GBM, customer lending of $216bn fell by $7bn, primarily as customers repaid credit facilities, primarily in the UK, Singapore and the US.

Reverse repurchase agreements - non-trading decreased by $29bn or 13%, primarily in the US, as we redeployed our commercial surplus to cash due to a favourable US Federal Funds Rate. Additionally, in Europe there was an increase in balances eligible for netting, resulting in an overall balance reduction. These decreases were partly offset by an increase in Asia due to client demand.

Financial investments decreased by $56bn or 11%, mainly as we decreased our holdings of debt securities and treasury bills through a combination of disposals and maturities. A notable portion of these funds was redeployed into cash as we managed our commercial surplus.

Other assets grew by $27bn or 11%, primarily due to an increase in settlement accounts in the US, the UK and Hong Kong from higher trading activity, compared with the seasonal reduction in December 2020. Additionally, $3bn of loans and advances to customers were reclassified to assets held for sale, reflecting our exit of mass market retail banking in the US. These increases were partly offset by lower cash collateral as derivative balances decreased.

Liabilities

Customer accounts of $1.7tn increased by $26bn on a reported basis, including adverse foreign currency translation differences of $1bn. On a constant currency basis, customer accounts were $27bn higher.

The commentary below is on a constant currency basis.

The increase in customer accounts was primarily in WPB (up $7bn), despite a reclassification of $9.9bn to liabilities of disposal groups held for sale, which is reported in 'other liabilities', reflecting our exit of mass market retail banking in the US. The remaining increase was driven by lower consumer spending, resulting in higher deposit and savings balances, due to ongoing Covid-19 restrictions. There was a continued movement of funds from term accounts to call accounts as customers showed a preference for liquidity while interest rates remained low.

Additionally, increases in CMB (up $15bn) and GBM (up $5bn) were observed as wholesale customers continued to consolidate funds across many of our markets.

Trading liabilities increased by $14bn or 19%, notably from an increase in debt security and equity short positions in Hong Kong, the UK and the US.

Derivative liabilities decreased by $103bn or 34%, which is consistent with the decrease in derivative assets, since the underlying risk is broadly matched.

Other liabilities increased by $47bn or 23%. During the period $10bn of customer accounts were reclassified to liabilities held for sale, reflecting our exit of mass market retail banking in the US. Additionally, there was an increase in settlement accounts in the US, France, Hong Kong and the UK from higher trading activity, compared with the seasonal reduction in December 2020. These increases were partly offset by lower cash collateral as derivative balances decreased.

Equity

Total shareholders' equity , including non-controlling interests, increased by $1.8bn or 1% compared with 31 December 2020, reflecting the effects of profits generated of $8.4bn. These were partly offset by coupon distributions on securities classified as equity and dividends paid of $4.1bn, as well as net losses through other comprehensive income ('OCI') of $2.7bn. The net losses in OCI included adverse fair value movements of debt instruments of $1.4bn, an adverse remeasurement of defined benefit pension obligations of $0.7bn and adverse foreign exchange differences of $0.4bn.

Customer accounts by country/territory
	At
	30 Jun	31 Dec
	2021	2020
	$m	$m
Europe	663,996	629,647
- UK	534,034	504,275
- France	55,924	55,111
- Germany	23,530	21,605
- Switzerland	10,464	10,102
- other	40,044	38,554
Asia	759,948	762,406
- Hong Kong	529,172	531,489
- Singapore	52,126	55,140
- mainland China	57,227	56,826
- Australia	27,340	29,286
- India	23,976	20,199
- Malaysia	15,823	15,997
- Taiwan	15,367	16,041
- Indonesia	5,593	5,198
- other	33,324	32,230
Middle East and North Africa (excluding Saudi Arabia)	41,086	41,221
- United Arab Emirates	19,541	20,974
- Egypt	6,054	5,659
- Turkey	4,554	3,987
- other	10,937	10,601
North America	176,152	182,028
- US¹	110,579	117,485
- Canada	56,660	56,520
- other	8,913	8,023
Latin America	27,909	27,478
- Mexico	22,516	22,220
- other	5,393	5,258
At end of period	1,669,091	1,642,780

1 At 30 June 2021, customer accounts of $9.9bn related to the disposal of the US retail banking business met the criteria to be classified as held for sale and are reported within 'Accruals, deferred income and other liabilities' on the balance sheet. Refer to Note 15 on page 124 for further details.

Risk-weighted assets

Risk-weighted assets ('RWAs') rose by $4.8bn during the first half of the year, including a decrease of $2.7bn due to foreign currency translation differences. The increase of $7.5bn in RWAs (excluding foreign currency translation differences) included the following movements:

• a $12.9bn asset size increase, largely driven by WPB and CMB lending growth in Asia, partly offset by reductions in GBM and market risk RWAs, which included the effects of management initiatives; and

• a $5.2bn decrease in RWAs due to changes in methodology and policy. This was mostly due to risk parameter refinements in GBM and CMB.

Global businesses
	Page
Summary	35
Basis of preparation	35
Reconciliation of reported and adjusted items - global businesses	37
Reconciliation of reported and adjusted items - risk-weighted assets	40
Supplementary tables for WPB	40

Summary

The Group Chief Executive, supported by the rest of the Group Executive Committee ('GEC'), reviews operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 'Operating Segments', and are presented in Note 5: 'Segmental analysis' on page 107.

Basis of preparation

The Group Chief Executive, supported by the rest of the GEC, is considered the Chief Operating Decision Maker ('CODM') for the purposes of identifying the Group's reportable segments. Global business results are assessed by the CODM on the basis of adjusted performance, which removes the effects of significant items and currency translation from reported results. Therefore, we present these results on an adjusted basis. Adjusted performance information for 1H20 and 2H20 is presented on a constant currency basis as described on page 27.

As required by IFRS 8, reconciliations of the total adjusted global business results to the Group's reported results are presented on page 108.

Supplementary reconciliations from reported to adjusted results by global business are presented on pages 35 to 37 for information purposes.

Global business performance is also assessed using return on tangible equity ('RoTE'), excluding significant items. A reconciliation of global business RoTE, excluding significant items to the Group's RoTE is provided on page 52.

Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully attributed to global businesses and geographical regions. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.

Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm's length terms. The intra-Group elimination items for the global businesses are presented in Corporate Centre.

The expense of the UK bank levy is included in the Europe geographical region as HSBC regards the levy as a cost of being headquartered in the UK. The current year expense is reflected in the fourth quarter as it is assessed on our balance sheet position as at 31 December. For the purposes of the presentation by global business, the cost of the levy is included in Corporate Centre.

The results of geographical regions are presented on a reported and adjusted basis. Geographical information is classified by the location of the principal operations of the subsidiary or, for The Hongkong and Shanghai Banking Corporation Limited, HSBC Bank plc, HSBC UK Bank plc, HSBC Bank Middle East Limited and HSBC Bank USA, by the location of the branch responsible for reporting the results or providing funding.

A description of the global businesses is provided in the Overview section, pages 16 to 22.

Reconciliation of reported and adjusted items - global businesses

Supplementary unaudited analysis of significant items by global business is presented below.

	Half-year to 30 Jun 2021
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Revenue¹
Reported	11,400	6,670	7,703	(222)	25,551
Significant items	1	(19)	175	89	246
- customer redress programmes	2	(20)	-	-	(18)
- fair value movements on financial instruments²	(1)	(1)	13	183	194
- restructuring and other related costs³	-	2	162	(94)	70
Adjusted	11,401	6,651	7,878	(133)	25,797
ECL
Reported	52	249	414	4	719
Adjusted	52	249	414	4	719
Operating expenses
Reported	(7,817)	(3,544)	(5,058)	(668)	(17,087)
Significant items	217	19	73	556	865
- customer redress programmes	13	-	-	4	17
- restructuring and other related costs	204	19	73	552	848
Adjusted	(7,600)	(3,525)	(4,985)	(112)	(16,222)
Share of profit in associates and joint ventures
Reported	11	1	-	1,644	1,656
Adjusted	11	1	-	1,644	1,656
Profit before tax
Reported	3,646	3,376	3,059	758	10,839
Significant items	218	-	248	645	1,111
- revenue	1	(19)	175	89	246
- operating expenses	217	19	73	556	865
Adjusted	3,864	3,376	3,307	1,403	11,950
Loans and advances to customers (net)
Reported	491,320	350,945	216,098	1,148	1,059,511
Adjusted	491,320	350,945	216,098	1,148	1,059,511
Customer accounts
Reported	841,257	485,689	341,242	903	1,669,091
Adjusted	841,257	485,689	341,242	903	1,669,091

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3 Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.

Reconciliation of reported results to adjusted results - global businesses (continued)
	Half-year to 30 Jun 2020
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Revenue¹
Reported	11,270	7,000	8,185	290	26,745
Currency translation	445	326	390	(44)	1,117
Significant items	(21)	-	(1)	(243)	(265)
- customer redress programmes	(26)	-	-	-	(26)
- disposals, acquisitions and investment in new businesses	7	-	-	1	8
- fair value movements on financial instruments²	-	-	(65)	(234)	(299)
- restructuring and other related costs³	-	-	58	(9)	49
- currency translation on significant items	(2)	-	6	(1)	3
Adjusted	11,694	7,326	8,574	3	27,597
ECL
Reported	(2,202)	(3,526)	(1,118)	(12)	(6,858)
Currency translation	(126)	(225)	(77)	(1)	(429)
Adjusted	(2,328)	(3,751)	(1,195)	(13)	(7,287)
Operating expenses
Reported	(7,569)	(3,397)	(5,153)	(408)	(16,527)
Currency translation	(366)	(178)	(376)	33	(887)
Significant items	240	118	716	635	1,709
- customer redress programmes	49	1	-	-	50
- impairment of goodwill and other intangibles	85	41	567	332	1,025
- restructuring and other related costs⁴	89	65	72	279	505
- settlements and provisions in connection with legal and regulatory matters	-	-	2	3	5
- currency translation on significant items	17	11	75	21	124
Adjusted	(7,695)	(3,457)	(4,813)	260	(15,705)
Share of profit in associates and joint ventures
Reported	(8)	-	-	966	958
Currency translation	-	-	-	91	91
Adjusted	(8)	-	-	1,057	1,049
Profit before tax
Reported	1,491	77	1,914	836	4,318
Currency translation	(47)	(77)	(63)	79	(108)
Significant items	219	118	715	392	1,444
- revenue	(21)	-	(1)	(243)	(265)
- operating expenses	240	118	716	635	1,709
Adjusted	1,663	118	2,566	1,307	5,654
Loans and advances to customers (net)
Reported	429,487	344,567	243,355	1,272	1,018,681
Currency translation	26,776	17,527	10,771	93	55,167
Adjusted	456,263	362,094	254,126	1,365	1,073,848
Customer accounts
Reported	775,870	418,263	337,573	674	1,532,380
Currency translation	34,267	23,164	19,509	64	77,004
Adjusted	810,137	441,427	357,082	738	1,609,384

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.

4 Includes impairment of software intangible assets of $173m (of the total software intangible asset impairment of $1,247m).

Reconciliation of reported results to adjusted results - global businesses (continued)
	Half-year to 31 Dec 2020
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Revenue¹
Reported	10,729	6,294	6,809	(148)	23,684
Currency translation	258	177	187	8	630
Significant items	32	18	327	(168)	209
- customer redress programmes	31	16	-	-	47
- disposals, acquisitions and investment in new businesses	2	-	-	-	2
- fair value movements on financial instruments²	-	1	67	(33)	35
- restructuring and other related costs³	-	1	249	(129)	121
- currency translation on significant items	(1)	-	11	(6)	4
Adjusted	11,019	6,489	7,323	(308)	24,523
ECL
Reported	(653)	(1,228)	(91)	13	(1,959)
Currency translation	(32)	(37)	(4)	1	(72)
Adjusted	(685)	(1,265)	(95)	14	(2,031)
Operating expenses
Reported	(7,877)	(3,503)	(5,016)	(1,509)	(17,905)
Currency translation	(189)	(93)	(174)	(15)	(471)
Significant items	195	105	274	851	1,425
- customer redress programmes	(113)	-	-	9	(104)
- impairment of goodwill and other intangibles	209	4	10	(158)	65
- past service costs of guaranteed minimum pension benefits equalisation	-	-	-	17	17
- restructuring and other related costs⁴	103	100	254	946	1,403
- settlements and provisions in connection with legal and regulatory matters	-	-	-	7	7
- currency translation on significant items	(4)	1	10	30	37
Adjusted	(7,871)	(3,491)	(4,916)	(673)	(16,951)
Share of profit in associates and joint ventures
Reported	14	(1)	-	626	639
Currency translation	1	-	-	37	38
Significant items	-	-	-	462	462
- impairment of goodwill⁵	-	-	-	462	462
Adjusted	15	(1)	-	1,125	1,139
Profit/(loss) before tax
Reported	2,213	1,562	1,702	(1,018)	4,459
Currency translation	38	47	9	31	125
Significant items	227	123	601	1,145	2,096
- revenue	32	18	327	(168)	209
- operating expenses	195	105	274	851	1,425
- share of profit in associates and joint ventures	-	-	-	462	462
Adjusted	2,478	1,732	2,312	158	6,680
Loans and advances to customers (net)
Reported	469,186	343,182	224,364	1,255	1,037,987
Currency translation	32	(231)	(969)	(1)	(1,169)
Adjusted	469,218	342,951	223,395	1,254	1,036,818
Customer accounts
Reported	834,759	470,428	336,983	610	1,642,780
Currency translation	(383)	258	(1,006)	(1)	(1,132)
Adjusted	834,376	470,686	335,977	609	1,641,648

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3 Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.

4 Includes impairment of tangible assets of $197m.

5 During the six months to 31 December 2020, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.

Reconciliation of reported and adjusted risk-weighted assets

	At 30 Jun 2021
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$bn	$bn	$bn	$bn	$bn
Risk-weighted assets
Reported	185.0	332.1	255.2	90.0	862.3
Adjusted	185.0	332.1	255.2	90.0	862.3

	At 30 Jun 2020
Risk-weighted assets
Reported	161.8	330.9	277.6	84.3	854.6
Currency translation	6.6	17.0	9.0	1.0	33.6
Adjusted	168.4	347.9	286.6	85.3	888.2


	At 31 Dec 2020
Risk-weighted assets
Reported	172.8	327.7	265.1	91.9	857.5
Currency translation	(0.5)	(0.7)	(1.2)	(0.3)	(2.7)
Adjusted	172.3	327.0	263.9	91.6	854.8

Supplementary tables for WPB

WPB adjusted performance by business unit

A breakdown of WPB by business unit is presented below to reflect the basis of how the revenue performance of the business units is assessed and managed.

WPB - summary (adjusted basis)
	Total WPB	Consists of¹
	Total WPB	Banking operations	Insurance manufacturing	Global Private Banking	Asset management
	$m	$m	$m	$m	$m
Half-year to 30 Jun 2021
Net operating income before change in expected credit losses and other credit impairment charges²	11,401	8,392	1,477	935	597
- net interest income	7,068	5,608	1,142	320	(2)
- net fee income/(expense)	3,042	2,298	(316)	477	583
- other income	1,291	486	651	138	16
ECL	52	71	(20)	1	-
Net operating income	11,453	8,463	1,457	936	597
Total operating expenses	(7,600)	(6,209)	(268)	(712)	(411)
Operating profit	3,853	2,254	1,189	224	186
Share of profit/(loss) in associates and joint ventures	11	4	7	-	-
Profit before tax	3,864	2,258	1,196	224	186

Half-year to 30 Jun 2020
Net operating income before change in expected credit losses and other credit impairment charges²	11,694	9,595	620	960	519
- net interest income	8,332	6,831	1,115	388	(2)
- net fee income/(expense)	2,785	2,130	(285)	431	509
- other income/(expense)	577	634	(210)	141	12
ECL	(2,328)	(2,166)	(105)	(57)	-
Net operating income	9,366	7,429	515	903	519
Total operating expenses	(7,695)	(6,422)	(204)	(702)	(367)
Operating profit	1,671	1,007	311	201	152
Share of profit/(loss) in associates and joint ventures	(8)	3	(11)	-	-
Profit before tax	1,663	1,010	300	201	152

WPB - summary (adjusted basis) (continued)
	Total WPB	Consists of¹
	Total WPB	Banking operations	Insurance manufacturing	Global Private Banking	Asset management
	$m	$m	$m	$m	$m
Half-year to 31 Dec 2020
Net operating income before change in expected credit losses and other credit impairment charges²	11,019	8,356	1,259	840	564
- net interest income	7,231	5,783	1,145	303	-
- net fee income/(expense)	2,763	2,064	(245)	417	527
- other income/(expense)	1,025	509	359	120	37
ECL	(685)	(708)	39	(15)	(1)
Net operating income	10,334	7,648	1,298	825	563
Total operating expenses	(7,871)	(6,455)	(286)	(736)	(394)
Operating profit	2,463	1,193	1,012	89	169
Share of profit in associates and joint ventures	15	3	12	-	-
Profit before tax	2,478	1,196	1,024	89	169

1 The results presented for insurance manufacturing operations are shown before elimination of inter-company transactions with HSBC non-insurance operations. These eliminations are presented within Banking operations.

2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue. WPB insurance manufacturing adjusted revenue of $1,477m (1H20: $620m, 2H20: $1,259m) is disclosed within the management view of adjusted revenue on page 16, as follows: Wealth Management $1,439m (1H20: $583m, 2H20: $1,237m) and Other $38m (1H20: $37m, 2H20: $22m).

WPB insurance manufacturing adjusted results

The following table shows the results of our insurance manufacturing operations by income statement line item. It shows the results of insurance manufacturing operations for WPB and for all global business segments in aggregate, and separately the insurance distribution income earned by HSBC bank channels.

Adjusted results of insurance manufacturing operations and insurance distribution income earned by HSBC bank channels^{1, 2}
	Half-year to
	30 Jun		30 Jun		31 Dec
	2021		2020		2020
	WPB	All global businesses	WPB	All global businesses	WPB	All global businesses
	$m	$m	$m	$m	$m	$m
Net interest income	1,142	1,232	1,115	1,187	1,145	1,239
Net fee expense	(316)	(340)	(285)	(310)	(245)	(258)
- fee income	46	58	61	70	50	62
- fee expense	(362)	(398)	(346)	(380)	(295)	(320)
Net income/(expense) from financial instruments held for trading or managed on a fair value basis	2	(1)	17	18	51	68
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss	2,771	2,798	(1,343)	(1,362)	3,468	3,440
Gains less losses from financial investments	58	54	4	4	9	9
Net insurance premium income	5,399	5,726	4,934	5,189	4,938	5,175
Other operating income/(expense)	55	39	393	408	(58)	(59)
Of which: PVIF	25	13	428	443	(59)	(62)
Total operating income	9,111	9,508	4,835	5,134	9,308	9,614
Net insurance claims and benefits paid and movement in liabilities to policyholders	(7,634)	(7,953)	(4,215)	(4,458)	(8,049)	(8,308)
Net operating income before change in expected credit losses and other credit impairment charges³	1,477	1,555	620	676	1,259	1,306
Change in expected credit losses and other credit impairment charges	(20)	(20)	(105)	(116)	39	40
Net operating income	1,457	1,535	515	560	1,298	1,346
Total operating expenses	(268)	(280)	(204)	(231)	(286)	(287)
Operating profit	1,189	1,255	311	329	1,012	1,059
Share of profit/(loss) in associates and joint ventures	7	7	(11)	(11)	12	12
Profit before tax of insurance manufacturing operations⁴	1,196	1,262	300	318	1,024	1,071
Annualised new business premiums of insurance manufacturing operations	1,551	1,588	1,238	1,288	1,090	1,104
Insurance distribution income earned by HSBC bank channels	399	444	407	459	349	362

1 Adjusted results are derived by adjusting for period-on-period effects of foreign currency translation differences, and the effect of significant items that distort period-on-period comparisons. There are no significant items included within insurance manufacturing, and the impact of foreign currency translation on 'All global businesses' profit before tax is 1H20: $10m favourable (reported: $308m), 2H20: $2m favourable (reported: $1,069m).

2 The results presented for insurance manufacturing operations are shown before elimination of inter-company transactions with HSBC non-insurance operations.

3 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

4 The effect on the insurance manufacturing operations of applying hyperinflation accounting in Argentina resulted in an increase in adjusted revenue in 1H21 of $6m (1H20: increase of $4m, 2H20: increase of $5m) and an increase in profit before tax in 1H21 of $6m (1H20: increase of $9m, 2H20: increase of $3m). These effects are recorded within 'All global businesses'.

Insurance manufacturing

The following commentary, unless otherwise specified, relates to the 'All global businesses' results.

HSBC recognises the present value of long-term in-force insurance contracts and investment contracts with discretionary participation features ('PVIF') as an asset on the balance sheet.

The overall balance sheet equity, including PVIF, is therefore a measure of the embedded value in the insurance manufacturing entities, and the movement in this embedded value in the period drives the overall income statement result.

Adjusted profit before tax of $1.3bn increased by $0.9bn compared with 1H20.

Net operating income before change in expected credit losses and other credit impairment charges was $1.6bn, which was $0.9bn higher than in 1H20. This reflected the following:

• 'Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss' of $2.8bn in 1H21 compared with a net expense of $1.4bn in 1H20. This was primarily due to favourable equity market performances in France and Hong Kong in 1H21, compared with unfavourable market performances in 1H20 following the outbreak of Covid-19.

This favourable movement resulted in a corresponding movement in liabilities to policyholders and PVIF (see 'Other operating income' below), reflecting the extent to which policyholders and shareholders respectively participate in the investment performance of the associated asset portfolios.

• Net insurance premium income of $5.7bn was $0.5bn higher than in 1H20. This increase reflected higher sales volumes, particularly in France and Singapore.

• Other operating income decreased by $0.4bn compared with 1H20, mainly due to a net reduction of $0.5bn from assumption changes and experience variances, primarily in Hong Kong and Singapore. This was partly offset by positive experience variances in France where improved economic conditions resulted in a positive impact on PVIF assumptions. This overall net reduction due to assumption changes was partly offset by a $0.1bn increase in the value of new business written, primarily in Hong Kong.

• Net insurance claims and benefits paid and movement in liabilities to policyholders of $8.0bn were $3.5bn higher, primarily due to increased returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk primarily in France and Hong Kong and higher sales volumes in France and Singapore.

• Change in expected credit losses and other credit impairment charges ('ECL') were $0.1bn lower than 1H20, mainly due to charges in the comparative period following the onset of the Covid-19 pandemic.

• Total operating expenses of $0.3bn increased by 21% compared with 1H20, reflecting the investment in core insurance functions and capabilities, including preparation for the implementation of IFRS 17 'Insurance Contracts'.

Annualised new business premiums ('ANP') is a measure of new insurance premium generation by the business. It is calculated as 100% of annualised first year regular premiums and 10% of single premiums, before reinsurance ceded. The higher ANP during the period reflected an increase in new business volumes, mainly in Hong Kong.

Insurance distribution income from HSBC channels included $265m (1H20: $277m; 2H20: $202m) on HSBC manufactured products, for which a corresponding fee expense is recognised within insurance manufacturing, and $179m (1H20: $182m; 2H20: $160m) on products manufactured by third-party providers. The WPB component of this distribution income was $230m (1H20: $234m; 2H20: $197m) from HSBC manufactured products and $169m (1H20: $173m; 2H20: $152m) from third-party products.

WPB: Client assets and funds under management

The following table shows the client assets and funds under management, including self-directed client investments and execution-only trades, across our WPB global business. Funds under management represents assets managed, either actively or passively, on behalf of our customers.

WPB - reported client assets and funds under management¹
	Half-year to
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$bn	$bn	$bn
Global Private Banking client assets	427	353	394
- managed by Global Asset Management	69	62	66
- external managers, direct securities and other	358	291	328
Retail Wealth balances	457	357	407
- managed by Global Asset Management	231	196	219
- external managers, direct securities and other	226	161	188
Asset Management third-party distribution	317	263	317
Closing balance	1,201	973	1,118

1 Client funds distributed and under management are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager. Customer deposits included in client assets are on-balance sheet.

WPB wealth balances

The following table shows the consolidated areas of focus across all WPB wealth balances.

WPB wealth balances
	Half-year to
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$bn	$bn	$bn
Client assets and funds under management	1,201	973	1,118
Premier and Jade deposits¹	470	445	470
Total	1,671	1,418	1,588

1 Premier and Jade deposits, which include Prestige deposits in Hang Seng Bank, form part of the total WPB customer accounts balance of $841bn on page 35 (30 June 2020: $776bn, 31 December 2020: $835bn).

Asset Management: Funds under management

The following table shows the funds under management of our Asset Management business. Funds under management represents assets managed, either actively or passively, on behalf of our customers.

Asset Management - reported funds under management¹
	Half-year to
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$bn	$bn	$bn
Opening balance	602	506	521
Net new money	4	33	20
Value change	16	(9)	26
Exchange and other	(6)	(9)	35
Closing balance	616	521	602

Asset Management - reported funds under management by geography
	At
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$bn	$bn	$bn
Europe	347	292	346
Asia	186	160	176
MENA	6	5	6
North America	68	57	65
Latin America	9	7	9
Closing balance	616	521	602

1 Funds under management are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager.

Global Private Banking client assets¹

The following table shows the client assets of our Global Private Banking business.

Global Private Banking - reported client assets²
	Half-year to
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$bn	$bn	$bn
Opening balance	394	361	353
Net new money	20	5	1
Value change	16	(16)	22
Exchange and other	(3)	3	18
Closing balance	427	353	394

Global Private Banking - reported client assets by geography
	At
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$bn	$bn	$bn
Europe	176	161	174
Asia	193	154	176
North America	58	38	44
Closing balance	427	353	394

1 Client assets are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported separately.

2 Client assets are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager. Customer deposits included in these client assets are on balance sheet.

Geographical regions
	Page
Analysis of reported results by geographical regions	44
Reconciliation of reported and adjusted items - geographical regions	47
Analysis by country/territory	53

Analysis of reported results by geographical regions

HSBC reported profit/(loss) before tax and balance sheet data
	Half-year to 30 Jun 2021
	Europe	Asia	MENA	North America	Latin America	Intra-HSBC items	Total
	$m	$m	$m	$m	$m	$m	$m
Net interest income	3,144	6,266	650	1,432	1,009	597	13,098
Net fee income	1,925	3,115	370	1,009	255	-	6,674
Net income from financial instruments held for trading or managed on a fair value basis	1,439	2,010	205	258	235	37	4,184
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss	1,074	1,700	-	-	21	-	2,795
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	1,124	(3)	(3)	31	36	(637)	548
Other income/(expense)¹	1,523	168	30	321	(71)	(3,719)	(1,748)
Net operating income before change in expected credit losses and other credit impairment charges²	10,229	13,256	1,252	3,051	1,485	(3,722)	25,551
Change in expected credit losses and other credit impairment charges	670	(207)	116	212	(72)	-	719
Net operating income	10,899	13,049	1,368	3,263	1,413	(3,722)	26,270
Total operating expenses excluding impairment of goodwill and other intangible assets	(9,071)	(7,457)	(782)	(2,448)	(1,009)	3,722	(17,045)
Impairment of goodwill and other intangible assets	(13)	(15)	(3)	(10)	(1)	-	(42)
Operating profit/(loss)	1,815	5,577	583	805	403	-	9,183
Share of profit in associates and joint ventures	153	1,359	140	-	4	-	1,656
Profit/(loss) before tax	1,968	6,936	723	805	407	-	10,839
	%	%	%	%	%		%
Share of HSBC's profit before tax	18.2	64.0	6.7	7.4	3.7		100.0
Cost efficiency ratio	88.8	56.4	62.7	80.6	68.0		66.9
Balance sheet data	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers (net)	402,778	502,360	27,608	106,414	20,351	-	1,059,511
Total assets	1,376,064	1,249,145	68,351	383,082	49,102	(149,739)	2,976,005
Customer accounts	663,996	759,948	41,086	176,152	27,909	-	1,669,091
Risk-weighted assets³	269,873	407,117	59,476	115,208	34,845	-	862,292

	Half-year to 30 Jun 2020
Net interest income	2,782	7,820	777	1,483	963	684	14,509
Net fee income	1,747	2,692	347	910	230	-	5,926
Net income from financial instruments held for trading or managed on a fair value basis	2,090	2,630	211	630	370	(163)	5,768
Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss	(809)	(512)	-	-	31	-	(1,290)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	563	22	(5)	(2)	21	(519)	80
Other income/(expense)¹	2,603	1,928	49	384	(38)	(3,174)	1,752
Net operating income before change in expected credit losses and other credit impairment charges²	8,976	14,580	1,379	3,405	1,577	(3,172)	26,745
Change in expected credit losses and other credit impairment charges	(2,885)	(1,818)	(611)	(887)	(657)	-	(6,858)
Net operating income	6,091	12,762	768	2,518	920	(3,172)	19,887
Total operating expenses excluding impairment of goodwill and other intangible assets	(7,933)	(6,356)	(722)	(2,491)	(909)	3,172	(15,239)
Impairment of goodwill and other intangible assets	(1,168)	(74)	(41)	(4)	(1)	-	(1,288)
Operating profit/(loss)	(3,010)	6,332	5	23	10	-	3,360
Share of profit/(loss) in associates and joint ventures	(50)	1,037	(31)	-	2	-	958
Profit/(loss) before tax	(3,060)	7,369	(26)	23	12	-	4,318
	%	%	%	%	%		%
Share of HSBC's profit before tax	(70.9)	170.7	(0.6)	0.5	0.3		100.0
Cost efficiency ratio	101.4	44.1	55.3	73.3	57.7		61.8
Balance sheet data	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers (net)	378,729	474,739	29,615	115,813	19,785	-	1,018,681
Total assets	1,357,087	1,164,850	68,418	449,393	48,933	(165,883)	2,922,798
Customer accounts	562,505	723,072	41,197	180,489	25,117	-	1,532,380
Risk-weighted assets³	278,500	374,684	58,585	130,580	33,278	-	854,552

HSBC reported profit/(loss) before tax and balance sheet data (continued)
	Half-year to 31 Dec 2020
	Europe	Asia	MENA	North America	Latin America	Intra-HSBC/ Global impairment	Total
	$m	$m	$m	$m	$m	$m	$m
Net interest income	2,913	6,498	688	1,353	997	620	13,069
Net fee income	1,752	2,726	348	885	237	-	5,948
Net income from financial instruments held for trading or managed on a fair value basis	1,176	1,643	191	367	223	214	3,814
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss	1,136	2,211	-	-	24	-	3,371
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	1,184	(5)	8	4	19	(835)	375
Other income/(expense)¹	1,282	(731)	14	361	(57)	(3,762)	(2,893)
Net operating income before change in expected credit losses and other credit impairment charges²	9,443	12,342	1,249	2,970	1,443	(3,763)	23,684
Change in expected credit losses and other credit impairment charges	(866)	(466)	(147)	(13)	(467)	-	(1,959)
Net operating income	8,577	11,876	1,102	2,957	976	(3,763)	21,725
Total operating expenses excluding impairment of goodwill and other intangible assets	(9,927)	(7,228)	(799)	(2,590)	(1,024)	3,763	(17,805)
Impairment of goodwill and other intangible assets	154	(4)	(24)	(222)	(4)	-	(100)
Operating profit/(loss)	(1,196)	4,644	279	145	(52)	-	3,820
Share of profit/(loss) in associates and joint ventures	51	819	(234)	-	3	-	639
Profit/(loss) before tax	(1,145)	5,463	45	145	(49)	-	4,459
	%	%	%	%	%		%
Share of HSBC's profit before tax	(25.7)	122.5	1.0	3.3	(1.1)		100.0
Cost efficiency ratio	103.5	58.6	65.9	94.7	71.2		75.6
Balance sheet data	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers (net)	408,495	473,165	28,700	107,969	19,658	-	1,037,987
Total assets	1,416,111	1,206,404	68,860	373,167	49,703	(130,081)	2,984,164
Customer accounts	629,647	762,406	41,221	182,028	27,478	-	1,642,780
Risk-weighted assets³	284,322	384,228	60,181	117,755	35,240	-	857,520

1 Other income/(expense) in this context comprises, where applicable, net income/(expense) from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.

2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

3 Risk-weighted assets are non-additive across geographical regions due to market risk diversification effects within the Group.

Reconciliation of reported and adjusted items - geographical regions

Reconciliation of reported and adjusted items - geographical regions and selected countries/territories
	Half-year to 30 Jun 2021
	Europe	Asia	MENA	North America	Latin America	Total
	$m	$m	$m	$m	$m	$m
Revenue¹
Reported²	10,229	13,256	1,252	3,051	1,485	25,551
Significant items	79	(54)	-	3	7	246
- customer redress programmes	(18)	-	-	-	-	(18)
- fair value movements on financial instruments³	188	5	-	-	1	194
- restructuring and other related costs^2,4	(91)	(59)	-	3	6	70
Adjusted²	10,308	13,202	1,252	3,054	1,492	25,797
ECL
Reported	670	(207)	116	212	(72)	719
Adjusted	670	(207)	116	212	(72)	719
Operating expenses
Reported²	(9,084)	(7,472)	(785)	(2,458)	(1,010)	(17,087)
Significant items	634	202	22	191	27	865
- customer redress programmes	17	-	-	-	-	17
- restructuring and other related costs²	617	202	22	191	27	848
Adjusted²	(8,450)	(7,270)	(763)	(2,267)	(983)	(16,222)
Share of profit in associates and joint ventures
Reported	153	1,359	140	-	4	1,656
Adjusted	153	1,359	140	-	4	1,656
Profit before tax
Reported	1,968	6,936	723	805	407	10,839
Significant items	713	148	22	194	34	1,111
- revenue²	79	(54)	-	3	7	246
- operating expenses²	634	202	22	191	27	865
Adjusted	2,681	7,084	745	999	441	11,950
Loans and advances to customers (net)
Reported	402,778	502,360	27,608	106,414	20,351	1,059,511
Adjusted	402,778	502,360	27,608	106,414	20,351	1,059,511
Customer accounts
Reported	663,996	759,948	41,086	176,152	27,909	1,669,091
Adjusted	663,996	759,948	41,086	176,152	27,909	1,669,091

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Amounts are non-additive across geographical regions due to inter-company transactions within the Group.

3 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

4 Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.

Reconciliation of reported and adjusted items - geographical regions and selected countries/territories (continued)
	Half-year to 30 Jun 2021
	UK	Hong Kong	Mainland China	US	Mexico
	$m	$m	$m	$m	$m
Revenue¹
Reported	8,179	7,661	1,791	2,048	1,149
Significant items	119	25	(21)	4	16
- customer redress programmes	(18)	-	-	-	-
- fair value movement on financial instruments²	186	2	-	-	1
- restructuring and other related costs	(49)	23	(21)	4	15
Adjusted	8,298	7,686	1,770	2,052	1,165
ECL
Reported	655	(91)	(2)	174	(68)
Adjusted	655	(91)	(2)	174	(68)
Operating expenses
Reported	(7,307)	(3,945)	(1,306)	(1,849)	(725)
Significant items	575	86	11	153	10
- customer redress programmes	17	-	-	-	-
- restructuring and other related costs	558	86	11	153	10
Adjusted	(6,732)	(3,859)	(1,295)	(1,696)	(715)
Share of profit in associates and joint ventures
Reported	153	8	1,348	-	4
Adjusted	153	8	1,348	-	4
Profit before tax
Reported	1,680	3,633	1,831	373	360
Significant items	694	111	(10)	157	26
- revenue	119	25	(21)	4	16
- operating expenses	575	86	11	153	10
Adjusted	2,374	3,744	1,821	530	386
Loans and advances to customers (net)
Reported	313,966	328,913	51,123	51,985	17,793
Adjusted	313,966	328,913	51,123	51,985	17,793
Customer accounts
Reported	534,034	529,172	57,227	110,579	22,516
Adjusted	534,034	529,172	57,227	110,579	22,516

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

Reconciliation of reported and adjusted items - geographical regions and selected countries/territories (continued)
	Half-year to 30 Jun 2020
	Europe	Asia	MENA	North America	Latin America	Total
	$m	$m	$m	$m	$m	$m
Revenue¹
Reported²	8,976	14,580	1,379	3,405	1,577	26,745
Currency translation²	879	301	(26)	74	(35)	1,117
Significant items	(230)	(35)	(1)	6	(5)	(265)
- customer redress programmes	(26)	-	-	-	-	(26)
- disposals, acquisitions and investment in new businesses	-	-	-	8	-	8
- fair value movements on financial instruments³	(252)	(34)	(1)	(3)	(9)	(299)
- restructuring and other related costs⁴	48	-	-	1	-	49
- currency translation on significant items	-	(1)	-	-	4	3
Adjusted²	9,625	14,846	1,352	3,485	1,537	27,597
ECL
Reported	(2,885)	(1,818)	(611)	(887)	(657)	(6,858)
Currency translation	(320)	(62)	3	(23)	(27)	(429)
Adjusted	(3,205)	(1,880)	(608)	(910)	(684)	(7,287)
Operating expenses
Reported²	(9,101)	(6,430)	(763)	(2,495)	(910)	(16,527)
Currency translation²	(791)	(165)	15	(46)	24	(887)
Significant items	1,459	17	41	184	8	1,709
- customer redress programmes	50	-	-	-	-	50
- impairment of goodwill and other intangibles	984	-	41	-	-	1,025
- restructuring and other related costs⁵	292	18	-	184	11	505
- settlement and provisions in connection with legal and regulatory matters	5	-	-	-	-	5
- currency translation on significant items	128	(1)	-	-	(3)	124
Adjusted²	(8,433)	(6,578)	(707)	(2,357)	(878)	(15,705)
Share of profit in associates and joint ventures
Reported	(50)	1,037	(31)	-	2	958
Currency translation	-	92	(1)	-	-	91
Adjusted	(50)	1,129	(32)	-	2	1,049
Profit/(loss) before tax
Reported	(3,060)	7,369	(26)	23	12	4,318
Currency translation	(232)	166	(9)	5	(38)	(108)
Significant items	1,229	(18)	40	190	3	1,444
- revenue	(230)	(35)	(1)	6	(5)	(265)
- operating expenses	1,459	17	41	184	8	1,709
Adjusted	(2,063)	7,517	5	218	(23)	5,654
Loans and advances to customers (net)
Reported	378,729	474,739	29,615	115,813	19,785	1,018,681
Currency translation	39,693	8,833	(538)	4,727	2,452	55,167
Adjusted	418,422	483,572	29,077	120,540	22,237	1,073,848
Customer accounts
Reported	562,505	723,072	41,197	180,489	25,117	1,532,380
Currency translation	60,068	9,796	(670)	5,440	2,370	77,004
Adjusted	622,573	732,868	40,527	185,929	27,487	1,609,384

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Amounts are non-additive across geographical regions due to inter-company transactions within the Group.

3 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

4 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.

5 Includes impairment of software intangible assets of $173m (of the total software intangible asset impairment of $1,247m).

Reconciliation of reported and adjusted items - geographical regions and selected countries/territories (continued)
	Half-year to 30 Jun 2020
	UK	Hong Kong	Mainland China	US	Mexico
	$m	$m	$m	$m	$m
Revenue¹
Reported	6,329	9,075	1,576	2,492	1,139
Currency translation	720	-	139	1	73
Significant items	(219)	(16)	-	7	(4)
- customer redress programmes	(26)	-	-	-	-
- disposals, acquisitions and investment in new businesses	-	-	-	8	-
- fair value movements on financial instruments²	(243)	(16)	-	(3)	(6)
- restructuring and other related costs³	47	-	-	1	-
- currency translation on significant items	3	-	-	1	2
Adjusted	6,830	9,059	1,715	2,500	1,208
ECL
Reported	(2,492)	(516)	(107)	(615)	(574)
Currency translation	(282)	1	(9)	-	(48)
Adjusted	(2,774)	(515)	(116)	(615)	(622)
Operating expenses
Reported	(7,210)	(3,460)	(1,016)	(1,957)	(647)
Currency translation	(619)	-	(89)	-	(45)
Significant items	1,090	10	1	177	2
- customer redress programmes	50	-	-	-	-
- impairment of goodwill and other intangibles	842	-	-	-	-
- restructuring and other related costs	98	10	1	177	2
- settlements and provisions in connection with legal and regulatory matters	5	-	-	-	-
- currency translation on significant items	95	-	-	-	-
Adjusted	(6,739)	(3,450)	(1,104)	(1,780)	(690)
Share of profit in associates and joint ventures
Reported	(49)	(7)	1,044	-	2
Currency translation	(1)	-	92	-	-
Adjusted	(50)	(7)	1,136	-	2
Profit/(loss) before tax
Reported	(3,422)	5,092	1,497	(80)	(80)
Currency translation	(182)	1	133	1	(20)
Significant items	871	(6)	1	184	(2)
- revenue	(219)	(16)	-	7	(4)
- operating expenses	1,090	10	1	177	2
Adjusted	(2,733)	5,087	1,631	105	(102)
Loans and advances to customers (net)
Reported	285,335	308,798	43,338	68,036	17,220
Currency translation	34,490	(609)	4,133	-	2,843
Adjusted	319,825	308,189	47,471	68,036	20,063
Customer accounts
Reported	437,735	514,381	47,557	120,236	19,759
Currency translation	52,911	(1,013)	4,536	-	3,262
Adjusted	490,646	513,368	52,093	120,236	23,021

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.

Reconciliation of reported and adjusted items - geographical regions and selected countries/territories (continued)
	Half-year to 31 Dec 2020
	Europe	Asia	MENA	North America	Latin America	Total
	$m	$m	$m	$m	$m	$m
Revenue¹
Reported²	9,443	12,342	1,249	2,970	1,443	23,684
Currency translation²	507	127	(4)	44	3	630
Significant items	(12)	(1)	-	35	6	209
- customer redress programmes	47	-	-	-	-	47
- disposals, acquisitions and investment in new businesses	-	-	-	2	-	2
- fair value movements on financial instruments³	(2)	29	1	1	6	35
- restructuring and other related costs^2,4	(57)	(32)	-	34	-	121
- currency translation on significant items	-	2	(1)	(2)	-	4
Adjusted²	9,938	12,468	1,245	3,049	1,452	24,523
ECL
Reported	(866)	(466)	(147)	(13)	(467)	(1,959)
Currency translation	(45)	1	-	-	(28)	(72)
Adjusted	(911)	(465)	(147)	(13)	(495)	(2,031)
Operating expenses
Reported²	(9,773)	(7,232)	(823)	(2,812)	(1,028)	(17,905)
Currency translation²	(412)	(88)	4	(30)	8	(471)
Significant items	914	155	41	420	76	1,425
- customer redress programmes	(104)	-	-	-	-	(104)
- impairment of goodwill and other intangibles	(181)	-	23	223	-	65
- past service costs of guaranteed minimum pension benefits equalisation	17	-	-	-	-	17
- restructuring and other related costs^2,5	1,133	153	19	194	80	1,403
- settlements and provisions in connection with legal and regulatory matters	7	-	-	-	-	7
- currency translation on significant items	42	2	(1)	3	(4)	37
Adjusted²	(9,271)	(7,165)	(778)	(2,422)	(944)	(16,951)
Share of profit/(loss) in associates and joint ventures
Reported	51	819	(234)	-	3	639
Currency translation	1	37	-	-	-	38
Significant items	-	-	462	-	-	462
- impairment of goodwill⁶	-	-	462	-	-	462
- currency translation on significant items	-	-	-	-	-	-
Adjusted	52	856	228	-	3	1,139
Profit/(loss) before tax
Reported	(1,145)	5,463	45	145	(49)	4,459
Currency translation	51	77	-	14	(17)	125
Significant items	902	154	503	455	82	2,096
- revenue²	(12)	(1)	-	35	6	209
- operating expenses²	914	155	41	420	76	1,425
- share of profit in associates and joint ventures⁶	-	-	462	-	-	462
Adjusted	(192)	5,694	548	614	16	6,680
Loans and advances to customers (net)
Reported	408,495	473,165	28,700	107,969	19,658	1,037,987
Currency translation	789	(2,632)	(468)	1,335	(193)	(1,169)
Adjusted	409,284	470,533	28,232	109,304	19,465	1,036,818
Customer accounts
Reported	629,647	762,406	41,221	182,028	27,478	1,642,780
Currency translation	2,306	(3,961)	(563)	1,573	(487)	(1,132)
Adjusted	631,953	758,445	40,658	183,601	26,991	1,641,648

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Amounts are non-additive across geographical regions due to inter-company transactions within the Group.

3 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

4 Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.

5 Includes impairment of tangible assets of $197m.

6 During the six months to 31 December 2020, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.

Reconciliation of reported and adjusted items - geographical regions and selected countries/territories (continued)
	Half-year to 31 Dec 2020
	UK	Hong Kong	Mainland China	US	Mexico
	$m	$m	$m	$m	$m
Revenue¹
Reported	7,557	7,270	1,512	2,098	1,095
Currency translation	472	(9)	71	(2)	62
Significant items	34	30	(5)	33	(7)
- customer redress programmes	47	-	-	-	-
- disposals, acquisitions and investment in new businesses	-	-	-	2	-
- fair value movements on financial instruments²	(13)	16	(1)	1	5
- restructuring and other related costs³	1	15	(4)	32	(12)
- currency translation on significant items	(1)	(1)	-	(2)	-
Adjusted	8,063	7,291	1,578	2,129	1,150
ECL
Reported	(764)	(308)	(7)	(7)	(476)
Currency translation	(47)	1	(1)	1	(27)
Adjusted	(811)	(307)	(8)	(6)	(503)
Operating expenses
Reported	(7,645)	(3,852)	(1,195)	(2,237)	(729)
Currency translation	(378)	4	(55)	-	(39)
Significant items	354	90	19	380	41
- customer redress programmes	(104)	-	-	-	-
- impairment of goodwill and other intangibles	(192)	-	-	223	-
- past service costs of guaranteed minimum pension benefits equalisation	17	-	-	-	-
- restructuring and other related costs	595	90	18	156	40
- settlements and provisions in connection with legal and regulatory matters	7	-	-	-	-
- currency translation on significant items	31	-	1	1	1
Adjusted	(7,669)	(3,758)	(1,231)	(1,857)	(727)
Share of profit in associates and joint ventures
Reported	50	5	805	-	3
Currency translation	3	-	35	-	-
Adjusted	53	5	840	-	3
Profit/(loss) before tax
Reported	(802)	3,115	1,115	(146)	(107)
Currency translation	50	(4)	50	(1)	(4)
Significant items	388	120	14	413	34
- revenue	34	30	(5)	33	(7)
- operating expenses	354	90	19	380	41
Adjusted	(364)	3,231	1,179	266	(77)
Loans and advances to customers (net)
Reported	314,530	302,454	46,113	58,082	17,296
Currency translation	3,859	(469)	533	-	(14)
Adjusted	318,389	301,985	46,646	58,082	17,282
Customer accounts
Reported	504,275	531,489	56,826	117,485	22,220
Currency translation	6,186	(824)	657	-	(18)
Adjusted	510,461	530,665	57,483	117,485	22,202

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.

Analysis by country/territory
Profit/(loss) before tax by country/territory within global businesses
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Europe	853	1,348	111	(344)	1,968
- UK¹	654	1,156	(42)	(88)	1,680
of which: HSBC UK Bank plc (ring-fenced bank)	802	1,403	58	(125)	2,138
of which: HSBC Bank plc (non-ring-fenced bank)	115	113	327	22	577
of which: Holdings and other	(263)	(360)	(427)	15	(1,035)
- France	164	52	(41)	(72)	103
- Germany	11	41	116	105	273
- Switzerland	20	12	(1)	(12)	19
- other	4	87	79	(277)	(107)
Asia	2,544	1,259	1,953	1,180	6,936
- Hong Kong	2,310	774	767	(218)	3,633
- Australia	83	62	74	(6)	213
- India	(11)	146	317	77	529
- Indonesia	18	(8)	59	(5)	64
- mainland China	(3)	171	304	1,359	1,831
- Malaysia	36	(68)	59	(10)	17
- Singapore	96	54	134	(7)	277
- Taiwan	11	7	58	(1)	75
- other	4	121	181	(9)	297
Middle East and North Africa	80	145	402	96	723
- Egypt	36	18	77	(4)	127
- UAE	37	22	188	(35)	212
- Saudi Arabia	11	-	23	139	173
- other	(4)	105	114	(4)	211
North America	4	522	419	(140)	805
- US	(86)	243	318	(102)	373
- Canada	72	274	85	(36)	395
- other	18	5	16	(2)	37
Latin America	165	102	174	(34)	407
- Mexico	178	73	134	(25)	360
- other	(13)	29	40	(9)	47
Half-year to 30 Jun 2021	3,646	3,376	3,059	758	10,839

Europe	(898)	(678)	(1,298)	(186)	(3,060)
- UK¹	(536)	(638)	(1,243)	(1,005)	(3,422)
of which: HSBC UK Bank plc (ring-fenced bank)	(275)	(242)	39	(10)	(488)
of which: HSBC Bank plc (non-ring-fenced bank)	44	1	(858)	(279)	(1,092)
of which: Holdings and other	(305)	(397)	(424)	(716)	(1,842)
- France	(343)	(127)	(207)	(64)	(741)
- Germany	12	(4)	109	(9)	108
- Switzerland	(15)	3	1	(1)	(12)
- other	(16)	88	42	893	1,007
Asia	2,799	921	2,393	1,256	7,369
- Hong Kong	2,790	1,173	1,119	10	5,092
- Australia	32	35	78	1	146
- India	5	83	313	160	561
- Indonesia	(11)	(1)	81	(8)	61
- mainland China	(26)	190	232	1,101	1,497
- Malaysia	1	12	82	(6)	89
- Singapore	3	(682)	140	(9)	(548)
- Taiwan	12	12	58	(1)	81
- other	(7)	99	290	8	390
Middle East and North Africa	(63)	(122)	208	(49)	(26)
- Egypt	34	19	101	1	155
- UAE	(40)	(158)	23	(23)	(198)
- Saudi Arabia	5	-	14	(32)	(13)
- other	(62)	17	70	5	30
North America	(224)	(62)	509	(200)	23
- US	(274)	(89)	463	(180)	(80)
- Canada	32	25	34	(22)	69
- other	18	2	12	2	34
Latin America	(123)	18	102	15	12
- Mexico	(67)	(31)	(5)	23	(80)
- other	(56)	49	107	(8)	92
Half-year to 30 Jun 2020	1,491	77	1,914	836	4,318

Profit/(loss) before tax by country/territory within global businesses (continued)
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Europe	218	149	(511)	(1,001)	(1,145)
- UK¹	179	95	(526)	(550)	(802)
of which: HSBC UK Bank plc (ring-fenced bank)	388	409	51	(114)	734
of which: HSBC Bank plc (non-ring-fenced bank)	65	35	(172)	(175)	(247)
of which: Holdings and other	(274)	(349)	(405)	(261)	(1,289)
- France	3	(41)	(140)	(246)	(424)
- Germany	5	20	88	(6)	107
- Switzerland	13	(7)	(1)	(9)	(4)
- other	18	82	68	(190)	(22)
Asia	2,232	1,023	1,609	599	5,463
- Hong Kong	2,137	614	555	(191)	3,115
- Australia	76	41	60	(8)	169
- India	11	104	280	68	463
- Indonesia	5	(13)	66	(5)	53
- mainland China	(8)	105	274	744	1,115
- Malaysia	7	21	59	(49)	38
- Singapore	42	38	99	(3)	176
- Taiwan	(3)	6	46	(1)	48
- other	(35)	107	170	44	286
Middle East and North Africa	48	2	270	(275)	45
- Egypt	34	27	84	(2)	143
- UAE	19	(52)	79	(16)	30
- Saudi Arabia	16	-	12	(232)	(204)
- other	(21)	27	95	(25)	76
North America	(225)	428	203	(261)	145
- US	(273)	228	110	(211)	(146)
- Canada	20	200	66	(45)	241
- other	28	-	27	(5)	50
Latin America	(60)	(40)	131	(80)	(49)
- Mexico	(48)	(75)	64	(48)	(107)
- other	(12)	35	67	(32)	58
Half-year to 31 Dec 2020	2,213	1,562	1,702	(1,018)	4,459

1 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies ('ServCo Group').

Reconciliation of alternative performance measures
	Page
Use of alternative performance measures	56
Return on average ordinary shareholders' equity and return on average tangible equity	56
Net asset value and tangible net asset value per ordinary share	58
Post-tax return and average total shareholders' equity on average total assets	58
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers	58

Use of alternative performance measures

Our reported results are prepared in accordance with IFRSs as detailed in our interim condensed financial statements starting on page 99.

As described on page 27, we use a combination of reported and alternative performance measures, including those derived from our reported results that eliminate factors that distort period-on-period comparisons. These are considered alternative performance measures (non-GAAP financial measures).

The following information details the adjustments made to the reported results and the calculation of other alternative performance measures. All alternative performance measures are reconciled to the closest reported performance measure.

Return on average ordinary shareholders'

equity and return on average tangible equity

Return on average ordinary shareholders' equity ('RoE') is computed by taking profit attributable to the ordinary shareholders of the parent company ('reported results'), divided by average ordinary shareholders' equity ('reported equity') for the period. The adjustment to reported results and reported equity excludes amounts attributable to non-controlling interests and holders of preference shares and other equity instruments.

Return on average tangible equity ('RoTE') is computed by adjusting reported results for the movements in the present value of in-force long-term insurance business ('PVIF') and for impairment of goodwill and other intangible assets (net of tax), divided by average reported equity adjusted for goodwill, intangibles and PVIF for the period.

Return on average tangible equity excluding significant items is annualised profit attributable to ordinary shareholders, excluding changes in PVIF, significant items and bank levy (net of tax), divided by average tangible shareholders' equity excluding fair value of own debt, debt valuation adjustment ('DVA') and other adjustments for the period. Since 1 January 2021, the UK bank levy has no longer been excluded from the calculation of this measure. Comparative data have not been re-presented.

We provide RoTE ratios in addition to RoE as a way of assessing our performance, which is closely aligned to our capital position.

Return on average ordinary shareholders' equity and return on average tangible equity
	Half-year ended		Year ended
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$m	$m	$m
Profit
Profit attributable to the ordinary shareholders of the parent company	7,276	1,977	3,898
Impairment of goodwill and other intangible assets (net of tax)	-	1,154	1,036
Decrease/(increase) in PVIF (net of tax)	16	(310)	(253)
Profit attributable to ordinary shareholders, excluding goodwill impairment and PVIF	7,292	2,821	4,681
Significant items (net of tax) and other adjustments¹	994	227	2,402
Profit attributable to ordinary shareholders, excluding goodwill impairment, PVIF and significant items¹	8,286	3,048	7,083
Equity
Average total shareholders' equity	197,402	187,633	189,719
Effect of average preference shares and other equity instruments	(23,414)	(22,308)	(22,326)
Average ordinary shareholders' equity	173,988	165,325	167,393
Effect of goodwill, PVIF and other intangibles (net of deferred tax)	(17,576)	(17,310)	(17,292)
Average tangible equity	156,412	148,015	150,101
Fair value of own debt, DVA and other adjustments	3,286	(852)	422
Average tangible equity excluding fair value of own debt, DVA and other adjustments	159,698	147,163	150,523
Ratio	%	%	%
Return on average ordinary shareholders' equity (annualised)	8.4	2.4	2.3
Return on average tangible equity (annualised)	9.4	3.8	3.1
Return on average tangible equity excluding significant items (annualised)¹	10.5	4.2	4.7

1 Since 1 January 2021, the UK bank levy has no longer been excluded from the calculation of this measure. Comparative data have not been re-presented.

Return on average tangible equity by global business
	Half-year ended 30 Jun 2021
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Profit before tax	3,646	3,376	3,059	758	10,839
Tax expense	(769)	(874)	(624)	(150)	(2,417)
Profit after tax	2,877	2,502	2,435	608	8,422
Less attributable to: preference shareholders, other equity holders, non-controlling interests	(389)	(343)	(382)	(32)	(1,146)
Profit attributable to ordinary shareholders of the parent company	2,488	2,159	2,053	576	7,276
Decrease/(increase) in PVIF (net of tax)	9	10	-	(3)	16
Significant items (net of tax)¹	169	(6)	197	600	960
Other adjustments	-	(1)	(1)	36	34
Profit attributable to ordinary shareholders, excluding PVIF and significant items¹	2,666	2,162	2,249	1,209	8,286
Average tangible shareholders' equity excluding fair value of own debt, DVA and other adjustments	29,971	39,310	42,428	47,989	159,698
RoTE excluding significant items (annualised) (%)¹	17.9	11.1	10.7	5.1	10.5

	Half-year ended 30 Jun 2020
Profit before tax	1,491	77	1,914	836	4,318
Tax expense	(269)	(147)	(650)	(127)	(1,193)
Profit after tax	1,222	(70)	1,264	709	3,125
Less attributable to: preference shareholders, other equity holders, non-controlling interests	(353)	(330)	(322)	(143)	(1,148)
Profit attributable to ordinary shareholders of the parent company	869	(400)	942	566	1,977
Increase in PVIF (net of tax)	(299)	(9)	-	(2)	(310)
Significant items (net of tax) and UK bank levy	195	109	624	272	1,200
Other adjustments	8	(3)	(4)	180	181
Profit attributable to ordinary shareholders, excluding PVIF, significant items and UK bank levy	773	(303)	1,562	1,016	3,048
Average tangible shareholders' equity excluding fair value of own debt, DVA and other adjustments	25,865	37,233	40,865	43,200	147,163
RoTE excluding significant items and UK bank levy (annualised) (%)	6.0	(1.6)	7.7	4.7	4.2

	Year ended 31 Dec 2020
Profit before tax	3,704	1,639	3,616	(182)	8,777
Tax expense	(509)	(661)	(977)	(531)	(2,678)
Profit after tax	3,195	978	2,639	(713)	6,099
Less attributable to: preference shareholders, other equity holders, non-controlling interests	(736)	(673)	(784)	(8)	(2,201)
Profit attributable to ordinary shareholders of the parent company	2,459	305	1,855	(721)	3,898
Increase in PVIF (net of tax)	(242)	(10)	-	(1)	(253)
Significant items (net of tax) and UK bank levy	190	208	958	2,041	3,397
Other adjustments	20	(14)	(25)	60	41
Profit attributable to ordinary shareholders, excluding PVIF, significant items and UK bank levy	2,427	489	2,788	1,379	7,083
Average tangible shareholders' equity excluding fair value of own debt, DVA and other adjustments	26,551	37,826	41,566	44,580	150,523
RoTE excluding significant items and UK bank levy (annualised) (%)	9.1	1.3	6.7	3.1	4.7

1 Since 1 January 2021, the UK bank levy has no longer been excluded from the calculation of this measure. Comparative data have not been re-presented.

Net asset value and tangible net asset value per ordinary share

Net asset value per ordinary share is total shareholders' equity less non-cumulative preference shares and capital securities ('total ordinary shareholders' equity'), divided by the number of ordinary shares in issue excluding shares that the company has purchased and are held in treasury.

Tangible net asset value per ordinary share is total ordinary shareholders' equity excluding goodwill, PVIF and other intangible assets (net of deferred tax) ('tangible ordinary shareholders' equity'), divided by the number of basic ordinary shares in issue excluding shares that the company has purchased and are held in treasury.

Net asset value and tangible net asset value per ordinary share
	At
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$m	$m	$m
Total shareholders' equity	198,218	187,036	196,443
Preference shares and other equity instruments	(22,414)	(22,319)	(22,414)
Total ordinary shareholders' equity	175,804	164,717	174,029
Goodwill, PVIF and intangible assets (net of deferred tax)	(17,819)	(16,838)	(17,606)
Tangible ordinary shareholders' equity	157,985	147,879	156,423
Basic number of $0.50 ordinary shares outstanding	20,223	20,162	20,184
Value per share	$	$	$
Net asset value per ordinary share	8.69	8.17	8.62
Tangible net asset value per ordinary share	7.81	7.34	7.75

Post-tax return and average total shareholders'

equity on average total assets

Post-tax return on average total assets is profit after tax divided by average total assets for the period.

Average total shareholders' equity to average total assets is average total shareholders' equity divided by average total assets for the period.

Post-tax return and average total shareholders' equity on average total assets
	Half-year ended		Year-ended
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$m	$m	$m
Profit after tax	8,422	3,125	6,099
Average total shareholders' equity	197,402	187,633	189,719
Average total assets	3,011,306	2,883,976	2,936,939
Ratio	%	%	%
Post-tax return on average total assets (annualised)	0.6	0.2	0.2
Average total shareholders' equity to average total assets	6.56	6.51	6.46

Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers

Expected credit losses and other credit impairment charges ('ECL') as % of average gross loans and advances to customers is the annualised adjusted ECL divided by adjusted average gross loans and advances to customers for the period.

The adjusted numbers are derived by adjusting reported ECL and loans and advances to customers for the effects of foreign currency translation differences.

Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers
	Half-year ended
	30 Jun	30 Jun	31 Dec
	2021	2020	2020
	$m	$m	$m
Expected credit losses and other credit impairment charges ('ECL')	719	(6,858)	(1,959)
Currency translation	-	(429)	(72)
Adjusted ECL	719	(7,287)	(2,031)
Average gross loans and advances to customers	1,059,548	1,042,683	1,046,476
Currency translation	582	48,388	29,004
Average gross loans and advances to customers - at most recent balance sheet foreign exchange rates	1,060,130	1,091,071	1,075,480
Ratio	%	%	%
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers (annualised)	(0.14)	1.34	0.38

Risk
	Page
Key developments in the first half of 2021	60
Areas of special interest	60
Credit risk	64
Treasury risk	91
Market risk	99
Insurance manufacturing operations risk	101

We recognise that the primary role of risk management is to protect our customers, business, colleagues, shareholders and the communities that we serve, while ensuring we are able to support our strategy and provide sustainable growth.

The implementation of our business strategy, which includes a major transformation programme, remains a key focus. As we implement change initiatives, we actively manage the execution risks. We also perform periodic risk assessments, including against strategies, to help ensure retention of key personnel for our continued safe operation.

We aim to use a comprehensive risk management approach across the organisation and across all risk types, underpinned by our culture and values. This is outlined in our risk management framework, including the key principles and practices that we employ in managing material risks, both financial and non-financial. The framework fosters continual monitoring, promotes risk awareness and encourages sound operational and strategic decision making. It also supports a consistent approach to identifying, assessing, managing and reporting the risks we accept and incur in our activities. We continue to actively review and develop our risk management framework and enhance our approach to managing risk, through our activities with regard to: people and capabilities; governance; reporting and management information; credit risk management models; and data.

All our people are responsible for the management of risk, with the ultimate accountability residing with the Board. We merged our Group Risk and Compliance functions on 1 July 2021 to take an increasingly comprehensive view of risk, and enhance cross-discipline collaboration on key areas such as fraud, credit and conduct risk. This merger does not impact our current policies and practices regarding the management of risk set out in the Annual Report and Accounts 2020. Led by the Group Chief Risk and Compliance Officer, this merged function plays an important role in reinforcing our culture and values. It focuses on creating an environment that encourages our people to speak up and do the right thing.

Group Risk and Compliance is independent from the global businesses, including our sales and trading functions, to provide challenge, oversight and appropriate balance in risk/reward decisions.

A summary of our current policies and practices regarding the management of risk is set out in the 'Risk management' section on pages 107 to 109 of the Annual Report and Accounts 2020.

Key developments in the first half of 2021

We continued to actively manage the risks resulting from the Covid-19 outbreak and its impacts on our customers and operations during the first half of 2021, as well as other key risks described in this section. In addition, we enhanced our risk management in the following areas:

• We streamlined the articulation of our risk appetite framework, providing further clarity on how risk appetite interacts with strategic planning and recovery planning processes.

• We continued to simplify our approach to non-financial risk management, with the implementation of more effective oversight tools and techniques to improve end-to-end identification and management of these risks.

• We accelerated the transformation of our approach to managing financial risks across the businesses and risk functions, including initiatives to enhance portfolio monitoring and analytics, credit risk, traded risk and treasury risk management, as well as the models used to manage financial risks.

• We continued to enhance our approach to portfolio and concentration risk management, through clearly defined roles and responsibilities, and improving our data and management information reporting capabilities.

• We appointed a Head of Climate Risk in support of our climate change strategy and to oversee the development of our climate risk management capabilities. Our climate risk programme will shape our approach to climate risk across four key pillars: governance and risk appetite; risk management; stress testing; and disclosures. We enhanced our risk appetite statement with quantitative climate risk metrics.

• We continued to improve the effectiveness of our financial crime controls with a targeted update of our fraud controls. We refreshed our financial crime policies, ensuring they remained up-to-date and addressed changing and emerging risks, and we continued to meet our regulatory obligations.

• We introduced enhanced governance and oversight around model adjustments and related processes for IFRS 9 models and Sarbanes-Oxley controls.

Areas of special interest

During the first half of 2021, a number of areas were considered as part of our top and emerging risks because of the effect they have on the Group. In this section we have focused on risks related to Covid-19, geopolitical and macroeconomic risk, and interbank offered rate ('Ibor') transition.

Risks related to Covid-19

The Covid-19 outbreak and its effect on the global economy have impacted our customers. The outbreak necessitated governments to respond at unprecedented levels to protect public health, and to support local economies and livelihoods. It affected regions at different times and to varying degrees. Various government support measures and restrictions in response have added challenges, given the rapid pace of change and significant operational demands. The speed at which countries and territories are able to return to pre-Covid-19 levels of economic activity will vary based on the extent of continuing government support offered, infection rates and the ability to roll out vaccines. Renewed outbreaks emphasise the ongoing threat of Covid-19, as seen in India during the first half of 2021 following the outbreak of a new variant of the virus, and may again result in renewed tightening of government restrictions following recent relaxations.

Government restrictions imposed around the world to limit the spread of Covid-19 resulted in a sharp contraction in global economic activity during 2020. Our Central scenario used to calculate impairment assumes that economic activity will recover over the course of 2021. In this scenario, recovery is supported by a successful roll-out of vaccination programmes across our key markets, and the use of a variety of non-pharmacological measures to contain the virus. Governments and central banks are expected to continue to work together across many of our key markets to ensure that households and firms receive an appropriate level of financial support until restrictions on economic activity and mobility can be materially eased. There is a high degree of uncertainty associated with economic forecasts in the current environment and there are significant risks to our Central scenario. The degree of uncertainty varies by market, driven by country-specific trends in the evolution of the pandemic and associated policy responses. As a result, our Central scenario for impairment has not been assigned an equal likelihood of occurrence across our key markets. For further details of our Central and other scenarios, see 'Measurement uncertainty and sensitivity analysis of ECL estimates' on page 62.

There is a material risk of a renewed drop in economic activity, particularly in countries with low vaccination rates. The economic fallout from the Covid-19 outbreak risks increasing inequality across markets that have already suffered from social unrest. It will likely take time before societies return to pre-pandemic levels of social interactions, meaning that increased inequalities in living standards within societies will continue to disrupt most markets in the medium term. This will leave the burden on governments and central banks to maintain or increase fiscal and monetary stimulus, possibly in a more targeted fashion than seen during 2020 and the first half of 2021. After financial markets suffered a sharp fall in the early phases of the spread of Covid-19, they rebounded but still remain volatile. Depending on the long-term impact on global economic growth, financial asset prices may suffer a further sharp fall.

Governments and central banks in major economies have deployed extensive measures to support their local populations. Central banks in developed markets are expected to maintain historically low interest rates for a considerable period of time, but some of their emerging markets counterparts have begun to increase their interest rates to contain rising inflation or counter the risk of capital outflows. Government debt has risen in most advanced economies, and is expected to remain high into the medium term. This could eventually pose a dilemma for central banks, as they face the conflicting aims of keeping debt servicing costs contained while preventing a steep rise in inflation.

We continue to support our personal and business customers through market-specific measures initiated during the Covid-19 outbreak, and by supporting national government schemes that focus on the parts of the economy most impacted by the pandemic. For further details of our customer relief programmes, see page 74.

The rapid introduction and varying nature of the government support schemes introduced throughout the Covid-19 pandemic has led to increased operational risks, including complex conduct considerations, increased reputational risk and increased risk of fraud. These risks are likely to be heightened further as and when those government support schemes are unwound. Central bank and government actions and support measures, and our responses to those, have also led to increased litigation risk, including lawsuits that have been and may continue to be brought in connection with our cancellation of the fourth interim dividend for 2019.

The impact of the pandemic on the long-term prospects of businesses in the most vulnerable sectors of the economy - such as retail, hospitality and commercial real estate - remains uncertain and may lead to significant credit losses on specific exposures, which may not be fully captured in ECL estimates. In addition, in times of stress, fraudulent activity is often more prevalent, leading to potentially significant credit or operational losses.

As economic conditions improve, and government support measures come to an end, there is a risk that the outputs of IFRS 9 models may have a tendency to underestimate loan losses. Model outputs and management adjustments are closely monitored and independently reviewed at the Group and country level for reliability and appropriateness prior to inclusion in the financial results. We are also working to redevelop models used to calculate capital levels and drive business decisions. These include those related to credit and traded risk to address new and changing regulatory requirements to internal ratings-based methodologies, Ibor replacement and the fundamental review of the trading book.

The operational support functions on which the Group relies are based in a number of countries worldwide, some of which, notably India, have been particularly affected by the Covid-19 outbreak and have recently experienced a significant increase in infection rates. As a result of the Covid-19 outbreak, business continuity responses have been implemented, with no significant impacts to service delivery in locations where the Group operates. We continue to monitor the situation, in particular in those countries and regions where the level of Covid-19 infections is most prevalent.

Despite the ongoing economic recovery, significant uncertainties remain in assessing the duration and impact of the Covid-19 outbreak, including whether any subsequent outbreaks result in a reimposition of government restrictions. There is a risk that economic activity remains below pre-pandemic levels for a prolonged period. We continue to monitor the situation closely, and given the novel and prolonged nature of the outbreak, additional mitigating actions may be required.

Geopolitical and macroeconomic risk

Our operations and portfolios are exposed to risks associated with political instability, civil unrest and military conflict, which could lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets.

Global tensions over trade, technology and ideology are manifesting themselves in divergent regulatory standards and compliance regimes, presenting long-term strategic challenges for multinational businesses.

The Covid-19 outbreak, including its perceived origins and responses, has also heightened geopolitical tensions, which could have potential ramifications for the Group and its customers. Developments in Hong Kong, the US approach to strategic competition with China, supply chain restrictions, claims of human rights violations, diplomatic tensions between China and the UK, the EU, India and other countries, and other potential areas of tension may affect the Group by creating regulatory, reputational and market risks. Some of these tensions have manifested themselves through actions taken by governments in 2020 and during the first half of 2021.

The US-China relationship in particular remains complex, with divisions over a number of issues. The US has imposed a range of sanctions and trade restrictions on Chinese individuals and companies. These include sanctions and trade restrictions on those individuals and companies that the US considers to be involved in human rights violations; the erosion of Hong Kong's autonomy; China's military-industrial complex; and technology and telecommunications that implicate US national security. The Biden administration issued an advisory highlighting risks, including reputational, regulatory, financial and legal risks for businesses operating in Hong Kong. This was issued in light of recent actions by the governments of China and Hong Kong, including the passing of the national security law.

Certain measures are of particular relevance. The US Hong Kong Autonomy Act authorises the imposition of secondary sanctions against non-US financial institutions found to be knowingly engaged in significant transactions with individuals and entities subject to US sanctions for engaging in certain activities that undermine Hong Kong's autonomy. In addition, the US has imposed restrictions on US persons' ability to purchase or sell certain publicly traded securities linked to a number of prominent Chinese companies.

There are also increasing discussions between the US and other governments on multilateral efforts to address certain issues with China, which are likely to create a more complex operating environment for the Group and its customers. Notably, the US has increasingly instituted sanctions with its traditional allies including the EU, UK, and Canada, primarily in response to allegations of human rights abuses in Xinjiang.

In response, over the last year, China announced a number of its own sanctions and trade restrictions that target or provide authority to target foreign individuals and companies, which have been primarily imposed against certain public officials associated with the implementation of foreign sanctions against China. More generally, China has promulgated new laws that provide a legal framework for further imposing such sanctions, prohibit implementing or complying with foreign sanctions against China and create private rights of action in Chinese courts for damages caused by third parties implementing foreign sanctions or other discriminatory measures. To date, no financial institution has been targeted for action under these measures. However, it should be noted that the scope and application of the recent Chinese laws remain uncertain. These and any future measures and countermeasures that may be taken by the US, China and other countries may affect the Group, its customers and the markets in which the Group operates.

Expanding data privacy and cybersecurity laws in a number of markets could pose potential challenges to intra-group data sharing. These developments could increase financial institutions' compliance burdens in respect of cross-border transfers of personal information.

As geopolitical tensions rise, compliance by multinational corporations with their legal or regulatory obligations in one jurisdiction may be seen as supporting the law or policy objectives of that jurisdiction over another, creating additional compliance, reputational and political risks for the Group. We maintain an open dialogue with our regulators on the impact of legal and regulatory obligations on HSBC's business and customers.

Multilateral institutions have mobilised support for emerging and frontier economies, with the International Monetary Fund expected to approve a $650bn increase in reserve assets in August 2021. Much of this is anticipated to go towards countering the effects of the pandemic on the countries that have most suffered. Developed markets are expected to continue recovering from the economic crisis, as macroeconomic policies remain highly accommodative. However, permanent business closures and job losses in some sectors will likely prevent some developed markets from achieving pre-crisis activity levels in the near term. These countries and territories should be able to manage the higher public deficits and debts necessary to offset private sector weaknesses, given that debt servicing costs are likely to remain low for the foreseeable future. Nevertheless, renewed government restrictions in response to new waves of infections could once again put pressure on these economies.

A benign near-term outlook for global economic growth may benefit the creditworthiness of HSBC's clients and foster business growth. We continue to monitor the situation.

Central bank interest rates remain at historically low levels, although a vaccine-led economic recovery and rising inflation indicators contributed to an increase in interest rate yields and a steepening of yield curves in our major markets in the first half of 2021. Against a backdrop of high and rising asset valuations, monetary policies remained very accommodative during this period, but rising inflation is posing a policy dilemma for some central banks. We continue to monitor our risk profile closely in the context of a possible tightening in monetary policy.

The recovery in the global economy since the beginning of 2021 is easing financial difficulties for some of our customers. As a result, we have seen a reduction in ECL charges for wholesale GBM and CMB customers. For further details on customer relief programmes, see page 74.

Potential changes to tax legislation and tax rates in the countries in which we operate could increase the Group's effective tax rate in future periods as governments in many countries seek revenue sources to pay for the Covid-19 support packages that they have implemented. In June 2021, the finance ministers of G7 countries reached agreement on the key principles with respect to the introduction of a global minimum tax rate. This was followed in July 2021 by confirmation from the Organisation for Economic Co-operation and Development of agreement across 130 countries (including all of the G20 countries) to the key components of the proposed rules and commitment to implement the global minimum tax rate by 2023. The financial impact on HSBC will depend significantly on the minimum tax rate, which is proposed by the G7 and G20 to be at least 15%, as well as finalisation of several key aspects of the calculations. It is expected that the rules will be finalised during the second half of 2021. Given the uncertainty of both the application of these proposed tax rules (and any further implications on related tax requirements) and the future mix of profits earned by geography, we are not able to reliably estimate the potential impact at this stage.

The EU and the UK agreed a Trade and Cooperation Agreement just before the end of the transition period on 31 December 2020, following the UK's withdrawal from the EU. The agreement mainly focuses on goods and services but also covers a wide range of other areas, including competition, state aid, tax, fisheries, transport, data and security. It addressed financial services in a limited manner and, as a result, did not change HSBC's planning in relation to the UK's withdrawal from the EU. Bilateral discussions have now concluded at a technical level to create the framework for voluntary regulatory cooperation in financial services between the UK and EU through the establishment of a Joint UK-EU Financial Regulatory Forum, which will provide a platform within which both parties will be able to discuss financial services-related issues including future equivalence determinations.

Our global presence and diversified customer base should help mitigate the direct impacts on our financial position of the absence of a comprehensive agreement on financial services between the UK and EU. Our existing wholesale and markets footprint in the EU provides a strong foundation for us to build upon. Over the medium to long term the UK's withdrawal from the EU may impact markets and increase economic risk, particularly in the UK, which could adversely impact our profitability and prospects for growth in this market.

Ibor transition

Interbank offered rates ('Ibors') are used to set interest rates on hundreds of trillions of US dollars of different types of financial transactions and are used extensively for valuation purposes, risk measurement and performance benchmarking.

The UK's Financial Conduct Authority ('FCA') announced in July 2017 that it would no longer continue to persuade or require panel banks to submit rates for the London interbank offered rate ('Libor') after 2021. In addition, the 2016 EU Benchmark Regulation, which aims to ensure the accuracy, robustness and integrity of interest rate benchmarks, has resulted in other regulatory bodies reassessing their national benchmarks. As a result, HSBC is participating in industry-led national working groups, which are discussing the mechanisms for an orderly transition of five Libor currencies, four Asia-Pacific benchmarks that reference US dollar Libor, the Euro Overnight Index Average ('Eonia'), the Singapore interbank offered rate ('Sibor'), and the Turkish Lira interbank offered rate ('TRLibor'), to their chosen replacement rates.

Furthermore, the FCA and the administrator of Libor, ICE Benchmark Administration Limited ('IBA'), announced on 5 March 2021 that publication of 24 of the 35 main Libor currency interest rate benchmark settings would cease at the end of 2021. Additionally, the FCA and IBA confirmed that the publication of the most widely used US dollar Libor settings will be extended until
30 June 2023, and that consultation will occur for continuing three sterling and three Japanese yen settings under a 'synthetic' calculation methodology. As a result, HSBC's transition programme continued its efforts to provide near risk-free rate ('RFR') and alternative rate products and is currently focused on actively transitioning clients away from those contracts that reference Ibors demising at the end of 2021.

Provision of RFR and alternative rate product capabilities

During 2020 and the first half of 2021, all of our global businesses developed and implemented system, modelling, and operational capabilities for the majority of RFR products and alternative rates, with only a limited number of non-standard products requiring completion in the second half of 2021. Our product readiness and increased market liquidity enabled new transactions to be undertaken in RFR and alternative rate products for all benchmarks. This, and market initiatives to reduce Ibor trade volumes, contributed to a continued decrease in Ibor exposures that have post-2021 maturities.

However, given the extension of the publication of US dollar Libor for the most widely used settings, the market activity for the Secured Overnight Financing Rate ('SOFR') continues to develop at a slow pace. We are currently monitoring other industry developments related to term SOFR, and supporting market initiatives to increase the volume of activity in the SOFR derivative market. We will also continue to develop additional products for our clients and in support of the transition from US dollar Libor.

Transition legacy contracts

For benchmarks demising in 2021, we plan to transition all viable legacy Ibor contracts by 30 September 2021 to the extent possible, in line with RFR working group guidelines. However, we remain dependent on our clients' decisions and the market to meet these targets. In support of our plans, by the end of the first half of 2021, we had held transition discussions with more than 85% of our customers. We approached clients in a structured manner, based on product readiness and client prioritisation, and our transition progress is being tracked using internal targets. In prioritising our client engagement, we also took into account our clients' adherence to the fallback provisions for derivatives within the ISDA protocol, implemented in January 2021, and contractual fallback language within legacy loan contracts. We placed greater emphasis on engaging with clients who do not have contractual fallback provisions, which as at 30 June 2021 accounted for approximately 15% of non-US dollar bilateral derivatives trades, and approximately 1% of non-US dollar loan contracts.

Following our transition discussions with clients, we will be led by their decisions on timing and their level of readiness to transition. We are tracking client decisions to adequately plan for operational activities that need to occur in the second half of 2021. However, given the continued impact of Covid-19 on our customers and the market, there is a risk that our clients are not operationally ready to transition their Ibor contracts. This could potentially result in delays to transition, past the 30 September 2021 target date, with transition activities being further concentrated into the latter part of 2021. This could increase regulatory compliance, legal, resilience and operational risks.

While operational risks could be increased, contractual repapering and rebooking activities will be managed accordingly through bilateral and bulk transition processes. However, we may need to rely on some jurisdictional legislative solutions to allow for a smooth transition of all contracts, such as the proposed 'synthetic'-based Libor methodology in the UK. Adequate contract continuity provisions will be critical to the successful implementation of such solutions.

As a result of our transition efforts, we continue to reduce our derivative, loan and bond exposures to Ibors and Eonia maturing beyond 2021.

For derivatives exposures, following the first quarter cessation milestone for issuance of new sterling Libor linear derivatives, we are only transacting sterling Libor linear derivatives for risk management purposes. This has led to a decrease in Libor exposure and an increase in the volume of transactions referencing Sterling Overnight Index Average ('Sonia'). We now have approximately 80% of the Group's sterling linear cleared interest rate derivatives notional in Sonia. Second quarter industry milestones for cessation of sterling non-linear derivatives have been adhered to and this is expected to result in a further exposure reduction.

For HSBC's loan book, all loan contracts referencing 2021 demising Ibors that require refinancing are being offered on an RFR or alternative rate basis. We have adhered to the first half cessation milestones for issuance of new Libor loans, and continue to support and engage our clients in transitioning to a suitable RFR or alternative rate product, prior to the relevant Ibor cessation date. For syndicated loans, we are actively engaging with agents and participants, as appropriate, but will be reliant on all syndicate members to transition.

With respect to HSBC's legacy bond issuances referencing Ibors that are subject to demise, we continue to work on plans to transition such bond issuances into suitable alternatives in line with Ibor cessation dates. The success of these transition plans will, to a certain extent, also depend on the participation and engagement of third-party market participants. This dependency is also true for those bonds where HSBC is the paying agent, and paying agents are reliant on the timing set out by third-party market participants in the transition process of their issued debt. We have identified and engaged with issuers as appropriate to aid in this transition.

Financial instruments impacted by Ibor reform

	Financial instruments yet to transition to alternative benchmarks, by main benchmark
	USD Libor	GBP Libor	JPY Libor	Others¹
At 30 Jun 2021	$m	$m	$m	$m
Non-derivative financial assets²	64,882	43,587	367	9,478
Non-derivative financial liabilities²	28,224	7,098	1,451	421
Derivative notional contract amount	2,326,050	1,210,192	489,421	428,113

At 31 Dec 2020	$m	$m	$m	$m
Non-derivative financial assets²	94,148	46,587	371	10,763
Non-derivative financial liabilities²	33,602	7,183	1,548	549
Derivative notional contract amount	3,045,337	1,196,865	508,200	514,959

1 Comprises financial instruments referencing other significant benchmark rates yet to transition to alternative benchmarks (Euro Libor, Swiss franc Libor, Eonia, SOR, THBFIX and Sibor).

2 Gross carrying amount excluding allowances for expected credit losses.

The amounts in the above table relate to HSBC's main operating entities where HSBC has material exposures impacted by Ibor reform, including in the UK, Hong Kong, France, the US, Mexico, Canada, Singapore, the UAE, Bermuda, Australia, Qatar, Germany, Japan and Thailand. The amounts provide an indication of the extent of the Group's exposure to the Ibor benchmarks that are due to be replaced. Amounts are in respect of financial instruments that:

• contractually reference an interest rate benchmark that is planned to transition to an alternative benchmark;

• have a contractual maturity date beyond the date by which the reference interest rate benchmark is expected to cease; and

• are recognised on HSBC's consolidated balance sheet.

In March 2021, the administrator of Libor, IBA, announced that the publication date of most US dollar Libor tenors has been extended from 31 December 2021 to 30 June 2023. Publication of one-week and two-month tenors will cease after 31 December 2021. This change, together with the extended publication dates of Sibor, SOR and THBFIX, reduce the amounts presented at 30 June 2021 in the above table as some financial instruments included at
31 December 2020 will reach their contractual maturity date prior to the extended publication dates. Comparative data have not been re-presented.

Credit risk

	Page
Overview	64
Credit risk in the first half of 2021	64
Summary of credit risk	64
Measurement uncertainty and sensitivity analysis of ECL estimates	67
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers	76
Credit quality of financial instruments	78
Customer relief programmes	80
Personal lending	82
Wholesale lending	84
Supplementary information	87

Overview

Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. Credit risk arises principally from direct lending, trade finance and leasing business, but also from certain other products, such as guarantees and derivatives.

Credit risk in the first half of 2021

There were no material changes to credit risk policy in the first half of 2021.

A summary of our current policies and practices for the management of credit risk is set out in 'Credit risk management' on page 119 of the Annual Report and Accounts 2020.

At 30 June 2021, gross loans and advances to customers and banks of $1,159bn increased by $25.2bn, compared with 31 December 2020. This included adverse foreign exchange movements of $1.5bn and a $2.6bn decrease due to the exit of domestic mass market retail banking in the US being reclassified to assets held for sale.

Excluding foreign exchange movements, the growth was driven by a $21.2bn increase in personal loans and advances to customers and a $6.0bn increase in loans and advances to banks. Wholesale loans and advances to customers decreased by $0.5bn.

The increase in personal loans and advances to customers was driven by other personal loans growth of $12.5bn, mainly in Hong Kong (up $13.0bn). Mortgages increased by $10.0bn, mainly in the UK (up 5.1bn), Hong Kong (up $2.9bn) and Canada (up $2.0bn). This was partly offset by a decrease of $1.0bn in credit cards, mainly in the US (down $0.4bn) and Hong Kong (down $0.2bn).

During the first six months of 2021, the Group experienced a release in allowances for ECL, which was driven by improving economic forecasts. Excluding foreign exchange movements, the allowance for ECL in relation to loans and advances to customers decreased by $1.6bn from 31 December 2020. This was attributable to:

• a $0.9bn decrease in wholesale loans and advances to customers, of which $0.7bn was driven by stages 1 and 2; and

• a $0.7bn decrease in personal loans and advances to customers, of which $0.6bn was driven by stages 1 and 2.

At 30 June 2021, the allowance for ECL of $13.8bn decreased by $1.9bn compared with 31 December 2020, including favourable foreign exchange movements of $0.1bn. The $13.8bn allowance comprised $13.1bn in respect of assets held at amortised cost, $0.6bn in respect of loan commitments and financial guarantees, and $0.1bn in respect of debt instruments measured at fair value through other comprehensive income ('FVOCI').

Stage 3 balances at 30 June 2021 remained broadly stable compared with 31 December 2020.

The ECL release for the first six months of 2021 was $719m, inclusive of recoveries. This comprised: $633m in respect of wholesale lending, of which the stage 3 and purchased or originated credit impaired ('POCI') charge was $196m; $116m in respect of personal lending, of which the stage 3 charge was $221m; and $26m in respect of debt instruments measured at FVOCI, partly offset by a charge of $56m in other financial assets measured at amortised cost. Uncertainty remains as countries emerge from the pandemic at different speeds, government support measures unwind and new virus strains test the efficacy of vaccination programmes.

During 1H21, we continued to provide Covid-19-related support to customers under the current policy framework. For further details of market-specific measures to support our personal and business customers, see page 74.

Summary of credit risk

The following disclosure presents the gross carrying/nominal amount of financial instruments to which the impairment requirements in IFRS 9 are applied and the associated allowance for ECL.

The following tables analyse loans by industry sector and represent the concentration of exposures on which credit risk is managed. The allowance for ECL decreased from $15.7bn at 31 December 2020 to $13.8bn at 30 June 2021.

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
	At 30 Jun 2021		At 31 Dec 2020
	Gross carrying/ nominal amount	Allowance for ECL¹	Gross carrying/ nominal amount	Allowance for ECL¹
	$m	$m	$m	$m
Loans and advances to customers at amortised cost	1,072,375	(12,864)	1,052,477	(14,490)
- personal	482,447	(4,006)	460,809	(4,731)
- corporate and commercial	520,201	(8,640)	527,088	(9,494)
- non-bank financial institutions	69,727	(218)	64,580	(265)
Loans and advances to banks at amortised cost	86,905	(19)	81,658	(42)
Other financial assets measured at amortised cost	854,504	(224)	772,408	(175)
- cash and balances at central banks	393,562	(3)	304,486	(5)
- items in the course of collection from other banks	9,406	-	4,094	-
- Hong Kong Government certificates of indebtedness	41,880	-	40,420	-
- reverse repurchase agreements - non-trading	201,714	-	230,628	-
- financial investments	84,662	(88)	88,719	(80)
- prepayments, accrued income and other assets²	123,280	(133)	104,061	(90)
Total gross carrying amount on-balance sheet	2,013,784	(13,107)	1,906,543	(14,707)
Loans and other credit-related commitments	661,373	(530)	659,783	(734)
- personal	238,559	(23)	236,170	(40)
- corporate and commercial	288,414	(475)	299,802	(650)
- financial	134,400	(32)	123,811	(44)
Financial guarantees	27,274	(64)	18,384	(125)
- personal	919	(1)	900	(1)
- corporate and commercial	21,679	(58)	12,946	(114)
- financial	4,676	(5)	4,538	(10)
Total nominal amount off-balance sheet³	688,647	(594)	678,167	(859)
	2,702,431	(13,701)	2,584,710	(15,566)

	Fair value	Memorandum allowance for ECL⁴	Fair value	Memorandum allowance for ECL⁴
	$m	$m	$m	$m
Debt instruments measured at fair value through other comprehensive income ('FVOCI')	348,107	(111)	399,717	(141)

1 Total ECL is recognised in the loss allowance for the financial asset unless total ECL exceeds the gross carrying amount of the financial asset, in which case the ECL is recognised as a provision.

2 Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. 'Prepayments, accrued income and other assets', as presented within the consolidated balance sheet on page 101, includes both financial and non-financial assets. The 30 June 2021 balances include $2,649m gross carrying amounts and $48m allowances for ECL related to assets held for sale due to the exit of domestic mass market retail banking in the US.

3 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

4 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in 'Change for expected credit losses and other credit impairment charges' in the income statement.

The following table provides an overview of the Group's credit risk by stage and industry, and the associated ECL coverage. The financial assets recorded in each stage have the following characteristics:

• Stage 1: These financial assets are unimpaired and without a significant increase in credit risk for which a 12-month allowance for ECL is recognised.

• Stage 2: A significant increase in credit risk has been experienced on these financial assets since initial recognition for which a lifetime ECL is recognised.

• Stage 3: There is objective evidence of impairment and the financial assets are therefore considered to be in default or otherwise credit impaired for which a lifetime ECL is recognised.

POCI: Financial assets that are purchased or originated at a deep discount are seen to reflect the incurred credit losses on which a lifetime ECL is recognised.

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 30 June 2021
	Gross carrying/nominal amount¹					Allowance for ECL					ECL coverage %
	Stage 1	Stage 2	Stage 3	POCI²	Total	Stage 1	Stage 2	Stage 3	POCI²	Total	Stage 1	Stage 2	Stage 3	POCI²	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m	%	%	%	%	%
Loans and advances to customers at amortised cost	895,546	157,544	19,069	216	1,072,375	(1,770)	(3,888)	(7,131)	(75)	(12,864)	0.2	2.5	37.4	34.7	1.2
- personal	455,646	21,338	5,463	-	482,447	(747)	(1,850)	(1,409)	-	(4,006)	0.2	8.7	25.8	-	0.8
- corporate and commercial	378,700	128,212	13,073	216	520,201	(983)	(1,970)	(5,612)	(75)	(8,640)	0.3	1.5	42.9	34.7	1.7
- non-bank financial institutions	61,200	7,994	533	-	69,727	(40)	(68)	(110)	-	(218)	0.1	0.9	20.6	-	0.3
Loans and advances to banks at amortised cost	85,486	1,419	-	-	86,905	(16)	(3)	-	-	(19)	-	0.2	-	-	-
Other financial assets measured at amortised cost	848,978	5,200	284	42	854,504	(130)	(38)	(47)	(9)	(224)	-	0.7	16.5	21.4	-
Loans and other credit-related commitments	612,969	47,658	744	2	661,373	(184)	(266)	(80)	-	(530)	-	0.6	10.8	-	0.1
- personal	236,485	1,927	147	-	238,559	(21)	(1)	(1)	-	(23)	-	0.1	0.7	-	-
- corporate and commercial	246,462	41,389	561	2	288,414	(151)	(249)	(75)	-	(475)	0.1	0.6	13.4	-	0.2
- financial	130,022	4,342	36	-	134,400	(12)	(16)	(4)	-	(32)	-	0.4	11.1	-	-
Financial guarantees	23,169	3,883	221	1	27,274	(17)	(30)	(17)	-	(64)	0.1	0.8	7.7	-	0.2
- personal	892	26	1	-	919	-	(1)	-	-	(1)	-	3.8	-	-	0.1
- corporate and commercial	18,489	2,984	205	1	21,679	(14)	(28)	(16)	-	(58)	0.1	0.9	7.8	-	0.3
- financial	3,788	873	15	-	4,676	(3)	(1)	(1)	-	(5)	0.1	0.1	6.7	-	0.1
At 30 Jun 2021	2,466,148	215,704	20,318	261	2,702,431	(2,117)	(4,225)	(7,275)	(84)	(13,701)	0.1	2.0	35.8	32.2	0.5

1 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

2 Purchased or originated credit-impaired ('POCI').

Unless identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit risk when they are 30 days past due ('DPD') and are transferred from stage 1 to stage 2. The following disclosure presents the ageing of

stage 2 financial assets by those less than 30 and greater than 30 DPD and therefore presents those financial assets classified as stage 2 due to ageing (30 DPD) and those identified at an earlier stage (less than 30 DPD).

Stage 2 days past due analysis at 30 June 2021
	Gross carrying/nominal amount				Allowance for ECL				ECL coverage %
	Stage 2	Up-to-date	1 to 29 DPD^1,2	30 and > DPD^1,2	Stage 2	Up-to-date	1 to 29 DPD^1,2	30 and > DPD^1,2	Stage 2	Up-to-date	1 to 29 DPD^1,2	30 and > DPD^1,2
	$m	$m	$m	$m	$m	$m	$m	$m	%	%	%	%
Loans and advances to customers at amortised cost	157,544	154,354	1,901	1,289	(3,888)	(3,413)	(217)	(258)	2.5	2.2	11.4	20.0
- personal	21,338	19,014	1,349	975	(1,850)	(1,437)	(187)	(226)	8.7	7.6	13.9	23.2
- corporate and commercial	128,212	127,461	437	314	(1,970)	(1,910)	(28)	(32)	1.5	1.5	6.4	10.2
- non-bank financial institutions	7,994	7,879	115	-	(68)	(66)	(2)	-	0.9	0.8	1.7	-
Loans and advances to banks at amortised cost	1,419	1,419	-	-	(3)	(3)	-	-	0.2	0.2	-	-
Other financial assets measured at amortised cost	5,200	5,082	34	84	(38)	(35)	(2)	(1)	0.7	0.7	5.9	1.2

1 Days past due ('DPD').

2 The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2020
	Gross carrying/nominal amount¹					Allowance for ECL					ECL coverage %
	Stage 1	Stage 2	Stage 3	POCI²	Total	Stage 1	Stage 2	Stage 3	POCI²	Total	Stage 1	Stage 2	Stage 3	POCI²	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m	%	%	%	%	%
Loans and advances to customers at amortised cost	869,920	163,185	19,095	277	1,052,477	(1,974)	(4,965)	(7,439)	(112)	(14,490)	0.2	3.0	39.0	40.4	1.4
- personal	430,134	25,064	5,611	-	460,809	(827)	(2,402)	(1,502)	-	(4,731)	0.2	9.6	26.8	-	1.0
- corporate and commercial	387,563	126,287	12,961	277	527,088	(1,101)	(2,444)	(5,837)	(112)	(9,494)	0.3	1.9	45.0	40.4	1.8
- non-bank financial institutions	52,223	11,834	523	-	64,580	(46)	(119)	(100)	-	(265)	0.1	1.0	19.1	-	0.4
Loans and advances to banks at amortised cost	79,654	2,004	-	-	81,658	(33)	(9)	-	-	(42)	-	0.4	-	-	0.1
Other financial assets measured at amortised cost	768,216	3,975	177	40	772,408	(80)	(44)	(42)	(9)	(175)	-	1.1	23.7	22.5	-
Loans and other credit-related commitments	604,485	54,217	1,080	1	659,783	(290)	(365)	(78)	(1)	(734)	-	0.7	7.2	100.0	0.1
- personal	234,337	1,681	152	-	236,170	(39)	(1)	-	-	(40)	-	0.1	-	-	-
- corporate and commercial	253,062	45,851	888	1	299,802	(236)	(338)	(75)	(1)	(650)	0.1	0.7	8.4	100.0	0.2
- financial	117,086	6,685	40	-	123,811	(15)	(26)	(3)	-	(44)	-	0.4	7.5	-	-
Financial guarantees	14,090	4,024	269	1	18,384	(37)	(62)	(26)	-	(125)	0.3	1.5	9.7	-	0.7
- personal	872	26	2	-	900	-	(1)	-	-	(1)	-	3.8	-	-	0.1
- corporate and commercial	9,536	3,157	252	1	12,946	(35)	(54)	(25)	-	(114)	0.4	1.7	9.9	-	0.9
- financial	3,682	841	15	-	4,538	(2)	(7)	(1)	-	(10)	0.1	0.8	6.7	-	0.2
At 31 Dec 2020	2,336,365	227,405	20,621	319	2,584,710	(2,414)	(5,445)	(7,585)	(122)	(15,566)	0.1	2.4	36.8	38.2	0.6

1 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

2 Purchased or originated credit impaired ('POCI').

Stage 2 days past due analysis at 31 December 2020
	Gross carrying amount				Allowance for ECL				ECL coverage %
	Stage 2	Up-to-date	1 to 29 DPD^1,2	30 and > DPD^1,2	Stage 2	Up-to-date	1 to 29 DPD^1,2	30 and > DPD^1,2	Stage 2	Up-to-date	1 to 29 DPD^1,2	30 and > DPD^1,2
	$m	$m	$m	$m	$m	$m	$m	$m	%	%	%	%
Loans and advances to customers at amortised cost	163,185	159,367	2,052	1,766	(4,965)	(4,358)	(275)	(332)	3.0	2.7	13.4	18.8
- personal	25,064	22,250	1,554	1,260	(2,402)	(1,895)	(227)	(280)	9.6	8.5	14.6	22.2
- corporate and commercial	126,287	125,301	489	497	(2,444)	(2,344)	(48)	(52)	1.9	1.9	9.8	10.5
- non-bank financial institutions	11,834	11,816	9	9	(119)	(119)	-	-	1.0	1.0	-	-
Loans and advances to banks at amortised cost	2,004	2,004	-	-	(9)	(9)	-	-	0.4	0.4	-	-
Other financial assets measured at amortised cost	3,975	3,963	3	9	(44)	(44)	-	-	1.1	1.1	-	-

1 Days past due ('DPD').

2 The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.

Measurement uncertainty and sensitivity analysis of ECL estimates

There remains a high degree of uncertainty as countries emerge from the pandemic at different speeds, government support measures unwind and new virus strains test the efficacy of vaccination programmes. As a result of this uncertainty, management judgements and estimates reflect a degree of caution. Over 2020, stage 1 and stage 2 ECL provisions on loans increased by $3.9bn, reflecting mainly the evolution of the global pandemic, and while they reduced by $1.5bn in 1H21 as economic conditions recovered, $2.4bn of the 2020 uplift remained at 1H21 ($1.7bn wholesale and $0.7bn retail). Caution is reflected both in the selection of economic scenarios and their weightings, and in the management judgemental adjustments, which reflect how economic conditions interact with modelled outcomes, and are described in more detail below. The highest degree of uncertainty in ECL estimates relates to the UK.

The recognition and measurement of ECL involves the use of significant judgement and estimation. We form multiple economic scenarios based on economic forecasts, apply these assumptions to credit risk models to estimate future credit losses, and probability-weight the results to determine an unbiased ECL estimate.

Methodology

Four economic scenarios have been used to capture the exceptional nature of the current economic environment and to articulate management's view of the range of potential outcomes. Scenarios produced to calculate ECL are aligned to HSBC's top and emerging risks. Three of these scenarios are drawn from consensus forecasts and distributional estimates. The Central scenario is deemed the 'most likely' scenario, and usually attracts the largest probability weighting, while the outer scenarios represent the tails of the distribution, which are less likely to occur. The Central scenario is created using the average of a panel of external forecasters, while consensus Upside and Downside scenarios are created with reference to distributions for select markets that capture forecasters' views of the entire range of outcomes. Management has chosen to use an additional scenario to represent its view of severe downside risks. The use of an additional scenario is in line with HSBC's forward economic guidance methodology and has been regularly used over the course of 2021. Management may include additional scenarios if it feels that the consensus scenarios do not adequately capture the top and emerging risks. Unlike the consensus scenarios, these additional scenarios are driven by narrative assumptions, could be country-specific and may incorporate shocks that drive economic activity permanently away from trend.

Description of consensus economic scenarios

The economic assumptions presented in this section have been formed by HSBC, with reference to external forecasts specifically for the purpose of calculating ECL.

Global economic growth is experiencing a recovery in 2021, following an unprecedented contraction in 2020. Restrictions to mobility have started to ease across our key markets, aided in some cases by the successful roll-out of vaccination programmes. Data from vaccinated groups suggests vaccines provide a high level of immunity against the Covid-19 virus despite the emergence of more transmissible variants. To date, vaccinations have shown their effectiveness in lowering hospitalisations and deaths. A rapid roll-out of vaccination programmes has been a key factor enabling economies to reopen and some resumption of travel. The emergence of new variants that reduce the efficacy of vaccines remains a risk.

Economic forecasts are subject to a high degree of uncertainty in the current environment. While risks to the economic outlook are dominated by the progression and management of the pandemic and vaccine roll-out, geopolitical risks also present downside threats. These geopolitical risks include continued differences between the US and China over a range of issues, dampened business sentiment in Hong Kong, and the evolution of the UK's relationship with the EU. Four global scenarios have been used for the purpose of calculating ECL at 30 June 2021. These are the consensus Central scenario, the consensus Upside scenario, the consensus Downside scenario and an additional Downside scenario.

The scenarios used to calculate ECL in the Interim Report 2021 are described below.

The consensus Central scenario

Following a severe and unprecedented drop in global economic activity in 2020, HSBC's Central scenario features a sharp recovery in 2021, followed by a subsequent normalisation of growth. The
V-shape in activity over the course of 2020 and 2021 reflects the impact of the pandemic on our key markets, with restrictions to mobility and a reduction in activity resulting in a strong contraction in 2020, and an increase in mobility and resumption in activity in 2021 signalling a recovery.

The Central scenario further assumes that the stringent restrictions on activity, employed across several countries and territories in 2020 and the first half of 2021, will not be repeated. This will allow economic activity to first rebound and then revert to more normal long-run trend rates of growth. Minimal long-term damage to economic prospects is expected. Cross-region differences in the speed and scale of recovery across the forecast horizon reflect timing differences in the progression of the Covid-19 outbreak, different speeds of roll-out of vaccination programmes, national level differences in restrictions imposed and the scale of support measures.

Global GDP is expected to grow by 5.3% in 2021 in the Central scenario. The average rate of global GDP growth is expected to be 3.3% over the forecast period, which is higher than the average growth rate over the five-year period prior to the onset of the pandemic.

The unique circumstances surrounding the current fall in economic activity make it difficult to compare current prospects for global economic activity with previous recessions. However, we note that the depth of the contraction in economic activity and the subsequent recovery are both expected to be sharper than experienced during the last global economic downturn of
2008-2009 across our key markets.

Across the key markets, the Central scenario assumes the following:

• Economic growth is expected to increase sharply in 2021 as governments ease restrictions to mobility, encouraging consumers and firms to spend and invest. GDP is expected to grow across all our major markets in 2021. Country-specific measures aimed at supporting labour markets as economies reopen will affect the rate at which unemployment will decline.

• Inflation is expected to rise in 2021 in line with the economic recovery, before gradually converging back to central bank targets over the forecast period.

• Fiscal deficits are expected to reduce gradually over the course of the projection period from their peak in 2020 following a period where governments, in several of our key markets, provided extensive support to households and corporates. Sovereign indebtedness is expected to remain at high levels.

• Interest rate policy is expected to be highly accommodative over the projection horizon after major central banks lowered their main policy interest rates, implemented emergency support measures for funding markets, and either restarted or increased quantitative easing programmes, in order to support economies and the financial system.

• The West Texas Intermediate oil price is forecast to average $58 per barrel over the projection period.

The Central scenario was first created with forecasts available in May, and subsequently updated in June to reflect significant changes to forecasts. Probability weights assigned to the Central scenario reflect both the higher level of uncertainty in the current global economic environment and relative differences across markets. Weights assigned to the Central scenario vary from 45% to 80%.

The following table describes key macroeconomic variables and the probabilities assigned in the consensus Central scenario.

Central scenario 3Q21-2Q26
	UK	US	Hong Kong	Mainland China	Canada	France	UAE	Mexico
	%	%	%	%	%	%	%	%
GDP growth rate
2021: Annual average growth rate	6.1	6.1	5.2	8.5	5.8	4.9	2.5	4.9
2022: Annual average growth rate	5.5	4.0	3.2	5.5	3.9	3.9	3.8	2.9
2023: Annual average growth rate	2.2	2.3	2.7	5.3	2.3	2.1	3.0	2.3
5-year average	3.0	2.9	2.6	5.0	2.6	2.1	3.6	2.4
Unemployment rate
2021: Annual average rate	5.8	5.5	6.2	3.9	7.6	8.9	2.7	4.5
2022: Annual average rate	5.8	4.3	4.6	3.8	6.3	8.7	2.7	4.2
2023: Annual average rate	5.0	4.0	3.9	3.8	6.1	8.4	2.7	4.1
5-year average	5.1	4.1	4.0	3.8	6.1	8.3	2.7	4.2
House price growth
2021: Annual average growth rate	8.3	11.9	2.6	4.3	16.1	4.5	(3.9)	5.4
2022: Annual average growth rate	2.7	6.2	3.9	6.0	6.4	3.5	(0.7)	5.2
2023: Annual average growth rate	2.5	4.4	2.5	5.4	2.6	4.2	0.3	4.7
5-year average	3.0	5.1	2.9	4.9	4.7	3.5	0.8	4.6
Short-term interest rate
2021: Annual average rate	0.2	0.3	0.9	3.4	0.5	(0.6)	0.8	4.5
2022: Annual average rate	0.3	0.4	1.2	3.4	0.7	(0.6)	0.9	5.5
2023: Annual average rate	0.5	0.7	1.6	3.5	1.2	(0.5)	1.2	6.4
5-year average	0.6	1.1	1.9	3.5	1.4	(0.4)	1.5	6.4
Probability	50	75	70	80	70	45	65	65

The graphs comparing the respective Central scenarios in the second quarters of 2020 and 2021 reveal the extent of economic dislocation that occurred in 2020 and compare current economic expectations with those held a year ago.

GDP growth: Comparison of Central scenarios

Note: Real GDP shown as year-on-year percentage change.

Hong Kong

Note: Real GDP shown as year-on-year percentage change.

Mainland China

Note: Real GDP shown as year-on-year percentage change.

The consensus Upside scenario

Compared with the consensus Central scenario, the consensus Upside scenario features a faster recovery in economic activity during the first two years, before converging to long-run trends.

The scenario is consistent with a number of key upside risk themes. These include the orderly and rapid global abatement of Covid-19 via successful containment and prompt deployment of vaccines; de-escalation of tensions between the US and China;
de-escalation of political tensions in Hong Kong; continued support from fiscal and monetary policy; and smooth relations between the UK and the EU.

The following table describes key macroeconomic variables and the probabilities assigned in the consensus Upside scenario.

Consensus Upside scenario best outcome
	UK		US		Hong Kong		Mainland China		Canada		France		UAE		Mexico
	%		%		%		%		%		%		%		%
GDP growth rate	11.1	(1Q22)	11.0	(1Q22)	10.0	(2Q22)	13.5	(2Q22)	11.2	(2Q22)	8.3	(2Q22)	14.9	(1Q22)	8.6	(2Q22)
Unemployment rate	3.4	(2Q23)	2.2	(1Q22)	3.2	(2Q23)	3.6	(3Q22)	4.7	(1Q22)	7.2	(3Q22)	2.2	(2Q22)	3.0	(1Q22)
House price growth	9.1	(3Q21)	12.0	(3Q21)	8.9	(4Q21)	13.9	(2Q22)	20.2	(4Q21)	6.1	(3Q22)	21.1	(3Q22)	8.7	(3Q22)
Short-term interest rate	0.2	(3Q21)	0.5	(3Q21)	1.2	(3Q21)	3.4	(3Q21)	0.6	(3Q21)	(0.6)	(1Q22)	1.0	(3Q21)	5.0	(3Q21)
Probability	5		5		5		10		10		5		5		5

Note: Extreme point in the consensus Upside is 'best outcome' in the scenario, for example the highest GDP growth and the lowest unemployment rate, in the first two years of the scenario.

The consensus Downside scenario

In the consensus Downside scenario, economic recovery is considerably weaker compared with the Central scenario. GDP growth remains weak, unemployment rates stay elevated and asset and commodity prices fall before gradually recovering towards their long-run trends.

The scenario is consistent with the key downside risks articulated above. Further outbreaks of Covid-19, coupled with delays in vaccination programmes, lead to longer-lasting restrictions on economic activity in this scenario. Other global risks also increase and drive a rise in risk aversion in asset markets.

The following table describes key macroeconomic variables and the probabilities assigned in the consensus Downside scenario.

Consensus Downside scenario worst outcome
	UK		US		Hong Kong		Mainland China		Canada		France		UAE		Mexico
	%		%		%		%		%		%		%		%
GDP growth rate	0.4	(2Q23)	(0.6)	(2Q22)	(6.0)	(1Q22)	(0.7)	(4Q21)	(0.5)	(1Q22)	(1.6)	(3Q21)	(3.3)	(3Q22)	(2.7)	(1Q22)
Unemployment rate	7.3	(2Q22)	6.9	(1Q22)	7.1	(3Q21)	4.1	(4Q21)	8.3	(4Q21)	11.0	(4Q21)	3.2	(2Q22)	5.5	(4Q21)
House price growth	(3.7)	(4Q22)	2.7	(4Q22)	(8.0)	(2Q22)	0.8	(2Q22)	(2.3)	(4Q22)	0.3	(1Q22)	(17.0)	(4Q22)	2.3	(3Q22)
Short-term interest rate	0.2	(2Q23)	0.4	(1Q22)	1.2	(2Q23)	3.1	(3Q21)	0.4	(2Q23)	(0.6)	(3Q21)	0.9	(4Q21)	3.4	(3Q21)
Probability	30		15		20		8		10		35		25		25

Note: Extreme point in the consensus Downside is 'worst outcome' in the scenario, for example the lowest GDP growth and the highest unemployment rate, in the first two years of the scenario.

Additional Downside scenario

An additional Downside scenario that features a global recession has been created to reflect management's view of severe risks. Such a scenario has been in use since 2Q20. In this scenario, infections rise over the second half of 2021, with setbacks to vaccine programmes such that it takes until the end of 2022 for the pandemic to come to an end. The scenario also assumes governments and central banks are unable to significantly increase fiscal and monetary programmes, which results in a rise in unemployment and a fall in asset prices. In Hong Kong and France, the impacts on the unemployment rate are similar to those in the consensus Downside scenario, reflective of recent historical experiences. GDP growth is stronger in the additional Downside scenario compared with the other scenarios and this stronger bounce-back is a consequence of the deeper initial economic contraction.

The following table describes key macroeconomic variables and the probabilities assigned in the additional Downside scenario.

Additional Downside scenario worst outcome
	UK		US		Hong Kong		Mainland China		Canada		France		UAE		Mexico
	%		%		%		%		%		%		%		%
GDP growth rate	(2.1)	(2Q22)	(4.4)	(2Q22)	(10.6)	(1Q22)	(7.4)	(2Q22)	(4.6)	(2Q22)	(3.1)	(1Q22)	(11.6)	(2Q22)	(7.6)	(2Q22)
Unemployment rate	9.3	(3Q22)	11.0	(2Q23)	7.1	(3Q21)	5.7	(1Q23)	9.8	(2Q22)	11.1	(4Q21)	4.4	(3Q21)	6.1	(4Q22)
House price growth	(7.8)	(2Q22)	(5.7)	(2Q22)	(17.0)	(2Q22)	(20.7)	(2Q22)	(16.1)	(3Q22)	(5.9)	(2Q22)	(18.1)	(2Q22)	0.9	(4Q22)
Short-term interest rate	1.0	(4Q21)	1.3	(4Q21)	2.1	(3Q21)	4.8	(4Q21)	0.5	(3Q21)	0.3	(4Q21)	0.4	(4Q21)	7.2	(4Q21)
Probability	15		5		5		2		10		15		5		5

Note: Extreme point in the additional Downside is 'worst outcome' in the scenario, for example the lowest GDP growth and the highest unemployment rate, in the first two years of the scenario.

In considering economic uncertainty and assigning probabilities to scenarios, management has considered both global and country-specific factors. This has led management to assigning scenario probabilities that are tailored to its view of uncertainty in individual markets.

To inform its view, management has considered trends in the progression of the virus in individual countries, the expected reach and efficacy of vaccine roll-outs over the course of 2021, the size and effectiveness of future government support schemes and the connectivity with other countries. Management has also been guided by the actual response to the Covid-19 outbreak and by the economic experience across countries in 2020. China's visible success at containing the virus and its repeated rapid response to localised outbreaks, coupled with government support programmes and clear signs of economic recovery, have led management to conclude that the economic outlook for mainland China is the least volatile out of all our top markets. The Central scenario for mainland China has an 80% probability while a total of 10% has been assigned to the two Downside scenarios. In Hong Kong, the combination of recurrent outbreaks in the recent past, delays to its vaccination programme, evidence of vaccine hesitancy which has delayed the original target of reaching widespread immunity by the end of the third quarter this year, and the other risks outlined above, have led management to assign 25% weight to the two Downside scenarios.

The UK and France face the greatest economic uncertainties in our key markets. In the UK, the discovery of more infectious strains of the virus and subsequent national restrictions on activity imposed before the end of 2020, as well as the current increase in infections, have resulted in considerable uncertainty in the economic outlook. In France, the increases in cases and hospitalisations in the first few months of 2021, the difficulties experienced with the launch of a national vaccination programme and the spread of a more infectious strain of the virus similarly affect the economic outlook. Given these considerations, the consensus Central scenarios for the UK and France have been assigned probabilities of 50% and 45% respectively, while the consensus Downside scenarios have been allocated 30% and 35%. The additional Downside scenario has been assigned 15% probability to each of these markets to reflect the view that the balance of risks is weighted to the downside, and the consensus Upside scenario for these countries has been given a 5% probability.

For the US, Canada and Mexico, connectivity across the three North American economies has been considered. In the UAE, the impact of the oil price on the economy and the ability of non-oil sectors to contribute to economic recovery have influenced the view of uncertainty. The Central scenario has been assigned between 65% and 75% weight for these four markets and, with risks perceived as being weighted to the downside, the two Downside scenarios have been given weights of between 20% and 30%.

The following graphs show the historical and forecasted GDP growth rate for the various economic scenarios in our four largest markets.

Hong Kong

Mainland China

Note: Real GDP shown as year-on-year percentage change.

Critical accounting estimates and judgements

The calculation of ECL under IFRS 9 involves significant judgements, assumptions and estimates, as set out in the Annual Report and Accounts 2020 under 'Critical accounting estimates and judgements'. The level of estimation uncertainty and judgement has remained high since 31 December 2020 as a result of the economic effects of the Covid-19 outbreak, including judgements relating to:

• the selection and weighting of economic scenarios, given rapidly changing economic conditions in an unprecedented manner, uncertainty as to the effect of government and central bank support measures designed to alleviate adverse economic impacts, and a wide distribution of economic forecasts. There is judgement in making assumptions about the length of time and severity of the economic effects of the pandemic and the shape of recovery;

• estimating the economic effects of those scenarios on ECL, when the volatility of economic changes associated with the pandemic are outside the observable historical trends that can be reflected in the models. Modelled assumptions and linkages between economic factors and credit losses may underestimate or overestimate ECL in these conditions, including the effect of real estate prices on modelled ECL outcomes; and

• the identification of customers experiencing significant increases in credit risk and credit impairment, where judgements are made about the extent to which government support programmes have deferred or mitigated the risk of defaults, and the effects once support levels are reduced, particularly in relation to lending in high-risk and vulnerable sectors. Where customers have accepted payment deferrals and other reliefs designed to address short-term liquidity issues, or have extended those deferrals, judgements include the extent to which they are able to meet their financial obligations on returning to their original terms. The use of segmentation techniques for indicators of significant increases in credit risk for retail customers involves estimation uncertainty.

How economic scenarios are reflected in ECL calculations

The methodologies for the application of forward economic guidance into the calculation of ECL for wholesale and retail loans and portfolios are set out on page 132 of the Annual Report and Accounts 2020. Models are used to reflect economic scenarios on ECL estimates. These models are based largely on historical observations and correlations with default rates.

We continue to observe volatility in macroeconomic variables as a result of the Covid-19 pandemic, which - together with significant governmental support programmes, forbearance and payment holidays - have impacted model performance and historical correlations between macroeconomic variables and defaults. As economic forecasts begin to improve, the level and speed of economic recovery remains outside the range of historical experience used to calibrate the models, and the timing of defaults has considerably shifted from the modelled assumptions. Management judgements have been used to overcome the limitations in the model generated outcome, increasing the ECL.

Management judgemental adjustments arise when data and model limitations are addressed in the short term using in-model and post-model adjustments. This includes refining model inputs and outputs and using post-model adjustments based on management judgement and higher level quantitative analysis for impacts that are difficult to model.

Management judgemental adjustments

In the context of IFRS 9, management judgemental adjustments are typically short-term increases or decreases to the ECL at either a customer or portfolio level to account for late-breaking events, model deficiencies and other assessments applied during management review and challenge.

At 30 June 2021, management judgements were applied to reflect credit risk dynamics not captured by our models. The drivers of the management judgemental adjustments continue to evolve with the economic environment. We have internal governance in place to monitor management judgemental adjustments regularly and, where possible, to reduce the reliance on these through model recalibration or redevelopment, as appropriate.

Wider-ranging model changes will take time to develop and need observable loss data on which models can be developed. Models will be revisited over time once the longer-term impacts of the Covid-19 outbreak are observed. Therefore, we continue to anticipate significant management judgemental adjustments for the foreseeable future.

Judgemental adjustments, which primarily relate to delays in the timing and extent of defaults, will likely cease to occur when macroeconomic forecasts have stabilised and move within the range of historical experience, portfolio impacts due to unwinding of government schemes become visible and the uncertainty due to Covid-19 reduces.

The wholesale and retail management judgemental adjustments are presented as part of the global business impairment committees with representation from Model Risk Management. This is in line with the governance process as set out on page 120 of the Annual Report and Accounts 2020.

Management judgemental adjustments made in estimating the reported ECL at 30 June 2021 are set out in the following table. The table includes adjustments in relation to data and model limitations resulting from the pandemic, and as a result of the regular process of model development and implementation. It shows the adjustments applicable to the scenario-weighted ECL numbers.

Management judgemental adjustments to ECL at 30 June 2021¹
	Retail	Wholesale	Total
	$bn	$bn	$bn
Low-risk counterparties (banks, sovereigns and government entities)	0.1	(0.8)	(0.7)
Corporate lending adjustments		1.4	1.4
Retail lending probability of default adjustments	(0.1)		(0.1)
Retail model default timing adjustments	0.4		0.4
Macroeconomic-related adjustments	0.6		0.6
Other retail lending adjustments	0.3		0.3
Total	1.3	0.7	2.0

Management judgemental adjustments to ECL at 31 December 2020¹
	Retail	Wholesale	Total
	$bn	$bn	$bn
Low-risk counterparties (banks, sovereigns and government entities)	-	(0.7)	(0.7)
Corporate lending adjustments		0.5	0.5
Retail lending probability of default adjustments	(0.8)		(0.8)
Retail model default timing adjustments	1.9		1.9
Macroeconomic-related adjustments	0.1		0.1
Other retail lending adjustments	0.3		0.3
Total	1.5	(0.2)	1.3

1 Management judgemental adjustments presented in the table reflect increases or (decreases) to ECL, respectively.

In the wholesale portfolio, management judgemental adjustments were an ECL increase of $0.7bn (31 December 2020: $0.2bn decrease).

The adjustments relating to wholesale low-credit risk exposures decreased ECL by $0.8bn at 30 June 2021 (31 December 2020: $0.7bn decrease). These were mainly to highly rated banks, sovereigns and US government-sponsored entities, where modelled credit factors did not fully reflect the underlying fundamentals of these entities or the effect of government support and economic programmes in the Covid-19 environment.

Adjustments to corporate exposures increased ECL by $1.4bn at 30 June 2021 (31 December 2020: $0.5bn increase). These principally reflected the outcome of management judgements for high-risk and vulnerable sectors in some of our key markets, supported by credit experts' input, quantitative analyses and benchmarks. Considerations include uncertainty around vaccine efficacy and risk of new variants and, uncertainty around timing and extent of defaults in some sectors due to government intervention. The increase in adjustment impact relative to
31 December 2020 was mostly driven by management judgements as a result of further improvement of macroeconomic scenarios and increased dislocation of modelled outcomes to management expectations for high-risk and vulnerable sectors.

In the retail portfolio, management judgemental adjustments were an ECL increase of $1.3bn at 30 June 2021 (31 December 2020: $1.5bn increase).

The retail model default timing adjustment increased ECL by $0.4bn (31 December 2020: $1.9bn increase). This was applied in several economies as customer relief and government support programmes continue to delay the emergence of defaults. The level of adjustment decreased during the period given the improvement in macroeconomic forecasts and the unwinding in a number of markets as customer relief and government support concludes. Retail models are reliant on the assumption that as macroeconomic conditions deteriorate, defaults will crystallise. We will monitor the continuation of customer relief and government support programmes that have stabilised macroeconomic conditions and therefore the timing of retail model defaults.

The retail lending probability of default adjustments decreased ECL by $0.1bn (31 December 2020: $0.8bn decrease). These related to severe projections of macroeconomic variables that are outside the historical observations on which IFRS 9 models have been built and calibrated to operate. The majority of scenarios are now within historical observations leading to lower levels of adjustment.

Macroeconomic-related adjustments increased ECL by $0.6bn
(31 December 2020: $0.1bn increase). These were applied to reflect management's expectation in regards to the extent of previously forecast defaults that have not yet emerged in the retail portfolio in the context of improvements in the macroeconomic forecasts.

Other retail lending adjustments increased ECL by $0.3bn (31 December 2020: $0.3bn increase), reflecting those who remain in or have recently exited customer support programmes and all other data and model adjustments.

Economic scenarios sensitivity analysis of ECL estimates

Management considered the sensitivity of the ECL outcome against the economic forecasts as part of the ECL governance process by recalculating the ECL under each scenario described above for selected portfolios, applying a 100% weighting to each scenario in turn. The weighting is reflected in both the determination of a significant increase in credit risk and the measurement of the resulting ECL.

The ECL calculated for the Upside and Downside scenarios should not be taken to represent the upper and lower limits of possible ECL outcomes. The impact of defaults that might occur in the future under different economic scenarios is captured by recalculating ECL for loans in stages 1 and 2 at the balance sheet date. The population of stage 3 loans (in default) at the balance sheet date is unchanged in these sensitivity calculations. Stage 3 ECL would only be sensitive to changes in forecasts of future economic conditions if the loss-given default of a particular portfolio was sensitive to these changes.

There is a particularly high degree of estimation uncertainty in numbers representing tail risk scenarios when assigned a 100% weighting.

For wholesale credit risk exposures, the sensitivity analysis excludes ECL for financial instruments related to defaulted obligors because the measurement of ECL is relatively more sensitive to credit factors specific to the obligor than future economic scenarios. Therefore, it is impracticable to separate the effect of macroeconomic factors in individual assessments.

For retail credit risk exposures, the sensitivity analysis includes ECL for loans and advances to customers related to defaulted obligors. This is because the retail ECL for secured mortgage portfolios, including loans in all stages, is sensitive to macroeconomic variables.

Wholesale and retail sensitivity

The wholesale and retail sensitivity analysis is stated inclusive of management judgemental adjustments, as appropriate to each scenario. The results tables exclude portfolios held by the insurance business and small portfolios, and as such cannot be directly compared with personal and wholesale lending presented in other credit risk tables. Additionally, in both the wholesale and retail analysis, the comparative period results for additional/ alternative Downside scenarios are also not directly comparable with the current period, because they reflect different risk profiles relative to the consensus scenarios for the period end.

Wholesale analysis

IFRS 9 ECL sensitivity to future economic conditions^{1, 2}
	Gross carrying amount	Reported ECL	Central scenario ECL	Upside scenario ECL	Downside scenario ECL	Additional Downside scenario ECL
By geography at 30 Jun 2021	$m	$m	$m	$m	$m	$m
UK	481,849	1,740	1,433	1,083	1,888	2,949
US	229,768	270	253	185	319	490
Hong Kong	436,443	429	377	211	557	892
Mainland China	124,547	98	75	16	224	1,192
Canada	84,398	146	115	66	176	361
Mexico	24,971	180	161	123	210	358
UAE	45,997	201	164	119	257	607
France	197,175	133	115	107	147	233

By geography at 31 Dec 2020
UK	430,555	2,077	1,514	1,026	2,271	3,869
US	201,263	369	314	219	472	723
Hong Kong	452,983	474	388	211	672	1,363
Mainland China	118,163	116	93	28	252	1,158
Canada	85,720	183	140	82	253	528
Mexico	25,920	246	222	177	285	437
UAE	44,777	250	241	190	330	536
France	164,899	117	109	97	131	238

1 ECL sensitivity includes off-balance sheet financial instruments that are subject to significant measurement uncertainty.

2 Includes low credit-risk financial instruments such as debt instruments at FVOCI, which have high carrying amounts but low ECL under all the above scenarios.

At 30 June 2021, the most significant level of ECL sensitivity was observed in the UK, mainland China and Hong Kong. This higher sensitivity was largely driven by significant exposure in these regions and more severe impacts of the Downside scenarios relative to the Central and probability-weighted scenarios. For mainland China, the additional Downside scenario weighting of 2% reflected a scenario that is considered highly unlikely and is significantly more adverse compared with the Central scenario, resulting in a higher ECL estimate relative to the reported and Central scenarios.

Retail analysis

IFRS 9 ECL sensitivity to future economic conditions^1,2
	Gross carrying amount	Reported ECL	Central scenario ECL	Upside scenario ECL	Downside scenario ECL	Additional Downside scenario
By geography at 30 June 2021	$m	$m	$m	$m	$m	$m
UK
Mortgages	151,435	205	199	193	210	221
Credit cards	7,563	678	625	533	767	945
Other	8,460	713	631	534	779	934
Mexico
Mortgages	4,427	112	104	93	125	142
Credit cards	1,044	180	175	163	198	214
Other	2,626	395	380	357	412	437
Hong Kong
Mortgages	93,283	-	-	-	-	-
Credit cards	7,414	244	231	213	269	384
Other	5,787	102	96	89	119	141
UAE
Mortgages	1,902	55	52	44	60	64
Credit cards	395	73	66	61	80	95
Other	613	28	28	26	29	31
France
Mortgages	23,583	61	60	60	61	62
Other	1,668	75	75	74	76	77
US
Mortgages	15,283	41	41	40	42	48
Credit cards	938	162	161	160	164	178
Canada
Mortgages	24,681	31	30	27	32	38
Credit cards	232	10	10	10	10	10
Other	1,699	21	21	20	23	25

By geography at 31 December 2020
UK
Mortgages	146,478	197	182	172	205	221
Credit cards	7,869	857	774	589	904	1,084
Other	9,164	897	795	471	1,022	1,165
Mexico
Mortgages	3,896	111	101	79	136	167
Credit cards	1,113	260	255	243	269	290
Other	2,549	436	428	411	451	491
Hong Kong
Mortgages	89,943	-	-	-	-	-
Credit cards	7,422	266	259	247	277	405
Other	6,020	112	105	102	115	130
UAE
Mortgages	1,889	66	63	53	73	78
Credit cards	426	92	81	62	107	126
Other	683	38	37	33	41	46
France
Mortgages	24,565	68	68	68	69	70
Other	1,725	88	87	85	88	91
US
Mortgages	15,399	41	39	38	41	53
Credit cards	570	86	84	81	88	119
Canada
Mortgages	22,454	31	30	29	31	36
Credit cards	260	9	9	8	9	9
Other	1,775	22	21	20	24	28

1 ECL sensitivities exclude portfolios utilising less complex modelling approaches.

2 At 30 June 2021, US sensitivity includes the implementation of an enhanced model.

At 30 June 2021, the most significant level of ECL sensitivity was observed in the UK, Mexico and Hong Kong. Mortgages reflected the lowest level of ECL sensitivity across most markets as collateral values remain resilient. Hong Kong mortgages had low levels of reported ECL due to the credit quality of the portfolio, and so presented sensitivity was negligible. Credit cards and other unsecured lending are more sensitive to economic forecasts, which have reflected improvements during the first half of 2021.

Group ECL sensitivity results

The ECL impact of the scenarios and management judgemental adjustments are highly sensitive to movements in economic forecasts, including the efficacy of government support measures. Based upon the sensitivity tables presented above, if the Group ECL balance (excluding wholesale stage 3, which is assessed individually) was estimated solely on the basis of the Central scenario, Upside scenario, Downside scenario or the additional Downside scenario at 30 June 2021, it would increase/(decrease) as presented in the below table.

	Retail¹	Wholesale¹
Total Group ECL at 30 June 2021	$bn	$bn
Reported ECL	3.9	3.7
Scenarios
100% consensus Central scenario	(0.2)	(0.6)
100% consensus Upside scenario	(0.5)	(1.4)
100% consensus Downside scenario	0.3	0.7
100% additional Downside scenario	1.1	4.5

Total Group ECL at 31 December 2020
Reported ECL	4.5	4.5
Scenarios
100% consensus Central scenario	(0.3)	(0.9)
100% consensus Upside scenario	(1.0)	(2.0)
100% consensus Downside scenario	0.3	1.0
100% alternative Downside scenario	1.3	5.9

1 On the same basis as retail and wholesale sensitivity analysis.

At 30 June 2021, Group ECL sensitivity decreased across all scenarios compared with 31 December 2020, driven by the improvement of macroeconomic forecasts.

There still remains a significant degree of uncertainty in relation to the UK economic outlook. If a 100% weight were applied to the consensus Downside and additional Downside scenario for the UK, respectively, it would result in an increase in ECL of $0.1bn and $1.2bn in wholesale and $0.2bn and $0.5bn in retail.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers

The following disclosure provides a reconciliation by stage of the Group's gross carrying/nominal amount and allowances for loans and advances to banks and customers, including loan commitments and financial guarantees. Movements are calculated on a quarterly basis and therefore fully capture stage movements between quarters. If movements were calculated on a year-to-date basis they would only reflect the opening and closing position of the financial instrument.

The transfers of financial instruments represent the impact of stage transfers upon the gross carrying/nominal amount and associated allowance for ECL.

The net remeasurement of ECL arising from stage transfers represents the increase or decrease due to these transfers, for example, moving from a 12-month (stage 1) to a lifetime (stage 2) ECL measurement basis. Net remeasurement excludes the underlying customer risk rating ('CRR')/probability of default ('PD') movements of the financial instruments transferring stage. This is captured, along with other credit quality movements in the 'changes in risk parameters - credit quality' line item.

Changes in 'New financial assets originated or purchased', 'assets derecognised (including final repayments)' and 'changes to risk parameters - further lending/repayments' represent the impact from volume movements within the Group's lending portfolio.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/ nominal amount	Allowance for ECL	Gross carrying/ nominal amount	Allowance for ECL	Gross carrying/ nominal amount	Allowance for ECL	Gross carrying/ nominal amount	Allowance for ECL	Gross carrying/ nominal amount	Allowance for ECL
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
At 1 Jan 2021	1,506,451	(2,331)	223,432	(5,403)	20,424	(7,544)	279	(113)	1,750,586	(15,391)
Transfers of financial instruments:	(9,572)	(993)	6,141	1,411	3,431	(418)	-	-	-	-
- transfers from stage 1 to stage 2	(88,050)	273	88,050	(273)	-	-	-	-	-	-
- transfers from stage 2 to stage 1	79,249	(1,239)	(79,249)	1,239	-	-	-	-	-	-
- transfers to stage 3	(1,092)	18	(3,248)	522	4,340	(540)	-	-	-	-
- transfers from stage 3	321	(45)	588	(77)	(909)	122	-	-	-	-
Net remeasurement of ECL arising from transfer of stage	-	625	-	(320)	-	(12)	-	-	-	293
New financial assets originated or purchased	224,124	(268)	-	-	-	-	1	-	224,125	(268)
Assets derecognised (including final repayments)	(143,261)	82	(15,521)	258	(1,559)	234	(8)	6	(160,349)	580
Changes to risk parameters - further lending/repayments	(25,456)	285	(3,440)	285	(808)	348	(44)	4	(29,748)	922
Change in risk parameters - credit quality	-	609	-	(397)	-	(1,229)	-	28	-	(989)
Changes to models used for ECL calculation	-	12	-	(12)	-	-	-	-	-	-
Assets written off	-	-	-	-	(1,356)	1,352	(9)	1	(1,365)	1,353
Credit-related modifications that resulted in derecognition	-	-	-	-	(1)	-	-	-	(1)	-
Foreign exchange	(3,130)	(7)	(91)	(19)	(92)	35	(1)	-	(3,314)	9
Other	(180)	7	(20)	5	(7)	2	-	-	(207)	14
At 30 Jun 2021	1,548,976	(1,979)	210,501	(4,192)	20,032	(7,232)	218	(74)	1,779,727	(13,477)
ECL income statement change for the period		1,345		(186)		(659)		38		538
Recoveries										209
Other										(41)
Total ECL income statement change for the period										706

	At 30 Jun 2021		6 months ended 30 Jun 2021
	Gross carrying/nominal amount	Allowance for ECL	ECL release/(charge)
	$m	$m	$m
As above	1,779,727	(13,477)	706
Other financial assets measured at amortised cost	854,504	(224)	(56)
Non-trading reverse purchase agreement commitments	68,200	-	-
Performance and other guarantees	-	-	43
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement	2,702,431	(13,701)	693
Debt instruments measured at FVOCI	348,107	(111)	26
Total allowance for ECL/total income statement ECL charge for the period	n/a	(13,812)	719

As shown in the previous table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees decreased by $1,914m during the period, from $15,391m at 31 December 2020 to $13,477m at 30 June 2021.

This decrease was driven by:

• $1,353m of assets written off;

• $1,234m relating to volume movements, which included the ECL allowance associated with new originations, assets derecognised and further pending repayment;

• $293m relating to the net remeasurement impact of stage transfers; and

• foreign exchange and other movements of $23m.

This decrease was offset by $989m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages.

The ECL release for the period of $538m presented in the previous table consisted of $1,234m relating to underlying net book volume and $293m relating to the net remeasurement impact of stage transfers. These were partly offset by $989m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees (continued)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/ nominal amount	Allowance for ECL	Gross carrying/ nominal amount	Allowance for ECL	Gross carrying/ nominal amount	Allowance for ECL	Gross carrying/ nominal amount	Allowance for ECL	Gross carrying/ nominal amount	Allowance for ECL
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
At 1 Jan 2020	1,561,613	(1,464)	105,551	(2,441)	14,335	(5,121)	345	(99)	1,681,844	(9,125)
Transfers of financial instruments:	(129,236)	(1,122)	116,783	1,951	12,453	(829)	-	-	-	-
- transfers from stage 1 to stage 2	(298,725)	947	298,725	(947)	-	-	-	-	-	-
- transfers from stage 2 to stage 1	172,894	(2,073)	(172,894)	2,073	-	-	-	-	-	-
- transfers to stage 3	(3,942)	30	(10,320)	986	14,262	(1,016)	-	-	-	-
- transfers from stage 3	537	(26)	1,272	(161)	(1,809)	187	-	-	-	-
Net remeasurement of ECL arising from transfer of stage	-	907	-	(1,158)	-	(750)	-	-	-	(1,001)
New financial assets originated or purchased	437,836	(653)	-	-	-	-	25	(1)	437,861	(654)
Assets derecognised (including final repayments)	(313,347)	160	(37,409)	464	(3,430)	485	(23)	2	(354,209)	1,111
Changes to risk parameters - further lending/repayment	(83,147)	157	29,092	85	(597)	248	(50)	(2)	(54,702)	488
Changes in risk parameters - credit quality	-	(408)	-	(4,374)	-	(4,378)	-	(39)	-	(9,199)
Changes to models used for ECL calculation	-	134	-	294	-	5	-	-	-	433
Assets written off	-	-	-	-	(2,946)	2,944	(30)	30	(2,976)	2,974
Credit-related modifications that resulted in derecognition	-	-	-	-	(23)	7	-	-	(23)	7
Foreign exchange	32,808	(47)	9,123	(223)	633	(163)	4	(3)	42,568	(436)
Other	(76)	5	292	(1)	(1)	8	8	(1)	223	11
At 31 Dec 2020	1,506,451	(2,331)	223,432	(5,403)	20,424	(7,544)	279	(113)	1,750,586	(15,391)
ECL income statement change for the period		297		(4,689)		(4,390)		(40)		(8,822)
Recoveries										326
Others										(84)
Total ECL income statement change for the period¹										(8,580)

	At 31 Dec 2020		12 months ended 31 Dec 2020
	Gross carrying/nominal amount	Allowance for ECL	ECL charge
	$m	$m	$m
As above	1,750,586	(15,391)	(8,580)
Other financial assets measured at amortised cost	772,408	(175)	(95)
Non-trading reverse purchase agreement commitments	61,716	-	-
Performance and other guarantees	-	-	(94)
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement	2,584,710	(15,566)	(8,769)
Debt instruments measured at FVOCI	399,717	(141)	(48)
Total allowance for ECL/total income statement ECL charge for the period	n/a	(15,707)	(8,817)

1 The 31 December 2020 total ECL income statement change of $8,580m is attributable to $6,464m for the six months ended 30 June 2020 and $2,116m to the six months ended 31 December 2020.

Credit quality of financial instruments

We assess the credit quality of all financial instruments that are subject to credit risk. The credit quality of financial instruments is a point-in-time assessment of PD, whereas stages 1 and 2 are determined based on relative deterioration of credit quality since initial recognition. Accordingly, for non-credit-impaired financial instruments, there is no direct relationship between the credit quality assessment and stages 1 and 2, though typically the lower credit quality bands exhibit a higher proportion in stage 2.

The five credit quality classifications each encompass a range of granular internal credit rating grades assigned to wholesale and personal lending businesses and the external ratings attributed by external agencies to debt securities, as shown in the following table. Personal lending credit quality is disclosed based on a 12-month point-in-time PD adjusted for multiple economic scenarios. The credit quality classifications for wholesale lending are based on internal credit risk ratings.

Credit quality classification
	Sovereign debt securities and bills	Other debt securities and bills	Wholesale lending and derivatives		Retail lending
	External credit rating	External credit rating	Internal credit rating	12-month Basel probability of default %	Internal credit rating	12 month probability- weighted PD %
Quality classification^1,2
Strong	BBB and above	A- and above	CRR 1 to CRR 2	0 - 0.169	Band 1 and 2	0.000 - 0.500
Good	BBB- to BB	BBB+ to BBB-	CRR 3	0.170 - 0.740	Band 3	0.501 - 1.500
Satisfactory	BB- to B and unrated	BB+ to B and unrated	CRR 4 to CRR 5	0.741 - 4.914	Band 4 and 5	1.501 - 20.000
Sub-standard	B- to C	B- to C	CRR 6 to CRR 8	4.915 - 99.999	Band 6	20.001 - 99.999
Credit impaired	Default	Default	CRR 9 to CRR 10	100	Band 7	100

1 Customer risk rating ('CRR').

2 12-month point-in-time probability-weighted probability of default ('PD').

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
	Gross carrying/nominal amount						Allowance for ECL	Net
	Strong	Good	Satisfactory	Sub- standard	Credit impaired	Total	Allowance for ECL	Net
	$m	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers at amortised cost	528,036	232,101	258,457	34,496	19,285	1,072,375	(12,864)	1,059,511
- stage 1	522,137	204,332	164,251	4,826	-	895,546	(1,770)	893,776
- stage 2	5,899	27,769	94,206	29,670	-	157,544	(3,888)	153,656
- stage 3	-	-	-	-	19,069	19,069	(7,131)	11,938
- POCI	-	-	-	-	216	216	(75)	141
Loans and advances to banks at amortised cost	77,928	4,819	3,155	1,003	-	86,905	(19)	86,886
- stage 1	77,739	4,662	3,062	23	-	85,486	(16)	85,470
- stage 2	189	157	93	980	-	1,419	(3)	1,416
- stage 3	-	-	-	-	-	-	-	-
- POCI	-	-	-	-	-	-	-	-
Other financial assets measured at amortised cost	751,028	71,664	30,323	1,163	326	854,504	(224)	854,280
- stage 1	750,477	70,918	27,469	114	-	848,978	(130)	848,848
- stage 2	551	746	2,854	1,049	-	5,200	(38)	5,162
- stage 3	-	-	-	-	284	284	(47)	237
- POCI	-	-	-	-	42	42	(9)	33
Loan and other credit-related commitments	408,027	150,779	91,284	10,537	746	661,373	(530)	660,843
- stage 1	404,424	139,198	67,581	1,766	-	612,969	(184)	612,785
- stage 2	3,603	11,581	23,703	8,771	-	47,658	(266)	47,392
- stage 3	-	-	-	-	744	744	(80)	664
- POCI	-	-	-	-	2	2	-	2
Financial guarantees	15,693	5,018	5,125	1,216	222	27,274	(64)	27,210
- stage 1	15,592	4,178	3,151	248	-	23,169	(17)	23,152
- stage 2	101	840	1,974	968	-	3,883	(30)	3,853
- stage 3	-	-	-	-	221	221	(17)	204
- POCI	-	-	-	-	1	1	-	1
At 30 Jun 2021	1,780,712	464,381	388,344	48,415	20,579	2,702,431	(13,701)	2,688,730
Debt instruments at FVOCI¹
- stage 1	317,105	13,039	11,126	-	-	341,270	(65)	341,205
- stage 2	791	93	321	741	-	1,946	(15)	1,931
- stage 3	-	-	-	-	226	226	(24)	202
- POCI	-	-	-	-	48	48	(7)	41
At 30 Jun 2021	317,896	13,132	11,447	741	274	343,490	(111)	343,379

1 For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI will not reconcile to the balance sheet as it excludes fair value gains and losses.

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation (continued)
	Gross carrying/notional amount
	Strong	Good	Satisfactory	Sub- standard	Credit impaired	Total	Allowance for ECL	Net
	$m	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers at amortised cost	506,231	233,320	256,584	36,970	19,372	1,052,477	(14,490)	1,037,987
- stage 1	499,836	199,138	165,507	5,439	-	869,920	(1,974)	867,946
- stage 2	6,395	34,182	91,077	31,531	-	163,185	(4,965)	158,220
- stage 3	-	-	-	-	19,095	19,095	(7,439)	11,656
- POCI	-	-	-	-	277	277	(112)	165
Loans and advances to banks at amortised cost	71,318	5,496	3,568	1,276	-	81,658	(42)	81,616
- stage 1	71,126	5,098	3,357	73	-	79,654	(33)	79,621
- stage 2	192	398	211	1,203	-	2,004	(9)	1,995
- stage 3	-	-	-	-	-	-	-	-
- POCI	-	-	-	-	-	-	-	-
Other financial assets measured at amortised cost	683,231	61,768	26,581	611	217	772,408	(175)	772,233
- stage 1	682,412	61,218	24,532	54	-	768,216	(80)	768,136
- stage 2	819	550	2,049	557	-	3,975	(44)	3,931
- stage 3	-	-	-	-	177	177	(42)	135
- POCI	-	-	-	-	40	40	(9)	31
Loan and other credit-related commitments	400,911	157,339	90,784	9,668	1,081	659,783	(734)	659,049
- stage 1	396,028	143,600	63,592	1,265	-	604,485	(290)	604,195
- stage 2	4,883	13,739	27,192	8,403	-	54,217	(365)	53,852
- stage 3	-	-	-	-	1,080	1,080	(78)	1,002
- POCI	-	-	-	-	1	1	(1)	-
Financial guarantees	6,356	5,194	5,317	1,247	270	18,384	(125)	18,259
- stage 1	6,286	4,431	3,163	210	-	14,090	(37)	14,053
- stage 2	70	763	2,154	1,037	-	4,024	(62)	3,962
- stage 3	-	-	-	-	269	269	(26)	243
- POCI	-	-	-	-	1	1	-	1
At 31 Dec 2020	1,668,047	463,117	382,834	49,772	20,940	2,584,710	(15,566)	2,569,144
Debt instruments at FVOCI¹
- stage 1	367,542	12,585	10,066	-	-	390,193	(88)	390,105
- stage 2	143	93	343	825	-	1,404	(20)	1,384
- stage 3	-	-	-	-	257	257	(23)	234
- POCI	-	-	-	-	49	49	(10)	39
At 31 Dec 2020	367,685	12,678	10,409	825	306	391,903	(141)	391,762

Customer relief programmes

In response to the Covid-19 outbreak, governments and regulators around the world introduced a number of support measures for both personal and wholesale customers in market-wide schemes. The following table presents the number of personal accounts/wholesale customers and the associated drawn loan values of customers under these schemes and HSBC-specific measures for major markets at 30 June 2021. In relation to personal lending, the majority of relief measures, including payment holidays, relate to existing lending, while in wholesale lending the relief measures comprise payment holidays, refinancing of existing facilities and new lending under government-backed schemes.

At 30 June 2021, the gross carrying value of loans to personal customers under relief was $1.6bn (31 December 2020: $5.5bn). This comprised $1.3bn in relation to mortgages (31 December 2020: $4.7bn) and $0.3bn in relation to other personal lending (31 December 2020: $0.9bn). The decrease in personal customer relief during the first six months of 2021 was driven by customers exiting relief measures. The gross carrying value of loans to wholesale customers under relief was $27.8bn (31 December 2020: $35.3bn). We continue to monitor the recoverability of loans granted under customer relief programmes, including loans to a small number of customers that were subsequently found to be ineligible for such relief. The ongoing performance of such loans remains an area of uncertainty at 30 June 2021.

Personal lending
Extant at 30 June 2021		UK	Hong Kong	US	Other major markets^1,2	Total
Market-wide schemes
Number of accounts granted mortgage customer relief	000s	1	-	-	2	3
Drawn loan value of accounts granted mortgage customer relief	$m	167	-	-	231	398
Number of accounts granted other personal lending customer relief	000s	2	-	-	21	23
Drawn loan value of accounts granted other personal lending customer relief	$m	19	-	-	207	226
HSBC-specific measures
Number of accounts granted mortgage customer relief	000s	-	1	1	-	2
Drawn loan value of accounts granted mortgage customer relief	$m	3	267	587	19	876
Number of accounts granted other personal lending customer relief	000s	-	-	-	3	3
Drawn loan value of accounts granted other personal lending customer relief	$m	-	52	29	18	99
Total personal lending to major markets under market-wide schemes and HSBC-specific measures
Number of accounts granted mortgage customer relief	000s	1	1	1	2	5
Drawn loan value of accounts granted mortgage customer relief	$m	170	267	587	250	1,274
Number of accounts granted other personal lending customer relief	000s	2	-	-	24	26
Drawn loan value of accounts granted other personal lending customer relief	$m	19	52	29	225	325
Market-wide schemes and HSBC-specific measures - mortgage relief as a proportion of total mortgages	%	0.1	0.3	3.6	0.3	0.4
Market-wide schemes and HSBC-specific measures - other personal lending relief as a proportion of total other personal lending loans and advances	%	0.1	0.1	2.2	0.4	0.3

Wholesale lending
Extant at 30 June 2021		UK	Hong Kong	US	Other major markets¹	Total
Market-wide schemes
Number of customers under market-wide measures	000s	236	1	3	5	245
Drawn loan value of customers under market-wide schemes	$m	14,024	4,786	819	5,306	24,935
HSBC-specific schemes
Number of customers under HSBC-specific measures	000s	1	-	-	-	1
Drawn loan value of customers under HSBC-specific measures	$m	260	-	551	2,098	2,909
Total wholesale lending to major markets under market-wide schemes and HSBC-specific measures
Number of customers	000s	237	1	3	5	246
Drawn loan value	$m	14,284	4,786	1,370	7,404	27,844
Market-wide schemes and HSBC-specific measures as a proportion of total wholesale lending loans and advances	%	10.4	2.5	4.0	3.9	5.0

1 Other major markets include Australia, Canada, mainland China, Egypt, France, Germany, India, Indonesia, Malaysia, Mexico, Singapore, Switzerland, Taiwan and UAE.

2 In Malaysia, personal lending customers are granted an automatic moratorium programme for all eligible retail customers. At 30 June 2021, the number of accounts under this moratorium was 20,000 with an associated drawn balance of $247m.

Personal lending (continued)
Extant at 31 December 2020		UK	Hong Kong	US	Other major markets^1,2,3	Total
Market-wide schemes
Number of accounts granted mortgage customer relief	000s	6	-	-	5	11
Drawn loan value of accounts granted mortgage customer relief	$m	1,412	-	-	908	2,320
Number of accounts granted other personal lending customer relief	000s	15	-	-	28	43
Drawn loan value of accounts granted other personal lending customer relief	$m	140	-	-	386	526
HSBC-specific measures
Number of accounts granted mortgage customer relief	000s	-	3	2	3	8
Drawn loan value of accounts granted mortgage customer relief	$m	7	1,124	864	360	2,355
Number of accounts granted other personal lending customer relief	000s	-	1	6	18	25
Drawn loan value of accounts granted other personal lending customer relief	$m	-	75	67	182	324
Total personal lending to major markets under market-wide schemes and HSBC-specific measures
Number of accounts granted mortgage customer relief	000s	6	3	2	8	19
Drawn loan value of accounts granted mortgage customer relief	$m	1,419	1,124	864	1,268	4,675
Number of accounts granted other personal lending customer relief	000s	15	1	6	46	68
Drawn loan value of accounts granted other personal lending customer relief	$m	140	75	67	568	850
Market-wide schemes and HSBC-specific measures - mortgage relief as a proportion of total mortgages	%	0.9	1.2	4.7	1.6	1.4
Market-wide schemes and HSBC-specific measures - other personal lending relief as a proportion of total other personal lending loans and advances	%	0.7	0.2	3.1	1.1	0.8


Wholesale lending (continued)
Extant at 31 December 2020		UK	Hong Kong	US	Other major markets¹	Total
Market-wide schemes
Number of customers under market-wide measures	000s	226	3	3	5	237
Drawn loan value of customers under market-wide schemes	$m	13,517	10,622	1,043	6,017	31,199
HSBC-specific schemes
Number of customers under HSBC-specific measures	000s	-	-	-	-	-
Drawn loan value of customers under HSBC-specific measures	$m	349	-	924	2,869	4,142
Total wholesale lending to major markets under market-wide schemes and HSBC-specific measures
Number of customers	000s	226	3	3	5	237
Drawn loan value	$m	13,866	10,622	1,967	8,886	35,341
Market-wide schemes and HSBC-specific measures as a proportion of total wholesale lending loans and advances	%	9.6	5.9	5.2	4.6	6.4

1 Other major markets include Australia, Canada, mainland China, Egypt, France, Germany, India, Indonesia, Malaysia, Mexico, Singapore, Switzerland, Taiwan and UAE.

2 In Malaysia, personal lending customers are granted an automatic moratorium programme for all eligible retail customers. At 31 December 2020, the number of accounts under this moratorium was 26,000 with an associated drawn balance of $452m.

3 In Mexico, at 31 December 2020, there were 16,000 personal lending accounts under customer relief with an associated drawn balance of $233m.

The initial granting of customer relief does not automatically trigger a migration to stage 2 or 3. However, information provided by payment deferrals is considered in the context of other reasonable and supportable information. This forms part of the overall assessment for whether there has been a significant increase in credit risk and credit impairment to identify loans for which lifetime ECL is appropriate. An extension in payment deferral does not automatically result in stage 2 or stage 3. The key accounting and credit risk judgement to ascertain whether a significant increase in credit risk has occurred is whether the economic effects of the Covid-19 outbreak on the customer are likely to be temporary or whether they indicate that a concession is being made in respect of financial difficulty that would be consistent with stage 3.

On 4 March 2021, the Hong Kong Monetary Authority, together with the Banking Sector SME Lending Coordination Mechanism, announced that the Pre-approved Principal Payment Holiday Scheme for corporate customers will be extended for another six months to October 2021.

On 6 April 2021, the UK launched the Recovery Loan Scheme that provides businesses of any size financial support to recover from the Covid-19 pandemic subject to eligibility and viability assessments. The scheme will run until 31 December 2021. A government guarantee of 80% is provided under the scheme.

Personal lending

This section provides further details on the regions, countries and products driving the increase in personal loans and advances to customers. Additionally, Hong Kong and UK mortgage book
loan-to-value ('LTV') data are provided.

Further product granularity is also provided by stage, with geographical data presented for loans and advances to customers, loans and other credit-related commitments, and financial guarantees and similar contracts.

At 30 June 2021, total personal lending for loans and advances to customers of $482.4bn increased by $21.6bn compared with 31 December 2020. This increase included favourable exchange movements of $0.4bn. Excluding foreign exchange movements, there was growth of $21.2bn, primarily driven by $16.9bn in Asia and $4.5bn in Europe.

The allowance for ECL attributable to personal lending, excluding off-balance sheet loan commitments and guarantees, decreased by $0.7bn to $4.0bn at 30 June 2021, driven by other personal lending.

Excluding foreign exchange movements, mortgage lending balances grew by $10.0bn to $363.6bn at 30 June 2021. Mortgages grew in the UK by $5.1bn, driven in part by stamp duty holidays on residential properties purchased up until

30 September 2021. In Asia, mortgages grew $4.3bn, notably $2.9bn in Hong Kong. Mortgages grew by $2.0bn in Canada. In addition, mortgages with a value of $2.0bn were transferred to assets held for sale due to the exit of domestic mass market retail banking business in the US.

The allowance for ECL attributable to mortgages remained broadly flat at $0.7bn.

The quality of both our Hong Kong and UK mortgage books remained high, with negligible defaults and impairment allowances. The average LTV ratio on new mortgage lending in Hong Kong was 61%, compared with an estimated 43% for the overall mortgage portfolio. The average LTV ratio on new lending in the UK was 67%, compared with an estimated 54% for the overall mortgage portfolio.

Excluding foreign exchange movements, other personal lending balances at 30 June 2021 increased by $11.2bn compared with 31 December 2020. The increase was attributable to a $12.5bn growth in loans and overdrafts, partially offset by a $1.0bn decline in credit cards. The increase in loans and overdrafts was driven by $13.2bn in Asia, notably $13.0bn in Hong Kong.

The allowance for ECL attributable to other personal lending, excluding loan commitments and guarantees, decreased by $0.7bn to $3.3bn at 30 June 2021, with the greatest impact on stage 2 that decreased by $0.6bn. The main drivers of this decrease were loans and overdrafts and credit cards in the UK with decreases of $0.2bn in both products.

Total personal lending for loans and advances to customers by stage distribution
	Gross carrying amount				Allowance for ECL
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	$m	$m	$m	$m	$m	$m	$m	$m
By portfolio
First lien residential mortgages	349,840	10,482	3,300	363,622	(119)	(191)	(439)	(749)
- of which:
interest only (including offset)	28,978	2,490	315	31,783	(8)	(33)	(86)	(127)
affordability (including US adjustable rate mortgages)	12,991	1,257	496	14,744	(13)	(7)	(4)	(24)
Other personal lending	105,806	10,856	2,163	118,825	(628)	(1,659)	(970)	(3,257)
- other	86,715	6,229	1,678	94,622	(272)	(685)	(650)	(1,607)
- credit cards	17,373	4,415	440	22,228	(346)	(962)	(307)	(1,615)
- second lien residential mortgages	318	67	39	424	(2)	(6)	(8)	(16)
- motor vehicle finance	1,400	145	6	1,551	(8)	(6)	(5)	(19)
At 30 Jun 2021	455,646	21,338	5,463	482,447	(747)	(1,850)	(1,409)	(4,006)
By geography
Europe	208,712	8,089	2,482	219,283	(260)	(963)	(746)	(1,969)
- of which: UK	172,498	7,090	1,587	181,175	(235)	(928)	(483)	(1,646)
Asia	192,257	9,425	1,350	203,032	(157)	(396)	(253)	(806)
- of which: Hong Kong	132,928	6,015	205	139,148	(58)	(250)	(50)	(358)
MENA	4,856	235	225	5,316	(45)	(81)	(136)	(262)
North America	42,427	2,685	1,080	46,192	(55)	(163)	(126)	(344)
Latin America	7,394	904	326	8,624	(230)	(247)	(148)	(625)
At 30 Jun 2021	455,646	21,338	5,463	482,447	(747)	(1,850)	(1,409)	(4,006)

Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution
	Nominal amount				Allowance for ECL
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	$m	$m	$m	$m	$m	$m	$m	$m
Europe	58,423	702	103	59,228	(12)	(2)	(1)	(15)
- of which: UK	55,576	405	99	56,080	(12)	(2)	(1)	(15)
Asia	157,382	1,007	17	158,406	-	-	-	-
- of which: Hong Kong	119,194	163	15	119,372	-	-	-	-
MENA	2,749	27	2	2,778	(1)	-	-	(1)
North America	15,105	189	22	15,316	(5)	-	-	(5)
Latin America	3,718	28	4	3,750	(3)	-	-	(3)
At 30 Jun 2021	237,377	1,953	148	239,478	(21)	(2)	(1)	(24)

Total personal lending for loans and advances to customers by stage distribution (continued)
	Gross carrying amount				Allowance for ECL
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	$m	$m	$m	$m	$m	$m	$m	$m
By portfolio
First lien residential mortgages	336,666	12,233	3,383	352,282	(125)	(188)	(442)	(755)
- of which:
interest only (including offset)	29,143	3,074	351	32,568	(9)	(19)	(88)	(116)
affordability (including US adjustable rate mortgages)	13,265	2,209	606	16,080	(11)	(11)	(5)	(27)
Other personal lending	93,468	12,831	2,228	108,527	(702)	(2,214)	(1,060)	(3,976)
- other	74,174	7,288	1,489	82,951	(305)	(914)	(665)	(1,884)
- credit cards	17,327	5,292	680	23,299	(386)	(1,281)	(380)	(2,047)
- second lien residential mortgages	593	100	51	744	(3)	(9)	(10)	(22)
- motor vehicle finance	1,374	151	8	1,533	(8)	(10)	(5)	(23)
At 31 Dec 2020	430,134	25,064	5,611	460,809	(827)	(2,402)	(1,502)	(4,731)
By geography
Europe	200,120	11,032	2,511	213,663	(247)	(1,271)	(826)	(2,344)
- of which: UK	163,338	9,476	1,721	174,535	(223)	(1,230)	(545)	(1,998)
Asia	178,175	7,969	1,169	187,313	(234)	(446)	(241)	(921)
- of which: Hong Kong	118,252	5,133	206	123,591	(102)	(237)	(48)	(387)
MENA	4,879	403	251	5,533	(54)	(112)	(152)	(318)
North America	40,387	4,613	1,378	46,378	(93)	(200)	(132)	(425)
Latin America	6,573	1,047	302	7,922	(199)	(373)	(151)	(723)
At 31 Dec 2020	430,134	25,064	5,611	460,809	(827)	(2,402)	(1,502)	(4,731)

Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution (continued)
	Nominal amount				Allowance for ECL
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	$m	$m	$m	$m	$m	$m	$m	$m
Europe	56,920	719	96	57,735	(22)	(2)	-	(24)
- of which: UK	54,348	435	92	54,875	(21)	(2)	-	(23)
Asia	156,057	790	11	156,858	-	-	-	-
- of which: Hong Kong	118,529	10	10	118,549	-	-	-	-
MENA	2,935	46	8	2,989	(1)	-	-	(1)
North America	15,835	124	38	15,997	(11)	-	-	(11)
Latin America	3,462	28	1	3,491	(5)	-	-	(5)
At 31 Dec 2020	235,209	1,707	154	237,070	(39)	(2)	-	(41)

Wholesale lending

This section provides further details on the regions, countries and industries driving the increase in wholesale loans and advances to customers and banks, with the impact of foreign exchange separately identified. Industry granularity is also provided by stage, with geographical data presented for loans and advances to customers, banks, other credit commitments, financial guarantees and similar contracts.

At 30 June 2021, wholesale lending for loans and advances to banks and customers of $677bn increased by $3.5bn since 31 December 2020. This included adverse foreign exchange movements of $2bn.

Excluding foreign exchange movements, the total wholesale lending growth was driven by a $6bn increase in loans and advances to banks, which included a $6.7bn increase in Asia and a $0.6bn decrease in Europe. Growth in loans and advances to banks was partly offset by a decline of $0.5bn in loans and advances to customers.

The primary driver of the decline in corporate and commercial balances of $5.7bn was $11.6bn in Europe, notably $8.2bn in the UK and $1.4bn in France. This was partly offset by growth in Asia of $6.9bn, notably $3.6bn in Hong Kong.

Loans and advances to non-bank financial institutions grew by $5.2bn, including $8bn in Asia, which was partly offset by a decline of $1.7bn in North America and a decline of $0.8bn in Europe.

Loan commitments and financial guarantees grew $8.1bn since 31 December 2020 to $449bn at 30 June 2021, including a $6bn increase related to unsettled reverse repurchase agreements. This also included adverse foreign exchange movements of $3.5bn.

The allowance for ECL attributable to loans and advances to banks and customers of $8.9bn at 30 June 2021 decreased from $9.8bn at 31 December 2020. This included favourable foreign exchange movements of $47m.

Excluding foreign exchange movements, the total decrease in the wholesale ECL allowance for loans and advances to customers and banks was driven by $0.8bn in corporate and commercial balances. The primary driver of the decrease in corporate and commercial allowance for ECL was $0.5bn in Europe, mainly $0.5bn in the UK. Additionally, there were decreases of $0.2bn in each of North America and MENA and an increase of $0.1bn in Asia.

Total wholesale lending for loans and advances to banks and customers by stage distribution
	Gross carrying amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Corporate and commercial	378,700	128,212	13,073	216	520,201	(983)	(1,970)	(5,612)	(75)	(8,640)
- agriculture, forestry and fishing	6,575	954	359	1	7,889	(24)	(33)	(120)	(1)	(178)
- mining and quarrying	7,144	3,248	589	16	10,997	(29)	(71)	(175)	(12)	(287)
- manufacturing	68,031	20,393	2,094	77	90,595	(169)	(298)	(972)	(35)	(1,474)
- electricity, gas, steam and air-conditioning supply	12,931	1,945	65	-	14,941	(19)	(22)	(25)	-	(66)
- water supply, sewerage, waste management and remediation	2,702	437	50	-	3,189	(7)	(7)	(26)	-	(40)
- construction	9,099	4,947	747	1	14,794	(41)	(82)	(413)	(1)	(537)
- wholesale and retail trade, repair of motor vehicles and motorcycles	68,476	23,002	3,147	8	94,633	(150)	(273)	(2,012)	(2)	(2,437)
- transportation and storage	19,833	9,305	770	11	29,919	(56)	(138)	(220)	-	(414)
- accommodation and food	8,319	16,565	833	1	25,718	(98)	(340)	(129)	(1)	(568)
- publishing, audiovisual and broadcasting	17,760	2,778	151	26	20,715	(29)	(64)	(35)	(2)	(130)
- real estate	99,380	24,755	1,946	1	126,082	(170)	(233)	(706)	-	(1,109)
- professional, scientific and technical activities	15,215	5,507	642	32	21,396	(49)	(79)	(172)	(7)	(307)
- administrative and support services	17,450	7,987	764	42	26,243	(59)	(128)	(254)	(14)	(455)
- public administration and defence, compulsory social security	1,305	547	4	-	1,856	(3)	(6)	(1)	-	(10)
- education	1,447	504	27	-	1,978	(8)	(15)	(5)	-	(28)
- health and care	4,234	755	172	-	5,161	(13)	(18)	(43)	-	(74)
- arts, entertainment and recreation	1,161	1,928	220	-	3,309	(11)	(60)	(46)	-	(117)
- other services	9,902	1,962	492	-	12,356	(45)	(91)	(257)	-	(393)
- activities of households	698	118	-	-	816	-	-	-	-	-
- extra-territorial organisations and bodies activities	15	-	-	-	15	-	-	-	-	-
- government	6,665	561	1	-	7,227	(3)	(1)	(1)	-	(5)
- asset-backed securities	358	14	-	-	372	-	(11)	-	-	(11)
Non-bank financial institutions	61,200	7,994	533	-	69,727	(40)	(68)	(110)	-	(218)
Loans and advances to banks	85,486	1,419	-	-	86,905	(16)	(3)	-	-	(19)
At 30 Jun 2021	525,386	137,625	13,606	216	676,833	(1,039)	(2,041)	(5,722)	(75)	(8,877)
By geography
Europe	144,427	50,606	6,616	74	201,723	(580)	(1,126)	(1,828)	(14)	(3,548)
- of which: UK	96,909	39,863	4,803	26	141,601	(517)	(993)	(1,087)	(2)	(2,599)
Asia	292,866	64,874	3,806	95	361,641	(226)	(395)	(2,255)	(46)	(2,922)
- of which: Hong Kong	165,097	44,854	1,780	41	211,772	(135)	(263)	(786)	(22)	(1,206)
MENA	24,197	6,949	1,810	22	32,978	(93)	(129)	(1,106)	(13)	(1,341)
North America	53,254	10,870	734	-	64,858	(71)	(218)	(193)	-	(482)
Latin America	10,642	4,326	640	25	15,633	(69)	(173)	(340)	(2)	(584)
At 30 Jun 2021	525,386	137,625	13,606	216	676,833	(1,039)	(2,041)	(5,722)	(75)	(8,877)

Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution¹
	Nominal amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Corporate and commercial	264,951	44,373	766	3	310,093	(165)	(277)	(91)	-	(533)
Financial	133,810	5,215	51	-	139,076	(15)	(17)	(5)	-	(37)
At 30 Jun 2021	398,761	49,588	817	3	449,169	(180)	(294)	(96)	-	(570)
By geography
Europe	209,917	26,144	660	3	236,724	(95)	(145)	(80)	-	(320)
- of which: UK	79,958	13,912	409	2	94,281	(77)	(115)	(68)	-	(260)
Asia	69,801	7,635	21	-	77,457	(39)	(38)	(6)	-	(83)
- of which: Hong Kong	30,178	3,738	7	-	33,923	(16)	(14)	(5)	-	(35)
MENA	5,906	1,564	27	-	7,497	(17)	(25)	(4)	-	(46)
North America	111,071	13,910	77	-	125,058	(27)	(83)	(1)	-	(111)
Latin America	2,066	335	32	-	2,433	(2)	(3)	(5)	-	(10)
At 30 Jun 2021	398,761	49,588	817	3	449,169	(180)	(294)	(96)	-	(570)

1 Included in loans and other credit-related commitments and financial guarantees is $68bn relating to unsettled reverse repurchase agreements, which once drawn are classified as 'Reverse repurchase agreements - non-trading'.

Total wholesale lending for loans and advances to banks and customers by stage distribution (continued)
	Gross carrying amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Corporate and commercial	387,563	126,287	12,961	277	527,088	(1,101)	(2,444)	(5,837)	(112)	(9,494)
- agriculture, forestry and fishing	6,087	1,026	331	1	7,445	(12)	(45)	(149)	(1)	(207)
- mining and quarrying	7,429	3,705	797	16	11,947	(33)	(112)	(209)	(11)	(365)
- manufacturing	68,179	23,564	2,076	87	93,906	(201)	(442)	(905)	(40)	(1,588)
- electricity, gas, steam and air-conditioning supply	14,240	1,907	53	-	16,200	(25)	(40)	(8)	-	(73)
- water supply, sewerage, waste management and remediation	2,874	253	47	-	3,174	(8)	(7)	(22)	-	(37)
- construction	9,368	4,455	773	4	14,600	(42)	(118)	(426)	(4)	(590)
- wholesale and retail trade, repair of motor vehicles and motorcycles	65,937	21,518	3,196	12	90,663	(174)	(326)	(2,029)	(3)	(2,532)
- transportation and storage	19,510	9,143	769	11	29,433	(90)	(163)	(240)	-	(493)
- accommodation and food	10,616	14,918	536	1	26,071	(76)	(285)	(129)	(1)	(491)
- publishing, audiovisual and broadcasting	17,019	2,796	131	33	19,979	(45)	(85)	(39)	(20)	(189)
- real estate	102,933	22,186	1,907	1	127,027	(169)	(260)	(738)	-	(1,167)
- professional, scientific and technical activities	17,162	6,379	498	33	24,072	(56)	(149)	(185)	(8)	(398)
- administrative and support services	17,085	8,361	907	70	26,423	(66)	(153)	(291)	(24)	(534)
- public administration and defence, compulsory social security	1,530	475	3	-	2,008	(2)	(11)	(1)	-	(14)
- education	1,402	691	29	-	2,122	(12)	(20)	(9)	-	(41)
- health and care	4,049	1,192	261	8	5,510	(21)	(45)	(120)	-	(186)
- arts, entertainment and recreation	1,631	1,570	236	-	3,437	(9)	(62)	(87)	-	(158)
- other services	11,380	1,320	410	-	13,110	(54)	(105)	(249)	-	(408)
- activities of households	660	142	-	-	802	-	(1)	-	-	(1)
- extra-territorial organisations and bodies activities	10	-	-	-	10	-	-	-	-	-
- government	7,866	671	1	-	8,538	(6)	(2)	(1)	-	(9)
- asset-backed securities	596	15	-	-	611	-	(13)	-	-	(13)
Non-bank financial institutions	52,223	11,834	523	-	64,580	(46)	(119)	(100)	-	(265)
Loans and advances to banks	79,654	2,004	-	-	81,658	(33)	(9)	-	-	(42)
At 31 Dec 2020	519,440	140,125	13,484	277	673,326	(1,180)	(2,572)	(5,937)	(112)	(9,801)
By geography
Europe	156,474	51,708	6,531	109	214,822	(589)	(1,400)	(2,097)	(51)	(4,137)
- of which: UK	104,534	40,454	4,712	53	149,753	(536)	(1,234)	(1,320)	(33)	(3,123)
Asia	279,985	58,159	3,443	106	341,693	(337)	(383)	(2,040)	(43)	(2,803)
- of which: Hong Kong	156,817	39,257	1,637	45	197,756	(162)	(260)	(751)	(23)	(1,196)
MENA	24,753	7,893	1,952	30	34,628	(91)	(216)	(1,205)	(12)	(1,524)
North America	46,852	18,220	913	-	65,985	(77)	(302)	(281)	-	(660)
Latin America	11,376	4,145	645	32	16,198	(86)	(271)	(314)	(6)	(677)
At 31 Dec 2020	519,440	140,125	13,484	277	673,326	(1,180)	(2,572)	(5,937)	(112)	(9,801)

Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution¹ (continued)
	Nominal amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Corporate and commercial	262,598	49,008	1,140	2	312,748	(271)	(392)	(100)	(1)	(764)
Financial	120,768	7,526	55	-	128,349	(17)	(33)	(4)	-	(54)
At 31 Dec 2020	383,366	56,534	1,195	2	441,097	(288)	(425)	(104)	(1)	(818)
By geography
Europe	210,141	28,705	851	2	239,699	(152)	(208)	(83)	(1)	(444)
- of which: UK	81,153	17,048	480	1	98,682	(138)	(176)	(72)	(1)	(387)
Asia	63,586	6,311	20	-	69,917	(73)	(43)	(6)	-	(122)
- of which: Hong Kong	26,502	3,639	4	-	30,145	(24)	(22)	(1)	-	(47)
MENA	4,975	1,609	85	-	6,669	(14)	(44)	(2)	-	(60)
North America	102,399	19,360	198	-	121,957	(39)	(124)	(7)	-	(170)
Latin America	2,265	549	41	-	2,855	(10)	(6)	(6)	-	(22)
At 31 Dec 2020	383,366	56,534	1,195	2	441,097	(288)	(425)	(104)	(1)	(818)

1 Included in loans and other credit-related commitments and financial guarantees is $62bn relating to unsettled reverse repurchase agreements, which once drawn are classified as 'Reverse repurchase agreements - non-trading'.

Supplementary information

The following disclosure presents the gross carrying/nominal amount of financial instruments to which the impairment requirements in IFRS 9 are applied by global business and the associated allowance for ECL.

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied - by global business
	Gross carrying/nominal amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers at amortised cost	895,546	157,544	19,069	216	1,072,375	(1,770)	(3,888)	(7,131)	(75)	(12,864)
- WPB	467,295	22,388	5,782	-	495,465	(767)	(1,868)	(1,510)	-	(4,145)
- CMB	250,725	96,615	10,944	175	358,459	(834)	(1,673)	(4,945)	(62)	(7,514)
- GBM	176,437	38,472	2,343	41	217,293	(169)	(336)	(676)	(13)	(1,194)
- Corporate Centre	1,089	69	-	-	1,158	-	(11)	-	-	(11)
Loans and advances to banks at amortised cost	85,486	1,419	-	-	86,905	(16)	(3)	-	-	(19)
- WPB	19,713	370	-	-	20,083	(1)	(1)	-	-	(2)
- CMB	13,891	245	-	-	14,136	(1)	-	-	-	(1)
- GBM	36,402	737	-	-	37,139	(13)	(2)	-	-	(15)
- Corporate Centre	15,480	67	-	-	15,547	(1)	-	-	-	(1)
Other financial assets measured at amortised cost	848,978	5,200	284	42	854,504	(130)	(38)	(47)	(9)	(224)
- WPB	186,563	1,728	176	41	188,508	(92)	(29)	(9)	(9)	(139)
- CMB	162,532	2,346	59	1	164,938	(16)	(8)	(30)	-	(54)
- GBM	403,116	1,123	43	-	404,282	(22)	(1)	(8)	-	(31)
- Corporate Centre	96,767	3	6	-	96,776	-	-	-	-	-
Total gross carrying amount on-balance sheet at 30 Jun 2021	1,830,010	164,163	19,353	258	2,013,784	(1,916)	(3,929)	(7,178)	(84)	(13,107)
Loans and other credit-related commitments	612,969	47,658	744	2	661,373	(184)	(266)	(80)	-	(530)
- WPB	234,311	2,344	134	-	236,789	(22)	(1)	(1)	-	(24)
- CMB	114,658	26,479	516	2	141,655	(97)	(155)	(75)	-	(327)
- GBM	263,911	18,835	94	-	282,840	(65)	(110)	(4)	-	(179)
- Corporate Centre	89	-	-	-	89	-	-	-	-	-
Financial guarantees	23,169	3,883	221	1	27,274	(17)	(30)	(17)	-	(64)
- WPB	1,085	18	1	-	1,104	-	(1)	-	-	(1)
- CMB	5,469	2,448	118	1	8,036	(9)	(15)	(7)	-	(31)
- GBM	16,614	1,417	102	-	18,133	(7)	(14)	(10)	-	(31)
- Corporate Centre	1	-	-	-	1	(1)	-	-	-	(1)
Total nominal amount off-balance sheet at 30 Jun 2021	636,138	51,541	965	3	688,647	(201)	(296)	(97)	-	(594)
WPB	140,685	694	105	38	141,522	(20)	(1)	(16)	(5)	(42)
CMB	87,234	422	49	9	87,714	(10)	(2)	(3)	(2)	(17)
GBM	112,919	399	72	1	113,391	(12)	(1)	(5)	-	(18)
Corporate Centre	5,082	398	-	-	5,480	(23)	(11)	-	-	(34)
Debt instruments measured at FVOCI at 30 Jun 2021	345,920	1,913	226	48	348,107	(65)	(15)	(24)	(7)	(111)

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied - by global business (continued)
	Gross carrying/nominal amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers at amortised cost	869,920	163,185	19,095	277	1,052,477	(1,974)	(4,965)	(7,439)	(112)	(14,490)
- WPB	442,641	25,694	5,753	-	474,088	(854)	(2,458)	(1,590)	-	(4,902)
- CMB	238,517	101,960	10,408	212	351,097	(917)	(2,029)	(4,874)	(96)	(7,916)
- GBM	187,564	35,461	2,934	65	226,024	(203)	(465)	(975)	(16)	(1,659)
- Corporate Centre	1,198	70	-	-	1,268	-	(13)	-	-	(13)
Loans and advances to banks at amortised cost	79,654	2,004	-	-	81,658	(33)	(9)	-	-	(42)
- WPB	16,837	519	-	-	17,356	(2)	(2)	-	-	(4)
- CMB	12,253	222	-	-	12,475	(2)	-	-	-	(2)
- GBM	33,361	1,166	-	-	34,527	(23)	(7)	-	-	(30)
- Corporate Centre	17,203	97	-	-	17,300	(6)	-	-	-	(6)
Other financial assets measured at amortised cost	768,216	3,975	177	40	772,408	(80)	(44)	(42)	(9)	(175)
- WPB	167,053	1,547	50	39	168,689	(41)	(22)	(7)	(9)	(79)
- CMB	111,299	1,716	65	1	113,081	(17)	(19)	(25)	-	(61)
- GBM	391,967	705	56	-	392,728	(22)	(3)	(10)	-	(35)
- Corporate Centre	97,897	7	6	-	97,910	-	-	-	-	-
Total gross carrying amount on-balance sheet at 31 Dec 2020	1,717,790	169,164	19,272	317	1,906,543	(2,087)	(5,018)	(7,481)	(121)	(14,707)
Loans and other credit-related commitments	604,485	54,217	1,080	1	659,783	(290)	(365)	(78)	(1)	(734)
- WPB	232,027	2,591	136	-	234,754	(41)	(2)	-	-	(43)
- CMB	111,800	29,150	779	1	141,730	(157)	(203)	(72)	(1)	(433)
- GBM	260,527	22,476	165	-	283,168	(92)	(160)	(6)	-	(258)
- Corporate Centre	131	-	-	-	131	-	-	-	-	-
Financial guarantees	14,090	4,024	269	1	18,384	(37)	(62)	(26)	-	(125)
- WPB	1,048	23	2	-	1,073	-	-	-	-	-
- CMB	5,556	2,519	146	1	8,222	(19)	(36)	(12)	-	(67)
- GBM	7,482	1,482	121	-	9,085	(17)	(26)	(14)	-	(57)
- Corporate Centre	4	-	-	-	4	(1)	-	-	-	(1)
Total nominal amount off-balance sheet at 31 Dec 2020	618,575	58,241	1,349	2	678,167	(327)	(427)	(104)	(1)	(859)
WPB	159,988	625	154	39	160,806	(27)	(10)	(15)	(8)	(60)
CMB	95,182	313	51	10	95,556	(22)	(3)	(2)	(2)	(29)
GBM	136,909	126	93	-	137,128	(24)	(1)	(3)	-	(28)
Corporate Centre	5,838	389	-	-	6,227	(17)	(6)	(1)	-	(24)
Debt instruments measured at FVOCI at 31 Dec 2020	397,917	1,453	298	49	399,717	(90)	(20)	(21)	(10)	(141)

Wholesale lending - loans and advances to customers at amortised cost by country/territory
	Gross carrying amount				Allowance for ECL
	Corporate and commercial	Of which: real estate¹	Non-bank financial institutions	Total	Corporate and commercial	Of which: real estate¹	Non-bank financial institutions	Total
	$m	$m	$m	$m	$m	$m	$m	$m
Europe	167,562	25,731	21,437	188,999	(3,383)	(585)	(150)	(3,533)
- UK	122,314	18,437	14,715	137,029	(2,497)	(533)	(95)	(2,592)
- France	29,832	5,519	4,290	34,122	(611)	(37)	(46)	(657)
- Germany	7,849	291	1,238	9,087	(117)	-	(3)	(120)
- Switzerland	1,107	560	654	1,761	(9)	-	-	(9)
- other	6,460	924	540	7,000	(149)	(15)	(6)	(155)
Asia	263,512	82,372	39,535	303,047	(2,876)	(132)	(38)	(2,914)
- Hong Kong	165,429	64,274	25,898	191,327	(1,191)	(54)	(12)	(1,203)
- Australia	9,086	2,130	934	10,020	(90)	(2)	-	(90)
- India	7,704	1,800	2,922	10,626	(76)	(16)	(8)	(84)
- Indonesia	3,617	78	236	3,853	(237)	(2)	-	(237)
- mainland China	31,951	6,336	8,362	40,313	(188)	(28)	(15)	(203)
- Malaysia	7,336	1,896	143	7,479	(186)	(26)	(3)	(189)
- Singapore	16,806	4,350	246	17,052	(787)	(4)	-	(787)
- Taiwan	4,986	5	75	5,061	-	-	-	-
- other	16,597	1,503	719	17,316	(121)	-	-	(121)
Middle East and North Africa (excluding Saudi Arabia)	23,529	1,539	365	23,894	(1,333)	(178)	(7)	(1,340)
- Egypt	2,308	38	11	2,319	(167)	(7)	(3)	(170)
- UAE	13,261	1,399	211	13,472	(896)	(169)	(1)	(897)
- other	7,960	102	143	8,103	(270)	(2)	(3)	(273)
North America	53,404	14,855	7,648	61,052	(465)	(66)	(20)	(485)
- US	28,509	7,287	6,043	34,552	(231)	(41)	(2)	(233)
- Canada	24,332	7,468	1,473	25,805	(211)	(18)	(7)	(218)
- other	563	100	132	695	(23)	(7)	(11)	(34)
Latin America	12,194	1,585	742	12,936	(583)	(148)	(3)	(586)
- Mexico	10,255	1,585	737	10,992	(533)	(148)	(3)	(536)
- other	1,939	-	5	1,944	(50)	-	-	(50)
At 30 Jun 2021	520,201	126,082	69,727	589,928	(8,640)	(1,109)	(218)	(8,858)

Europe	179,104	26,505	22,176	201,280	(3,918)	(632)	(185)	(4,103)
- UK	128,933	18,890	16,165	145,098	(2,958)	(574)	(147)	(3,105)
- France	32,278	5,740	3,557	35,835	(645)	(40)	(26)	(671)
- Germany	8,309	364	1,156	9,465	(125)	-	(3)	(128)
- Switzerland	1,489	576	513	2,002	(14)	-	-	(14)
- other	8,095	935	785	8,880	(176)	(18)	(9)	(185)
Asia	257,942	82,359	31,637	289,579	(2,766)	(162)	(38)	(2,804)
- Hong Kong	162,039	64,216	18,406	180,445	(1,180)	(83)	(15)	(1,195)
- Australia	9,769	1,813	1,348	11,117	(95)	(2)	-	(95)
- India	7,223	1,951	3,075	10,298	(90)	(18)	(4)	(94)
- Indonesia	3,699	81	246	3,945	(229)	(2)	-	(229)
- mainland China	28,443	6,251	7,128	35,571	(187)	(23)	(18)	(205)
- Malaysia	7,228	1,968	123	7,351	(86)	(27)	-	(86)
- Singapore	18,859	4,637	362	19,221	(782)	(2)	-	(782)
- Taiwan	6,115	50	60	6,175	-	-	-	-
- other	14,567	1,392	889	15,456	(117)	(5)	(1)	(118)
Middle East and North Africa (excluding Saudi Arabia)	24,625	1,839	379	25,004	(1,512)	(187)	(9)	(1,521)
- Egypt	2,162	37	13	2,175	(157)	(7)	(3)	(160)
- UAE	13,485	1,690	170	13,655	(1,019)	(176)	(2)	(1,021)
- other	8,978	112	196	9,174	(336)	(4)	(4)	(340)
North America	53,386	14,491	9,292	62,678	(637)	(73)	(23)	(660)
- US	30,425	7,722	7,708	38,133	(367)	(38)	(3)	(370)
- Canada	22,361	6,645	1,440	23,801	(243)	(27)	(9)	(252)
- other	600	124	144	744	(27)	(8)	(11)	(38)
Latin America	12,031	1,833	1,096	13,127	(661)	(113)	(10)	(671)
- Mexico	10,244	1,832	1,083	11,327	(589)	(113)	(10)	(599)
- other	1,787	1	13	1,800	(72)	-	-	(72)
At 31 Dec 2020	527,088	127,027	64,580	591,668	(9,494)	(1,167)	(265)	(9,759)

1 Real estate lending within this disclosure corresponds solely to the industry of the borrower.

Personal lending - loans and advances to customers at amortised cost by country/territory
	Gross carrying amount				Allowance for ECL
	First lien residential mortgages	Other personal	Of which: credit cards	Total	First lien residential mortgages	Other personal	Of which: credit cards	Total
	$m	$m	$m	$m	$m	$m	$m	$m
Europe	169,403	49,880	8,481	219,283	(362)	(1,607)	(684)	(1,969)
- UK	161,816	19,359	8,087	181,175	(240)	(1,406)	(678)	(1,646)
- France¹	3,372	23,488	349	26,860	(42)	(102)	(5)	(144)
- Germany	-	303	-	303	-	-	-	-
- Switzerland	1,336	6,408	-	7,744	-	(82)	-	(82)
- other	2,879	322	45	3,201	(80)	(17)	(1)	(97)
Asia	144,930	58,102	10,550	203,032	(83)	(723)	(474)	(806)
- Hong Kong	94,761	44,387	7,392	139,148	(1)	(357)	(244)	(358)
- Australia	20,536	555	472	21,091	(7)	(37)	(35)	(44)
- India	922	522	176	1,444	(9)	(49)	(37)	(58)
- Indonesia	71	260	139	331	(1)	(23)	(16)	(24)
- mainland China	9,969	1,121	602	11,090	(7)	(69)	(63)	(76)
- Malaysia	2,630	2,653	713	5,283	(51)	(82)	(24)	(133)
- Singapore	7,494	6,650	334	14,144	-	(44)	(12)	(44)
- Taiwan	5,521	1,096	216	6,617	-	(15)	(4)	(15)
- other	3,026	858	506	3,884	(7)	(47)	(39)	(54)
Middle East and North Africa (excluding Saudi Arabia)	2,217	3,099	820	5,316	(34)	(228)	(115)	(262)
- Egypt	-	357	90	357	-	(5)	(2)	(5)
- UAE	1,875	1,170	415	3,045	(26)	(134)	(74)	(160)
- other	342	1,572	315	1,914	(8)	(89)	(39)	(97)
North America	42,549	3,643	997	46,192	(161)	(183)	(135)	(344)
- US	16,529	1,308	710	17,837	(21)	(146)	(125)	(167)
- Canada	24,891	2,166	251	27,057	(38)	(29)	(10)	(67)
- other	1,129	169	36	1,298	(102)	(8)	-	(110)
Latin America	4,523	4,101	1,380	8,624	(109)	(516)	(207)	(625)
- Mexico	4,367	3,557	1,093	7,924	(109)	(481)	(188)	(590)
- other	156	544	287	700	-	(35)	(19)	(35)
At 30 Jun 2021	363,622	118,825	22,228	482,447	(749)	(3,257)	(1,615)	(4,006)

Europe	162,630	51,033	8,471	213,663	(364)	(1,980)	(859)	(2,344)
- UK	154,839	19,696	8,064	174,535	(236)	(1,762)	(852)	(1,998)
- France¹	3,623	23,982	358	27,605	(43)	(120)	(5)	(163)
- Germany	-	368	-	368	-	-	-	-
- Switzerland	1,195	6,641	-	7,836	-	(79)	-	(79)
- other	2,973	346	49	3,319	(85)	(19)	(2)	(104)
Asia	141,581	45,732	11,186	187,313	(80)	(841)	(563)	(921)
- Hong Kong	91,997	31,594	7,573	123,591	-	(387)	(265)	(387)
- Australia	20,320	602	514	20,922	(12)	(47)	(45)	(59)
- India	933	544	215	1,477	(9)	(45)	(34)	(54)
- Indonesia	71	288	167	359	-	(37)	(26)	(37)
- mainland China	9,679	1,155	644	10,834	(6)	(81)	(73)	(87)
- Malaysia	2,797	2,964	841	5,761	(41)	(102)	(35)	(143)
- Singapore	7,394	6,537	375	13,931	-	(55)	(17)	(55)
- Taiwan	5,407	1,069	277	6,476	-	(15)	(5)	(15)
- other	2,983	979	580	3,962	(12)	(72)	(63)	(84)
Middle East and North Africa (excluding Saudi Arabia)	2,192	3,341	863	5,533	(43)	(275)	(142)	(318)
- Egypt	-	360	89	360	-	(8)	(3)	(8)
- UAE	1,841	1,158	432	2,999	(37)	(163)	(92)	(200)
- other	351	1,823	342	2,174	(6)	(104)	(47)	(110)
North America	41,826	4,552	1,373	46,378	(159)	(266)	(193)	(425)
- US	18,430	2,141	1,091	20,571	(26)	(226)	(182)	(252)
- Canada	22,241	2,230	244	24,471	(36)	(31)	(10)	(67)
- other	1,155	181	38	1,336	(97)	(9)	(1)	(106)
Latin America	4,053	3,869	1,406	7,922	(109)	(614)	(290)	(723)
- Mexico	3,901	3,351	1,119	7,252	(107)	(578)	(268)	(685)
- other	152	518	287	670	(2)	(36)	(22)	(38)
At 31 Dec 2020	352,282	108,527	23,299	460,809	(755)	(3,976)	(2,047)	(4,731)

1 Included in other personal lending as at 30 June 2021 is $20,336m (31 December 2020: $20,625m) guaranteed by Crédit Logement.

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