SCPLC Half Year Results 2022 - Part 2

RNS Number : 1887U

Standard Chartered PLC

29 July 2022

 

Standard Chartered PLC - Half Year Results 2022 - Part 2

Table of contents

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

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

The information within this report is unaudited.

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

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

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

Page 1

Risk review and Capital review

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

Page 2

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

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

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

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

Page 3

Credit Risk (reviewed)

Basis of preparation

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

Loans and advances to customers and banks held at amortised cost in this Risk profile section include reverse repurchase agreement balances held at amortised cost, per Note 14 Reverse repurchase and repurchase agreements including other similar secured lending and borrowing.

Credit Risk overview

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

Impairment model

IFRS 9 requires an impairment model that requires the recognition of expected credit losses (ECL) on all financial debt instruments held at amortised cost, fair value through other comprehensive income (FVOCI), undrawn loan commitments and financial guarantees.

Staging of financial instruments

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

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

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

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

Stage 1

• 12-month ECL

• Performing

Stage 2

• Lifetime ECL

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

Stage 3

• Credit-impaired

• Non-performing

Page 4

IFRS 9 principles and approaches

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

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

Page 5

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

Maximum exposure to Credit risk (reviewed)

The table below presents the Group's maximum exposure to Credit Risk for its on-balance sheet and off-balance sheet financial instruments as at 30 June 2022, before and after taking into account any collateral held or other Credit Risk mitigation.

The Group's on-balance sheet maximum exposure to Credit Risk increased by $10.7 billion to $806 billion (2021: $796 billion).

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

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

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

Page 6

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

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

2 Excludes equity and other investments of $755 million (31 December 2021: $737 million). Further details are set out in Note 13 Financial instruments

3 Excludes equity and other investments of $2,325 million (31 December 2021: $5,861 million). Further details are set out in Note 13 Financial instruments

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

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

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

7 Collateral capped at maximum exposure (over-collateralised)

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

Analysis of financial instrument by stage (reviewed)

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

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

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

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

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

Page 7

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

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

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

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

4 Stage 1 ECL is not material

5 Stage 3 includes gross of $28 million and ECL $6 million originated credit-impaired debt securities.

Page 8

	31.12.21
	Stage 1			Stage 2			Stage 3			Total
	Gross balance1 $million	Total credit impairment $million	Net carrying value $million	Gross balance1 $million	Total credit impairment $million	Net carrying value $million	Gross balance1 $million	Total credit impairment $million	Net carrying value $million	Gross balance1 $million	Total credit impairment $million	Net carrying value $million
Cash and balances at central banks	72,601	-	72,601	66	(4)	62	-	-	-	72,667	(4)	72,663
Loans and advances to banks (amortised cost)	43,776	(12)	43,764	580	(4)	576	54	(11)	43	44,410	(27)	44,383
Loans and advances to customers (amortised cost)	279,178	(473)	278,705	16,849	(524)	16,325	8,095	(4,657)	3,438	304,122	(5,654)	298,468
Debt securities and other eligible bills5	157,352	(67)		5,315	(42)		113	(66)		162,780	(175)
Amortised cost	41,092	(13)	41,079	200	(1)	199	113	(66)	47	41,405	(80)	41,325
FVOCI2	116,260	(54)		5,115	(41)		-	-		121,375	(95)
Accrued income (amortised cost)4	1,674	-	1,674	-	-	-	-	-	-	1,674	-	1,674
Assets held for sale4	52	-	52	-	-	-	-	-	-	52	-	52
Other assets	40,067	-	40,067	-	-	-	4	(3)	1	40,071	(3)	40,068
Undrawn commitments3	149,530	(42)		8,993	(60)		-	-		158,523	(102)
Financial guarantees, trade credits and irrevocable letter of credits3	54,923	(15)		2,813	(22)		799	(207)		58,535	(244)
Total	799,153	(609)		34,616	(656)		9,065	(4,944)		842,834	(6,209)

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

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

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

4 Stage 1 ECL is not material

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

Credit quality analysis (reviewed)

Credit quality by client segment

For the Corporate, Commercial and Institutional Banking portfolio, exposures are analysed by credit grade (CG), which plays a central role in the quality assessment and monitoring of risk. All loans are assigned a CG, which is reviewed periodically and amended in light of changes in the borrower's circumstances or behaviour. CGs 1 to 12 are assigned to stage 1 and stage 2 (performing) clients or accounts, while CGs 13 and 14 are assigned to stage 3 (defaulted) clients. The mapping of credit quality is as follows.

Mapping of credit quality

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

	Corporate, Commercial & Institutional Banking			Private Banking1	Consumer & Business Banking3
Credit quality description	Internal grade mapping	S&P external ratings equivalent	Regulatory PD range (%)	Internal ratings	Number of days past due
Strong	1A to 5B	AAA/AA+ to BBB-/BB+	0 to 0.425	Class I and Class IV	Current loans (no past dues nor impaired)
Satisfactory	6A to 11C	BB+/BB to B-/CCC+ 2	0.426 to 15.75	Class II and Class III	Loans past due till 29 days
Higher risk	Grade 12	CCC to C	15.751 to 99.999	Stressed Assets Risk managed	Past due loans 30 days and over till 90 days

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

2 Banks' rating: BB to CCC/C

3 Medium enterprise clients within Business Banking are managed using the same internal credit grades as Corporate, Commercial and Institutional Banking

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

Page 9

Stage 1

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

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

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

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

Central and other items segment increased by $4 billion.

Stage 2

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

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

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

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

Stage 3

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

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

Page 10

Loans and advances by client segment (reviewed)

Amortised cost	30.06.22
	Banks $million	Customers					Undrawn commitments $million	Financial Guarantees $million
		Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking $million	Ventures $million	Central & other items $million	Customer Total $million
Stage 1	35,779	121,965	130,104	340	26,727	279,136	157,596	54,991
- Strong	24,145	79,442	125,633	339	26,628	232,042	140,232	40,220
- Satisfactory	11,634	42,523	4,471	1	99	47,094	17,364	14,771
Stage 2	371	10,488	1,894	5	152	12,539	5,245	2,781
- Strong	34	1,614	1,299	3	-	2,916	1,475	347
- Satisfactory	337	8,191	278	1	-	8,470	3,213	2,146
- Higher risk	-	683	317	1	152	1,153	557	288
Of which (stage 2):
- Less than 30 days past due	-	54	278	1	-	333	-	-
- More than 30 days past due	-	8	317	1	-	326	-	-
Stage 3, credit-impaired financial assets	78	5,552	1,500	1	-	7,053	-	643
Gross balance¹	36,228	138,005	133,498	346	26,879	298,728	162,841	58,415
Stage 1	(7)	(141)	(359)	(2)	-	(502)	(37)	(16)
- Strong	(4)	(49)	(272)	(2)	-	(323)	(22)	(8)
- Satisfactory	(3)	(92)	(87)	-	-	(179)	(15)	(8)
Stage 2	(5)	(253)	(130)	-	(2)	(385)	(42)	(16)
- Strong	-	(13)	(53)	-	-	(66)	(6)	(1)
- Satisfactory	(5)	(201)	(37)	-	-	(238)	(32)	(9)
- Higher risk	-	(39)	(40)	-	(2)	(81)	(4)	(6)
Of which (stage 2):
- Less than 30 days past due	-	-	(37)	-	-	(37)	-	-
- More than 30 days past due	-	-	(40)	-	-	(40)	-	-
Stage 3, credit-impaired financial assets	(15)	(3,575)	(758)	-	-	(4,333)	-	(190)
Total credit impairment	(27)	(3,969)	(1,247)	(2)	(2)	(5,220)	(79)	(222)
Net carrying value	36,201	134,036	132,251	344	26,877	293,508
Stage 1	0.0%	0.1%	0.3%	0.6%	0.0%	0.2%	0.0%	0.0%
- Strong	0.0%	0.1%	0.2%	0.6%	0.0%	0.1%	0.0%	0.0%
- Satisfactory	0.0%	0.2%	1.9%	0.0%	0.0%	0.4%	0.1%	0.1%
Stage 2	1.3%	2.4%	6.9%	0.0%	1.3%	3.1%	0.8%	0.6%
- Strong	0.0%	0.8%	4.1%	0.0%	0.0%	2.3%	0.4%	0.3%
- Satisfactory	1.5%	2.5%	13.3%	0.0%	0.0%	2.8%	1.0%	0.4%
- Higher risk	0.0%	5.7%	12.6%	0.0%	1.3%	7.0%	0.7%	2.1%
Of which (stage 2):
- Less than 30 days past due	0.0%	0.0%	13.3%	0.0%	0.0%	11.1%	0.0%	0.0%
- More than 30 days past due	0.0%	0.0%	12.6%	0.0%	0.0%	12.3%	0.0%	0.0%
Stage 3, credit-impaired financial assets (S3)	19.2%	64.4%	50.5%	0.0%	0.0%	61.4%	0.0%	29.5%
Cover ratio	0.1%	2.9%	0.9%	0.6%	0.0%	1.7%	0.0%	0.4%
Fair value through profit or loss
Performing	26,439	58,280	42	-	2,639	60,961	-	-
- Strong	22,848	51,561	42	-	2,638	54,241	-	-
- Satisfactory	3,591	6,655	-	-	1	6,656	-	-
- Higher risk	-	64	-	-	-	64	-	-
Defaulted (CG13-14)	-	5	-	-	-	5	-	-
Gross balance (FVTPL)2	26,439	58,285	42	-	2,639	60,966	-	-
Net carrying value (incl FVTPL)	62,640	192,321	132,293	344	29,516	354,474	-	-

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

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

Page 11

Amortised cost	31.12.21 (Restated)1
	Banks $million	Customers					Undrawn commitments $million	Financial Guarantees $million
		Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking1 $million	Ventures1 $million	Central & other items $million	Customer Total $million
Stage 1	43,776	122,368	134,289	82	22,439	279,178	149,530	54,923
- Strong	30,813	77,826	129,486	82	22,333	229,727	132,274	37,418
- Satisfactory	12,963	44,542	4,803	-	106	49,451	17,256	17,505
Stage 2	580	14,818	1,912	9	110	16,849	8,993	2,813
- Strong	126	2,366	1,253	-	-	3,619	2,786	714
- Satisfactory	105	11,180	308	-	-	11,488	5,235	1,546
- Higher risk	349	1,272	351	9	110	1,742	972	553
Of which (stage 2):
- Less than 30 days past due	-	77	308	-	-	385	-	-
- More than 30 days past due	-	49	351	9	-	409	-	-
Stage 3, credit-impaired financial assets	54	6,520	1,575	-	-	8,095	-	799
Gross balance2	44,410	143,706	137,776	91	22,549	304,122	158,523	58,535
Stage 1	(12)	(103)	(369)	(1)	-	(473)	(42)	(15)
- Strong	(4)	(58)	(282)	(1)	-	(341)	(23)	(5)
- Satisfactory	(8)	(45)	(87)	-	-	(132)	(19)	(10)
Stage 2	(4)	(341)	(181)	(2)	-	(524)	(60)	(22)
- Strong	(2)	(62)	(104)	-	-	(166)	(6)	(1)
- Satisfactory	(2)	(179)	(32)	-	-	(211)	(46)	(9)
- Higher risk	-	(100)	(45)	(2)	-	(147)	(8)	(12)
Of which (stage 2):
- Less than 30 days past due	-	(2)	(32)	-	-	(34)	-	-
- More than 30 days past due	-	(3)	(45)	(2)	-	(50)	-	-
Stage 3, credit-impaired financial assets	(11)	(3,861)	(796)	-	-	(4,657)	-	(207)
Total credit impairment	(27)	(4,305)	(1,346)	(3)	-	(5,654)	(102)	(244)
Net carrying value	44,383	139,401	136,430	88	22,549	298,468
Stage 1	0.0%	0.1%	0.3%	1.2%	0.0%	0.2%	0.0%	0.0%
- Strong	0.0%	0.1%	0.2%	1.2%	0.0%	0.1%	0.0%	0.0%
- Satisfactory	0.1%	0.1%	1.8%	0.0%	0.0%	0.3%	0.1%	0.1%
Stage 2	0.7%	2.3%	9.5%	22.2%	0.0%	3.1%	0.7%	0.8%
- Strong	1.6%	2.6%	8.3%	0.0%	0.0%	4.6%	0.2%	0.1%
- Satisfactory	1.9%	1.6%	10.4%	0.0%	0.0%	1.8%	0.9%	0.6%
- Higher risk	0.0%	7.9%	12.8%	22.2%	0.0%	8.4%	0.8%	2.2%
Of which (stage 2):
- Less than 30 days past due	0.0%	2.6%	10.4%	0.0%	0.0%	8.8%	0.0%	0.0%
- More than 30 days past due	0.0%	6.1%	13.1%	0.0%	0.0%	12.2%	0.0%	0.0%
Stage 3, credit-impaired financial assets (S3)	20.4%	59.2%	50.5%	0.0%	0.0%	57.5%	0.0%	25.9%
Cover ratio	0.1%	3.0%	1.0%	3.3%	0.0%	1.9%	0.1%	0.4%
Fair value through profit or loss
Performing	22,574	69,356	67	-	1,774	71,197	-	-
- Strong	20,132	53,756	67	-	1,772	55,595	-	-
- Satisfactory	2,442	15,600	-	-	2	15,602	-	-
- Higher risk	-	-	-	-	-	-	-	-
Defaulted (CG13-14)	-	38	-	-	-	38	-	-
Gross balance (FVTPL)3	22,574	69,394	67	-	1,774	71,235	-	-
Net carrying value (incl FVTPL)	66,957	208,795	136,497	88	24,323	369,703	-	-

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

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

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

Page 12

Loans and advances by client segment credit quality analysis

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

Credit grade	Regulatory 1 year PD range (%)	S&P external ratings equivalent	31.12.21
			Gross				Credit impairment
			Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Strong			77,826	2,366	-	80,192	(58)	(62)	-	(120)
1A-2B	0 - 0.045	AA- and above	14,013	216	-	14,229	(1)	-	-	(1)
3A-4A	0.046 - 0.110	A+ to A-	23,173	515	-	23,688	(3)	-	-	(3)
4B-5B	0.111 - 0.425	BBB+ to BBB-/BB+	40,640	1,635	-	42,275	(54)	(62)	-	(116)
Satisfactory			44,542	11,180	-	55,722	(45)	(179)	-	(224)
6A-7B	0.426 - 1.350	BB+/BB to BB-	27,009	2,894	-	29,903	(21)	(40)	-	(61)
8A-9B	1.351 - 4.000	BB-/B+ to B+/B	11,910	5,592	-	17,502	(13)	(90)	-	(103)
10A-11C	4.001 - 15.75	B to B-/CCC	5,623	2,694	-	8,317	(11)	(49)	-	(60)
Higher risk			-	1,272	-	1,272	-	(100)	-	(100)
12	15.751 - 99.999	CCC/C	-	1,272	-	1,272	-	(100)	-	(100)
Defaulted			-	-	6,520	6,520	-	-	(3,861)	(3,861)
13-14	100	Defaulted	-	-	6,520	6,520	-	-	(3,861)	(3,861)
Total			122,368	14,818	6,520	143,706	(103)	(341)	(3,861)	(4,305)

Page 13

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

Credit grade	31.12.21 (Restated1)
	Gross				Credit impairment
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Strong	129,486	1,253	-	130,739	(282)	(104)	-	(386)
Secured	112,167	884	-	113,051	(48)	(19)	-	(67)
Unsecured	17,319	369	-	17,688	(234)	(85)	-	(319)
Satisfactory	4,803	308	-	5,111	(87)	(32)	-	(119)
Secured	4,524	164	-	4,688	(44)	(1)	-	(45)
Unsecured	279	144	-	423	(43)	(31)	-	(74)
Higher risk	-	351	-	351	-	(45)	-	(45)
Secured	-	250	-	250	-	(11)	-	(11)
Unsecured	-	101	-	101	-	(34)	-	(34)
Defaulted	-	-	1,575	1,575	-	-	(796)	(796)
Secured			1,107	1,107			(516)	(516)
Unsecured	-	-	468	468	-	-	(280)	(280)
Total	134,289	1,912	1,575	137,776	(369)	(181)	(796)	(1,346)

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

Credit quality by geographic region

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

Loans and advances to customers

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

1 Includes reverse repurchase agreements and other similar secured lending

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

Page 14

Loans and advances to banks

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

1 Includes reverse repurchase agreements and other similar secured lending

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

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

Methodology

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

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

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

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

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

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

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

Changes to ECL models, which incorporates changes to model approaches and methodologies, is not reported as a separate line item as it has an impact over a number of lines and stages.

Page 15

Movements during the period

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

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

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

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

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

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

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

Page 16

All segments (reviewed)

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 35			Total
	Gross balance3 $million	Total credit impair-ment $million	Net $million	Gross balance3 $million	Total credit impair-ment $million	Net $million	Gross balance3 $million	Total credit impair-ment $million	Net $million	Gross balance3 $million	Total credit impair-ment $million	Net $million
As at 1 January 2021	642,960	(663)	642,297	39,787	(881)	38,906	10,100	(5,593)	4,507	692,847	(7,137)	685,710
Transfers to stage 1	25,975	(620)	25,355	(25,924)	620	(25,304)	(51)	-	(51)	-	-	-
Transfers to stage 2	(53,994)	211	(53,783)	54,335	(220)	54,115	(341)	9	(332)	-	-	-
Transfers to stage 3	(212)	3	(209)	(2,822)	335	(2,487)	3,034	(338)	2,696	-	-	-
Net change in exposures⁵	84,288	(132)	84,156	(30,551)	169	(30,382)	(2,429)	661	(1,768)	51,308	698	52,006
Net remeasurement from stage changes	-	54	54	-	(157)	(157)	-	(212)	(212)	-	(315)	(315)
Changes in risk parameters	-	79	79	-	(89)	(89)	-	(915)	(915)	-	(925)	(925)
Write-offs	-	-	-	-	-	-	(1,215)	1,215	-	(1,215)	1,215	-
Interest due but unpaid	-	-	-	-	-	-	(189)	189	-	(189)	189	-
Discount unwind	-	-	-	-	-	-	-	227	227	-	227	227
Exchange translation differences and other movements¹	(14,258)	459	(13,799)	(275)	(429)	(704)	152	(184)	(32)	(14,381)	(154)	(14,535)
As at 31 December 2021²	684,759	(609)	684,150	34,550	(652)	33,898	9,061	(4,941)	4,120	728,370	(6,202)	722,168
Income statement ECL (charge)/release		1			(77)			(466)			(542)
Recoveries of amounts previously written off		-			-			288			288
Total credit impairment (charge)/release		1			(77)			(178)			(254)
As at 1 January 2022	684,759	(609)	684,150	34,550	(652)	33,898	9,061	(4,941)	4,120	728,370	(6,202)	722,168
Transfers to stage 1	15,825	(285)	15,540	(15,797)	285	(15,512)	(28)	-	(28)	-	-	-
Transfers to stage 2	(23,623)	109	(23,514)	24,047	(120)	23,927	(424)	11	(413)	-	-	-
Transfers to stage 3	(88)	-	(88)	(1,232)	101	(1,131)	1,320	(101)	1,219	-	-	-
Net change in exposures⁵	33,424	(47)	33,377	(14,431)	31	(14,400)	(868)	214	(654)	18,125	198	18,323
Net remeasurement from stage changes	-	31	31	-	(93)	(93)	-	(148)	(148)	-	(210)	(210)
Changes in risk parameters	-	33	33	-	59	59	-	(474)	(474)	-	(382)	(382)
Write-offs	-	-	-	-	-	-	(581)	581	-	(581)	581	-
Interest due but unpaid	-	-	-	-	-	-	(189)	189	-	(189)	189	-
Discount unwind	-	-	-	-	-	-	-	65	65	-	65	65
Exchange translation differences and other movements¹	(23,530)	145	(23,385)	(1,348)	(93)	(1,441)	(411)	(4)	(415)	(25,289)	48	(25,241)
As at 30 June 2022²	686,767	(623)	686,144	25,789	(482)	25,307	7,880	(4,608)	3,272	720,436	(5,713)	714,723
Income statement ECL (charge)/release		17			(3)			(408)			(394)
Recoveries of amounts previously written off		-			-			131			131
Total credit impairment (charge)/release4		17			(3)			(277)			(263)

1 Includes fair value adjustments and amortisation on debt securities

2 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets gross balances of $120,060 million (2021: $114,464 million) and
Total credit impairment of $7 million (2021: $7 million)

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

4 Statutory basis

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

Page 17

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

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
	Gross balance $million	Total credit impair-ment $million	Net $million	Gross balance $million	Total credit impair-ment $million	Net $million	Gross balance $million	Total credit impair-ment $million	Net $million	Gross balance $million	Total credit impair-ment $million	Net3 $million
As at 1 January 2021	149,316	(56)	149,260	3,506	(26)	3,480	114	(58)	56	152,936	(140)	152,796
Transfers to stage 1	403	(11)	392	(403)	11	(392)	-	-	-	-	-	-
Transfers to stage 2	(2,358)	16	(2,342)	2,358	(16)	2,342	-	-	-	-	-	-
Transfers to stage 3	-	-	-	-	-	-	-	-	-	-	-	-
Net change in exposures2	14,670	(39)	14,631	(155)	(11)	(166)	-	1	1	14,515	(49)	14,466
Net remeasurement from stage changes	-	13	13	-	(17)	(17)	-	-	-	-	(4)	(4)
Changes in risk parameters	-	21	21	-	8	8	-	(3)	(3)	-	26	26
Write-offs	-	-	-	-	-	-	-	-	-	-	-	-
Interest due but unpaid	-	-	-	-	-	-	-	-	-	-	-	-
Exchange translation differences and other movements1	(4,679)	(11)	(4,690)	9	9	18	(1)	(6)	(7)	(4,671)	(8)	(4,679)
As at 31 December 2021	157,352	(67)	157,285	5,315	(42)	5,273	113	(66)	47	162,780	(175)	162,605
Income statement ECL (charge)/release1		(5)			(20)			(2)			(27)
Recoveries of amounts previously written off		-			-			-			-
Total credit impairment (charge)/release		(5)			(20)			(2)			(27)
As at 1 January 2022	157,352	(67)	157,285	5,315	(42)	5,273	113	(66)	47	162,780	(175)	162,605
Transfers to stage 1	1,410	(17)	1,393	(1,410)	17	(1,393)	-	-	-	-	-	-
Transfers to stage 2	(1,470)	6	(1,464)	1,470	(6)	1,464	-	-	-	-	-	-
Transfers to stage 3	-	-	-	-	-	-	-	-	-	-	-	-
Net change in exposures2	10,054	(19)	10,035	(135)	(7)	(142)	-	1	1	9,919	(25)	9,894
Net remeasurement from stage changes	-	9	9	-	(2)	(2)	-	-	-	-	7	7
Changes in risk parameters	-	15	15	-	4	4	-	-	-	-	19	19
Write-offs	-	-	-	-	-	-	-	-	-	-	-	-
Interest due but unpaid	-	-	-	-	-	-	-	-	-	-	-	-
Exchange translation differences and other movements1	(8,081)	12	(8,069)	(387)	2	(385)	(7)	(5)	(12)	(8,475)	9	(8,466)
As at 30 June 2022	159,265	(61)	159,204	4,853	(34)	4,819	106	(70)	36	164,224	(165)	164,059
Income statement ECL (charge)/release		5			(5)			1			1
Recoveries of amounts previously written off		-			-			-			-
Total credit impairment (charge)/release		5			(5)			1			1

1 Includes fair value adjustments and amortisation on debt securities

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

3 FVOCI instruments are not presented net of ECL . While the presentation is on a net basis for the table , the total net on-balance sheet amount to $164,137 million (31 December 2021: $162,700 million. Refer to the Analysis of financial instrument by stage table

Page 18

Corporate, Commercial & Institutional Banking (reviewed)

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
	Gross balance1 $million	Total credit impair-ment $million	Net $million	Gross balance1 $million	Total credit impair-ment $million	Net $million	Gross balance1 $million	Total credit impair-ment $million	Net $million	Gross balance1 $million	Total credit impair-ment $million	Net $million
As at 1 January 2021	292,453	(154)	292,299	31,742	(599)	31,143	8,422	(4,803)	3,619	332,617	(5,556)	327,061
Transfers to stage 1	21,123	(243)	20,880	(21,123)	243	(20,880)	-	-	-	-	-	-
Transfers to stage 2	(45,354)	103	(45,251)	45,556	(112)	45,444	(202)	9	(193)	-	-	-
Transfers to stage 3	(69)	-	(69)	(1,989)	164	(1,825)	2,058	(164)	1,894	-	-	-
Net change in exposures	50,762	(62)	50,700	(28,447)	133	(28,314)	(2,082)	636	(1,446)	20,233	707	20,940
Net remeasurement from stage changes	-	1	1	-	(27)	(27)	-	(145)	(145)	-	(171)	(171)
Changes in risk parameters	-	41	41	-	(105)	(105)	-	(434)	(434)	-	(498)	(498)
Write-offs	-	-	-	-	-	-	(510)	510	-	(510)	510	-
Interest due but unpaid	-	-	-	-	-	-	(224)	224	-	(224)	224	-
Discount unwind	-	-	-	-	-	-	-	191	191	-	191	191
Exchange translation differences and other movements	(5,783)	151	(5,632)	(302)	(122)	(424)	(90)	(103)	(193)	(6,175)	(74)	(6,249)
As at 31 December 2021	313,132	(163)	312,969	25,437	(425)	25,012	7,372	(4,079)	3,293	345,941	(4,667)	341,274
Income statement ECL (charge)/release		(20)			1			57			38
Recoveries of amounts previously written off		-			-			19			19
Total credit impairment (charge)/release		(20)			1			76			57
As at 1 January 2022	313,132	(163)	312,969	25,437	(425)	25,012	7,372	(4,079)	3,293	345,941	(4,667)	341,274
Transfers to stage 1	11,236	(102)	11,134	(11,236)	102	(11,134)	-	-	-	-	-	-
Transfers to stage 2	(19,360)	59	(19,301)	19,745	(71)	19,674	(385)	12	(373)	-	-	-
Transfers to stage 3	-	-	-	(936)	28	(908)	936	(28)	908	-	-	-
Net change in exposures	10,908	(22)	10,886	(13,454)	31	(13,423)	(748)	213	(535)	(3,294)	222	(3,072)
Net remeasurement from stage changes	-	2	2	-	(45)	(45)	-	(135)	(135)	-	(178)	(178)
Changes in risk parameters	-	(8)	(8)	-	102	102	-	(324)	(324)	-	(230)	(230)
Write-offs	-	-	-	-	-	-	(318)	318	-	(318)	318	-
Interest due but unpaid	-	-	-	-	-	-	(195)	195	-	(195)	195	-
Discount unwind	-	-	-	-	-	-	-	52	52	-	52	52
Exchange translation differences and other movements	(7,498)	40	(7,458)	(806)	(36)	(842)	(390)	(4)	(394)	(8,694)	-	(8,694)
As at 30 June 2022	308,418	(194)	308,224	18,750	(314)	18,436	6,272	(3,780)	2,492	333,440	(4,288)	329,152
Income statement ECL (charge)/release		(28)			88			(246)			(186)
Recoveries of amounts previously written off		-			-			5			5
Total credit impairment (charge)/release		(28)			88			(241)			(181)

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

Page 19

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

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million
As at 1 January 2021	182,044	(445)	181,599	4,534	(259)	4,275	1,561	(730)	831	188,139	(1,434)	186,705
Transfers to stage 1	4,450	(365)	4,085	(4,399)	365	(4,034)	(51)	-	(51)	-	-	-
Transfers to stage 2	(6,270)	89	(6,181)	6,409	(89)	6,320	(139)	-	(139)	-	-	-
Transfers to stage 3	(144)	2	(142)	(833)	172	(661)	977	(174)	803	-	-	-
Net change in exposures	14,055	(28)	14,027	(2,060)	47	(2,013)	(347)	24	(323)	11,648	43	11,691
Net remeasurement from stage changes	-	40	40	-	(113)	(113)	-	(66)	(66)	-	(139)	(139)
Changes in risk parameters	-	17	17	-	8	8	-	(480)	(480)	-	(455)	(455)
Write-offs	-	-	-	-	-	-	(705)	705	-	(705)	705	-
Interest due but unpaid	-	-	-	-	-	-	35	(35)	-	35	(35)	-
Discount unwind	-	-	-	-	-	-	-	36	36	-	36	36
Exchange translation differences and other movements	(3,275)	313	(2,962)	24	(316)	(292)	247	(77)	170	(3,004)	(80)	(3,084)
As at 31 December 2021	190,860	(377)	190,483	3,675	(185)	3,490	1,578	(797)	781	196,113	(1,359)	194,754
Income statement ECL (charge)/release		29			(58)			(522)			(551)
Recoveries of amounts previously written off		-			-			269			269
Total credit impairment (charge)/release		29			(58)			(253)			(282)
As at 1 January 2022	190,860	(377)	190,483	3,675	(185)	3,490	1,578	(797)	781	196,113	(1,359)	194,754
Transfers to stage 1	3,175	(165)	3,010	(3,147)	165	(2,982)	(28)	-	(28)	-	-	-
Transfers to stage 2	(2,792)	43	(2,749)	2,831	(43)	2,788	(39)	-	(39)	-	-	-
Transfers to stage 3	(88)	-	(88)	(296)	73	(223)	384	(73)	311	-	-	-
Net change in exposures	5,638	(6)	5,632	(944)	7	(937)	(121)	-	(121)	4,573	1	4,574
Net remeasurement from stage changes	-	20	20	-	(46)	(46)	-	(12)	(12)	-	(38)	(38)
Changes in risk parameters	-	29	29	-	(47)	(47)	-	(150)	(150)	-	(168)	(168)
Write-offs	-	-	-	-	-	-	(262)	262	-	(262)	262	-
Interest due but unpaid	-	-	-	-	-	-	3	(3)	-	3	(3)	-
Discount unwind	-	-	-	-	-	-	-	13	13	-	13	13
Exchange translation differences and other movements	(7,396)	89	(7,307)	(101)	(53)	(154)	(12)	4	(8)	(7,509)	40	(7,469)
As at 30 June 2022	189,397	(367)	189,030	2,018	(129)	1,889	1,503	(756)	747	192,918	(1,252)	191,666
Income statement ECL (charge)/release		43			(86)			(162)			(205)
Recoveries of amounts previously written off		-			-			126			126
Total credit impairment (charge)/release		43			(86)			(36)			(79)

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

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

Page 20

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

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million
As at 1 January 2021	127,448	(72)	127,376	3,363	(52)	3,311	1,058	(418)	640	131,869	(542)	131,327
Transfers to stage 1	2,884	(37)	2,847	(2,843)	37	(2,806)	(41)	-	(41)	-	-	-
Transfers to stage 2	(3,888)	9	(3,879)	4,007	(9)	3,998	(119)	-	(119)	-	-	-
Transfers to stage 3	(107)	1	(106)	(400)	8	(392)	507	(9)	498	-	-	-
Net change in exposures	13,009	(9)	13,000	(1,452)	3	(1,449)	(224)	24	(200)	11,333	18	11,351
Net remeasurement from stage changes	-	(1)	(1)	-	(2)	(2)	-	(1)	(1)	-	(4)	(4)
Changes in risk parameters	-	4	4	-	14	14	-	(144)	(144)	-	(126)	(126)
Write-offs	-	-	-	-	-	-	(125)	125	-	(125)	125	-
Interest due but unpaid	-	-	-	-	-	-	(3)	3	-	(3)	3	-
Discount unwind	-	-	-	-	-	-	-	34	34	-	34	34
Exchange translation differences and other movements	(2,746)	9	(2,737)	10	(31)	(21)	50	(131)	(81)	(2,686)	(153)	(2,839)
As at 31 December 2021	136,600	(96)	136,504	2,685	(32)	2,653	1,103	(517)	586	140,388	(645)	139,743
Income statement ECL (charge)/release		(6)			15			(121)			(112)
Recoveries of amounts previously written off		-			-			68			68
Total credit impairment (charge)/release		(6)			15			(53)			(44)
As at 1 January 2022	136,600	(96)	136,504	2,685	(32)	2,653	1,103	(517)	586	140,388	(645)	139,743
Transfers to stage 1	2,212	(21)	2,191	(2,192)	21	(2,171)	(20)	-	(20)	-	-	-
Transfers to stage 2	(1,622)	13	(1,609)	1,655	(13)	1,642	(33)	-	(33)	-	-	-
Transfers to stage 3	(70)	-	(70)	(147)	-	(147)	217	-	217	-	-	-
Net change in exposures	2,392	(4)	2,388	(530)	-	(530)	(84)	-	(84)	1,778	(4)	1,774
Net remeasurement from stage changes	-	-	-	-	(1)	(1)	-	(2)	(2)	-	(3)	(3)
Changes in risk parameters	-	(2)	(2)	-	42	42	-	(44)	(44)	-	(4)	(4)
Write-offs	-	-	-	-	-	-	(52)	52	-	(52)	52	-
Interest due but unpaid	-	-	-	-	-	-	5	(5)	-	5	(5)	-
Discount unwind	-	-	-	-	-	-	-	6	6	-	6	6
Exchange translation differences and other movements	(5,457)	25	(5,432)	(67)	(30)	(97)	(100)	(26)	(126)	(5,624)	(31)	(5,655)
As at 30 June 2022	134,055	(85)	133,970	1,404	(13)	1,391	1,036	(536)	500	136,495	(634)	135,861
Income statement ECL (charge)/release		(6)			41			(46)			(11)
Recoveries of amounts previously written off		-			-			35			35
Total credit impairment (charge)/release		(6)			41			(11)			24

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

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

Page 21

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

Amortised cost and FVOCI	Stage 1			Stage 2			Stage 3			Total
	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million	Gross balance2 $million	Total credit impair-ment $million	Net $million
As at 1 January 2021	54,596	(373)	54,223	1,171	(207)	964	503	(312)	191	56,270	(892)	55,378
Transfers to stage 1	1,566	(328)	1,238	(1,556)	328	(1,228)	(10)	-	(10)	-	-	-
Transfers to stage 2	(2,382)	80	(2,302)	2,402	(80)	2,322	(20)	-	(20)	-	-	-
Transfers to stage 3	(37)	1	(36)	(433)	164	(269)	470	(165)	305	-	-	-
Net change in exposures	1,046	(19)	1,027	(608)	44	(564)	(123)	-	(123)	315	25	340
Net remeasurement from stage changes	-	41	41	-	(111)	(111)	-	(65)	(65)	-	(135)	(135)
Changes in risk parameters	-	13	13	-	(6)	(6)	-	(336)	(336)	-	(329)	(329)
Write-offs	-	-	-	-	-	-	(580)	580	-	(580)	580	-
Interest due but unpaid	-	-	-	-	-	-	38	(38)	-	38	(38)	-
Discount unwind	-	-	-	-	-	-	-	2	2	-	2	2
Exchange translation differences and other movements	(529)	304	(225)	14	(285)	(271)	197	54	251	(318)	73	(245)
As at 31 December 2021	54,260	(281)	53,979	990	(153)	837	475	(280)	195	55,725	(714)	55,011
Income statement ECL (charge)/release		35			(73)			(401)			(439)
Recoveries of amounts previously written off		-			-			201			201
Total credit impairment (charge)/release		35			(73)			(200)			(238)
As at 1 January 2022	54,260	(281)	53,979	990	(153)	837	475	(280)	195	55,725	(714)	55,011
Transfers to stage 1	963	(144)	819	(955)	144	(811)	(8)	-	(8)	-	-	-
Transfers to stage 2	(1,170)	30	(1,140)	1,176	(30)	1,146	(6)	-	(6)	-	-	-
Transfers to stage 3	(18)	-	(18)	(149)	73	(76)	167	(73)	94	-	-	-
Net change in exposures	3,246	(2)	3,244	(414)	7	(407)	(37)	-	(37)	2,795	5	2,800
Net remeasurement from stage changes	-	20	20	-	(45)	(45)	-	(10)	(10)	-	(35)	(35)
Changes in risk parameters	-	31	31	-	(89)	(89)	-	(106)	(106)	-	(164)	(164)
Write-offs	-	-	-	-	-	-	(210)	210	-	(210)	210	-
Interest due but unpaid	-	-	-	-	-	-	(2)	2	-	(2)	2	-
Discount unwind	-	-	-	-	-	-	-	7	7	-	7	7
Exchange translation differences and other movements	(1,939)	64	(1,875)	(34)	(23)	(57)	88	30	118	(1,885)	71	(1,814)
As at 30 June 2022	55,342	(282)	55,060	614	(116)	498	467	(220)	247	56,423	(618)	55,805
Income statement ECL (charge)/release		49			(127)			(116)			(194)
Recoveries of amounts previously written off		-			-			91			91
Total credit impairment (charge)/release		49			(127)			(25)			(103)

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

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

Page 22

Analysis of stage 2 balances

The table below analyses the proportion of stage 2 gross exposures and associated expected credit provisions by the key significant increase in credit risk (SICR) driver that caused the exposures to be classified as stage 2 as at 30 June 2022 for each segment. This may not be the same driver that caused the initial transfer into stage 2.

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

	30.06.22
	Corporate, Commercial & Institutional banking			Consumer, Private & Business Banking			Ventures			Central & other items			Total
	Gross $million	ECL $million	Cove-rage %	Gross $million	ECL $million	Cove-rage %	Gross $million	ECL $million	Cove-rage %	Gross $million	ECL $million	Cove-rage %	Gross $million	ECL $million	Cove-rage %
Increase in PD	11,363	174	1.5%	1,137	105	9.2%				3,415	20	0.6%	15,915	299	1.9%
Non-purely precautionary early alert	3,496	11	0.3%	72	-	0.5%				1,621	1	0.1%	5,189	12	0.2%
Higher risk (CG12)	474	27	5.8%	16	1	4.5%				679	19	2.8%	1,169	47	4.1%
Sub-investment grade	205	-	0.1%	-	-	0.0%				-	-	0.0%	205	-	0.1%
Top up/Sell down (Private Banking)			0.0%	422	-	0.1%				-		0.0%	422	-	0.1%
Others	3,212	11	0.4%	210	1	0.6%	4		0.0%	166	3	1.6%	3,592	15	0.4%
30 days past due		-	0.0%	160	17	10.5%	1		0.0%	-	-	0.0%	161	17	10.5%
Management overlay		91	0.0%		5	0.0%							-	96
Total stage 2	18,750	314	1.7%	2,017	129	6.4%	5	-	0.0%	5,881	43	0.7%	26,653	486	1.8%

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

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

The majority of exposures and the associated expected credit loss provisions continue to be in stage 2 due to increases in the probability of default. Overall stage 2 balances have reduced by $8.0 billion to $26.7 billion (2021: $34.6 billion) through repayments and transfers into stage 1 in Corporate, Commercial and Institutional Banking and lower undrawn commitments in Consumer, Private and Business Banking. Overall expected credit loss coverage has reduced to 1.8 per cent.

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

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

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

Page 23

Credit impairment charge (restated1) (reviewed)

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

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

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

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

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

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

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

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

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

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

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

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

Page 24

COVID-19 relief measures

The table below sets out the extent to which payment reliefs are in place across the Group's Consumer, Private and Business Banking loan portfolio based on the amount outstanding at 30 June 2022. The accounting for temporary changes to loan contractual term is unchanged from that presented on page 220 of the 2021 Annual Report. COVID-19 payment-related relief measures in most markets have now expired. The Consumer, Private and Business Banking loans under payment relief schemes reduced to $280 million compared to $1.2 billion at the end of 2021 and a peak of $8.9 billion in the first half of 2020, with the remaining balance concentrated in Asia. This represents 0.2 per cent of Consumer, Private and Business Banking's gross loans and advances to customers, mainly in Hong Kong, China and India.

Segment¹	Total		Asia		Africa & Middle East
	Outstanding $million	% of portfolio2	Outstanding $million	% of portfolio2	Outstanding $million	% of portfolio2
Credit card & Personal loans	18	0.1%	18	0.1%	-	-
Mortgages & Auto	90	0.1%	90	0.1%	-	-
Business Banking	172	1.7%	172	1.7%	-	-
Total Consumer, Private & Business Banking at 30 June 2022	280	0.2%	280	0.2%	-	-
Total Consumer, Private & Business Banking at 31 December 2021	1,182	0.9%	1,029	0.9%	153	3.1%

1 Outstanding relief balance for Corporate, Commercial and Institutional Banking are less than $100 million (31 December 2021: $1,195 million) at 30 June 2022 and $nil (31 December 2021: $nil) for Ventures³

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

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

Problem credit management and provisioning (reviewed)

Forborne and other modified loans by client segment

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

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

Amortised cost	30.06.22				31.12.21 (Restated)¹
	Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking $million	Ventures $million	Total $million	Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking $million	Ventures1 $million	Total $million
All loans with forbearance measures	2,440	395	-	2,835	2,526	406	-	2,932
Credit impairment (stage 1 and 2)	-	-	-	-	(4)	-	-	(4)
Credit impairment (stage 3)	(1,392)	(140)	-	(1,532)	(1,237)	(162)	-	(1,399)
Net carrying value	1,048	255	-	1,303	1,285	244	-	1,529
Included within the above table
Gross performing forborne loans	304	72	-	376	272	59	-	331
Modification of terms and conditions2	246	72	-	318	257	59	-	316
Refinancing3	58	-	-	58	15	-	-	15
Impairment provisions	-	-	-	-	(4)	-	-	(4)
Modification of terms and conditions2	-	-	-	-	(4)	-	-	(4)
Refinancing3	-	-	-	-	-	-	-	-
Net performing forborne loans	304	72	-	376	268	59	-	327
Collateral	134	70	-	204	65	56	-	121
Gross non-performing forborne loans	2,136	323	-	2,459	2,253	348	-	2,601
Modification of terms and conditions2	2,028	323	-	2,351	2,095	348	-	2,443
Refinancing3	108	-	-	108	158	-	-	158
Impairment provisions	(1,392)	(140)	-	(1,532)	(1,237)	(162)	-	(1,399)
Modification of terms and conditions2	(1,290)	(140)	-	(1,430)	(1,106)	(162)	-	(1,268)
Refinancing3	(102)	-	-	(102)	(131)	-	-	(131)
Net non-performing forborne loans	744	183	-	927	1,016	186	-	1,202
Collateral	269	64	-	333	236	62	-	298

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

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

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

Page 25

Forborne and other modified loans by region

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

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

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

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

Stage 3 cover ratio (reviewed)

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

The balance of stage 3 loans not covered by stage 3 impairment provisions represents the adjusted value of collateral held and the net outcome of any workout or recovery strategies.

Collateral provides risk mitigation to some degree in all client segments and supports the credit quality and cover ratio assessments post impairment provisions. Further information on collateral is provided in the Credit Risk mitigation section.

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

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

	30.06.22				31.12.21 (Restated)1
	Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking $million	Ventures $million	Total $million	Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking1 $million	Ventures $million	Total $million
Gross credit-impaired	5,552	1,500	1	7,053	6,520	1,575	-	8,095
Credit impairment provisions	(3,575)	(758)	-	(4,333)	(3,861)	(796)	-	(4,657)
Net credit-impaired	1,977	742	1	2,720	2,659	779	-	3,438
Cover ratio	64%	51%	0%	61%	59%	51%	0%	58%
Collateral ($ million)	738	601	-	1,339	805	641	-	1,446
Cover ratio (after collateral)	78%	91%	0%	80%	72%	91%	0%	75%

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

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

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

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

 

Page 26

Credit Risk mitigation

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

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

Collateral (reviewed)

The requirement for collateral is not a substitute for the ability to repay, which is the primary consideration for any
lending decisions. The unadjusted market value of collateral across all asset types, in respect of Corporate, Commercial and Institutional Banking, without adjusting for over-collateralisation, was $315 billion (2021: $346 billion).

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

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

Collateral held on loans and advances

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

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

Amortised cost	31.12.21 (Restated)3
	Net amount outstanding			Collateral			Net exposure
	Total $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million	Total2 $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million	Total $million	Stage 2 financial assets $million	Credit-impaired financial assets (S3) $million
Corporate, Commercial & Institutional Banking1	183,784	15,053	2,702	29,414	5,077	805	154,370	9976	1,897
Consumer, Private & Business Banking3	136,430	1,731	779	102,769	1,045	641	33,661	686	138
Ventures3	88	7	-	-	-	-	88	7	-
Central & other items	22,549	110	-	6,381	-	-	16,168	110	-
Total	342,851	16,901	3,481	138,564	6,122	1,446	204,287	10,779	2,035

1 Includes loans and advances to banks

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

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

Page 27

Collateral - Corporate, Commercial & Institutional Banking (reviewed)

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

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

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

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

Corporate, Commercial & Institutional Banking

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

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

Collateral - Consumer, Private & Business Banking (reviewed)

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

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

Amortised cost	30.06.22				31.12.21 (Restated)3
	Fully secured $million	Partially secured $million	Unsecured $million	Total¹ $million	Fully secured $million	Partially secured $million	Unsecured $million	Total² $million
Maximum exposure	113,458	1,213	17,580	132,251	117,129	1,329	17,972	136,430
Loans to individuals
Mortgages	86,967	-	-	86,967	89,222	-	-	89,222
CCPL	200	-	16,232	16,432	150	-	16,943	17,093
Auto	530	-	-	530	542	-	-	542
Secured wealth products	20,195	-	-	20,195	21,495	-	-	21,495
Other	5,566	1,213	1,348	8,127	5,720	1,329	1,029	8,078
Total collateral1				99,428				102,769
Net exposure2				32,823				33,661
Percentage of total loans	86%	1%	13%		86%	1%	13%

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

2 Amounts net of ECL

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

Page 28

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

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

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

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

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

Amortised cost	31.12.21
	Asia % Gross	Africa & Middle East % Gross	Europe & Americas % Gross	Total % Gross
Less than 50 per cent	68.2	27.6	16.8	66.4
50 per cent to 59 per cent	11.6	18.6	19.9	11.9
60 per cent to 69 per cent	8.1	19.6	37.5	8.9
70 per cent to 79 per cent	9.1	16.5	17.1	9.4
80 per cent to 89 per cent	2.4	9.1	8.7	2.7
90 per cent to 99 per cent	0.5	4.8	-	0.5
100 per cent and greater	0.1	3.8	-	0.2
Average portfolio loan-to-value	40.5	61.9	60.8	41.1
Loans to individuals - mortgages ($million)	85,765	1,651	1,806	89,222

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

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

Certain equity securities acquired may be held by the Group for investment purposes and are classified as fair value through profit or loss, and the related loan written off. The carrying value of collateral possessed and held by the Group as at 30 June 2022 is $7.0 million (2021: $11.8 million).

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

 

Page 29

Other Credit Risk mitigation (reviewed)

Other forms of credit risk mitigation are set out below.

Credit default swaps

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

Credit linked notes

The Group has issued credit linked notes for portfolio management purposes, referencing loan assets with a notional value of $12.5 billion (2021: $10.0 billion). The Group continues to hold the underlying assets for which the credit linked notes provide mitigation.

Derivative financial instruments

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

Off-balance sheet exposures

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

Other portfolio analysis

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

Credit quality by industry

Loans and advances

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

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

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

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

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

Page 30

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

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

Page 31

Amortised cost	31.12.21
	Stage 1			Stage 2			Stage 3			Total
	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million
Industry:
Energy	10,454	(19)	10,435	2,067	(76)	1,991	998	(719)	279	13,519	(814)	12,705
Manufacturing	23,792	(9)	23,783	1,181	(30)	1,151	852	(562)	290	25,825	(601)	25,224
Financing, insurance and non-banking	24,380	(9)	24,371	1,257	(12)	1,245	268	(207)	61	25,905	(228)	25,677
Transport, telecom and utilities	12,778	(5)	12,773	4,926	(51)	4,875	966	(289)	677	18,670	(345)	18,325
Food and household products	8,093	(2)	8,091	721	(26)	695	380	(276)	104	9,194	(304)	8,890
Commercial real estate	17,680	(43)	17,637	1,787	(75)	1,712	833	(335)	498	20,300	(453)	19,847
Mining and quarrying	4,793	(3)	4,790	480	(20)	460	272	(167)	105	5,545	(190)	5,355
Consumer durables	7,069	(3)	7,066	407	(9)	398	425	(346)	79	7,901	(358)	7,543
Construction	2,279	(3)	2,276	506	(19)	487	914	(624)	290	3,699	(646)	3,053
Trading companies & distributors	1,144	(1)	1,143	117	(8)	109	143	(135)	8	1,404	(144)	1,260
Government	26,588	(2)	26,586	678	(1)	677	154	(8)	146	27,420	(11)	27,409
Other	5,757	(4)	5,753	801	(14)	787	316	(194)	122	6,874	(212)	6,662
Retail Products:
Mortgage	87,987	(22)	87,965	862	(20)	842	599	(184)	415	89,448	(226)	89,222
Credit Cards2	5,899	(90)	5,809	388	(74)	314	61	(44)	17	6,348	(208)	6,140
Personal loans and other unsecured lending2	10,981	(188)	10,793	182	(58)	124	334	(210)	124	11,497	(456)	11,041
Equipment Leased
Auto	541	(1)	540	2	-	2	-	-	-	543	(1)	542
Secured wealth products	21,067	(61)	21,006	307	(10)	297	483	(291)	192	21,857	(362)	21,495
Other	7,896	(8)	7,888	180	(21)	159	97	(66)	31	8,173	(95)	8,078
Net carrying value (customers)¹	279,178	(473)	278,705	16,849	(524)	16,325	8,095	(4,657)	3,438	304,122	(5,654)	298,468

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

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

Industry and Retail Products analysis of loans and advances by geographic region

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

In the Corporate, Commercial and Institutional Banking segment, our largest industry exposures are to Government, Manufacturing, Financing, insurance and non-banking sectors for wholesale exposures.

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

Financing, insurance and non-banking industry clients are mostly investment-grade institutions and this lending forms part of the liquidity management of the Group. The manufacturing sector group is spread across a diverse range of industries, including automobiles and components, capital goods, pharmaceuticals, biotech and life sciences, technology hardware and equipment, chemicals, paper products and packaging, with lending spread over 3,416 clients.

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

The Group provides loans to Commercial real estate counterparties of $17 billion. In total, $8.5 billion of this lending is to counterparties where the source of repayment is substantially derived from rental or sale of real estate and is secured by real estate collateral. The remaining Commercial real estate loans comprise working capital loans to real estate corporates, loans with non-property collateral, unsecured loans and loans to real estate entities of diversified conglomerates. The average LTV ratio of the Commercial real estate portfolio has decreased to 48 per cent, compared with 50 per cent in 2021 (51 per cent in 2020). The proportion of loans with an LTV greater than 80 per cent has decreased to 1 per cent, compared with 2 per cent in 2021 (4 per cent in 2020).

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

Page 32

Amortised cost	30.06.22				31.12.21
	ASIA $million	Africa & Middle East $million	Europe & Americas $million	Total $million	ASIA $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Industry:
Energy	9,709	1,332	1,818	12,859	6,265	2,721	3,719	12,705
Manufacturing	19,447	1,578	3,195	24,220	20,771	1,751	2,702	25,224
Financing, insurance and non-banking	12,920	796	9,753	23,469	14,184	905	10,588	25,677
Transport, telecom and utilities	11,396	4,112	1,833	17,341	11,661	4,218	2,446	18,325
Food and household products	5,836	2,482	1,156	9,474	5,497	2,360	1,033	8,890
Commercial real estate	13,971	833	1,796	16,600	17,150	1,048	1,649	19,847
Mining and quarrying	3,894	489	1,094	5,477	3,833	572	950	5,355
Consumer durables	7,498	474	557	8,529	6,742	398	403	7,543
Construction	1,873	731	497	3,101	1,839	814	400	3,053
Trading companies and distributors	869	173	37	1,079	1,047	176	37	1,260
Government	26,545	5,664	131	32,340	22,987	4,117	305	27,409
Other	4,093	920	1,411	6,424	4,681	670	1,311	6,662
Retail Products:
Mortgages	83,753	1,542	1,671	86,966	85,765	1,651	1,806	89,222
Credit Cards¹	5,904	303	-	6,207	5,849	291	-	6,140
Personal loans and other unsecured lending1	8,817	1,652	101	10,570	9,241	1,700	100	11,041
Auto	490	39	-	529	500	42	-	542
Secured wealth products	18,842	599	754	20,195	19,984	545	966	21,495
Other	7,378	750	-	8,128	7,265	813	-	8,078
Net loans and advances to customers	243,235	24,469	25,804	293,508	245,261	24,792	28,415	298,468
Net loans and advances to banks	22,688	5,043	8,470	36,201	30,301	5,966	8,116	44,383

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

Vulnerable and Cyclical Sector tables

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

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

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

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

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

Page 33

Maximum exposure

Amortised Cost	30.06.22
	Maximum on Balance Sheet Exposure (net of credit impairment) $million	Collateral $million	Net On Balance Sheet Exposure $million	Undrawn Commitments (net of credit impairment) $million	Financial Guarantees (net of credit impairment) $million	Net Off Balance Sheet Exposure $million	Total On & Off Balance Sheet Net Exposure $million
Industry:
Aviation1	3,114	1,648	1,466	1,445	735	2,180	3,646
Commodity Traders	8,575	332	8,243	3,094	8,745	11,839	20,082
Metals & Mining	4,061	385	3,676	3,271	729	4,000	7,676
Commercial Real Estate	16,601	7,118	9,483	6,618	249	6,867	16,350
Hotels & Tourism	2,087	812	1,275	1,564	137	1,701	2,976
Oil & Gas	7,379	902	6,477	8,214	7,321	15,535	22,012
Total	41,817	11,197	30,620	24,206	17,916	42,122	72,742
Total Corporate, Commercial & Institutional Banking	134,036	24,522	109,514	97,559	51,066	148,625	258,139
Total Group	329,709	132,910	196,799	162,762	58,193	220,955	417,754

Amortised Cost	31.12.21
	Maximum On Balance Sheet Exposure (net of credit impairment) $million	Collateral $million	Net On Balance Sheet Exposure $million	Undrawn Commitments (net of credit impairment) $million	Financial Guarantees (net of credit impairment) $million	Net Off Balance Sheet Exposure $million	Total On & Off Balance Sheet Net Exposure $million
Industry:
Aviation¹	3,458	2,033	1,425	1,914	431	2,345	3,770
Commodity Traders	8,732	262	8,470	2,434	6,832	9,266	17,736
Metals & Mining	3,616	450	3,166	3,387	637	4,024	7,190
Commercial Real Estate	19,847	7,290	12,557	7,192	291	7,483	20,040
Hotels & Tourism	2,390	789	1,601	1,363	121	1,484	3,085
Oil & Gas	6,826	1,029	5,797	8,842	6,013	14,855	20,652
Total	44,869	11,853	33,016	25,132	14,325	39,457	72,473
Total Corporate, Commercial & Institutional Banking	139,401	26,294	113,107	96,406	49,666	146,072	259,179
Total Group	342,851	138,564	204,287	158,421	58,291	216,712	420,999

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

Page 34

Loans and advances by stage

Amortised Cost	30.06.22
	Stage 1			Stage 2			Stage 3			Total
	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million
Industry:
Aviation1	2,193	(2)	2,191	758	(1)	757	213	(47)	166	3,164	(50)	3,114
Commodity Traders	8,012	(6)	8,006	254	(3)	251	866	(548)	318	9,132	(557)	8,575
Metals & Mining	3,624	(2)	3,622	353	(11)	342	212	(115)	97	4,189	(128)	4,061
Commercial Real Estate	14,196	(63)	14,133	2,212	(82)	2,130	841	(503)	338	17,249	(648)	16,601
Hotels & Tourism	1,463	(2)	1,461	430	(5)	425	262	(61)	201	2,155	(68)	2,087
Oil & Gas	6,413	(6)	6,407	718	(12)	706	506	(240)	266	7,637	(258)	7,379
Total	35,901	(81)	35,820	4,725	(114)	4,611	2,900	(1,514)	1,386	43,526	(1,709)	41,817
Total CCIB	121,965	(141)	121,824	10,488	(253)	10,235	5,552	(3,575)	1,977	138,005	(3,969)	134,036
Total Group	314,916	(511)	314,405	12,910	(387)	12,523	7,131	(4,348)	2,783	334,957	(5,246)	329,711

Amortised cost	31.12.21
	Stage 1			Stage 2			Stage 3			Total
	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million	Gross balance $million	Total credit impair-ment $million	Net carrying amount $million
Industry:
Aviation1	1,120	-	1,120	2,174	(11)	2,163	239	(64)	175	3,533	(75)	3,458
Commodity Traders	8,482	(4)	8,478	195	(5)	190	713	(649)	64	9,390	(658)	8,732
Metals & Mining	3,083	(1)	3,082	450	(17)	433	219	(118)	101	3,752	(136)	3,616
Commercial Real Estate	17,680	(43)	17,637	1,787	(75)	1,712	833	(335)	498	20,300	(453)	19,847
Hotels & Tourism	1,562	(1)	1,561	722	(9)	713	182	(66)	116	2,466	(76)	2,390
Oil & Gas	4,999	(5)	4,994	1,595	(34)	1,561	486	(215)	271	7,080	(254)	6,826
Total	36,926	(54)	36,872	6,923	(151)	6,772	2,672	(1,447)	1,225	46,521	(1,652)	44,869
Total CCIB	122,368	(103)	122,265	14,818	(341)	14,477	6,520	(3,861)	2,659	143,706	(4,305)	139,401
Total Group	322,954	(485)	322,469	17,429	(528)	16,901	8,149	(4,668)	3,481	348,532	(5,681)	342,851

Loans and advances by region (net of credit impairment)

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

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

Page 35

Credit quality - loans and advances

Amortised Cost Credit Grade	30.06.22
	Aviation Gross $million	Commodity traders Gross $million	Metals & mining Gross $million	Commercial real estate Gross $million	Hotel & tourism Gross $million	Oil & gas Gross $million	Total Gross $million
Strong	1,043	5,170	2,582	7,470	756	4,517	21,538
Satisfactory	1,750	3,084	1,392	8,878	1,073	2,605	18,782
Higher risk	158	12	3	60	64	9	306
Defaulted	213	866	212	841	262	506	2,900
Total Gross Balance	3,164	9,132	4,189	17,249	2,155	7,637	43,526
Strong	(1)	(3)	(3)	(11)	(1)	(1)	(20)
Satisfactory	(2)	(5)	(10)	(130)	(4)	(17)	(168)
Higher risk	-	(1)	-	(4)	(2)	-	(7)
Defaulted	(47)	(548)	(115)	(503)	(61)	(240)	(1,514)
Total Credit Impairment	(50)	(557)	(128)	(648)	(68)	(258)	(1,709)
Strong	0.1%	0.1%	0.1%	0.1%	0.1%	0.0%	0.1%
Satisfactory	0.1%	0.2%	0.7%	1.5%	0.4%	0.7%	0.9%
Higher risk	0.0%	8.3%	0.0%	6.7%	3.1%	0.0%	2.3%
Defaulted	22.1%	63.3%	54.2%	59.8%	23.3%	47.4%	52.2%
Cover Ratio	1.6%	6.1%	3.1%	3.8%	3.2%	3.4%	3.9%

Credit Grade	31.12.21
	Aviation¹ Gross $million	Commodity traders Gross $million	Metals & mining Gross $million	Commercial real estate Gross $million	Hotel & tourism Gross $million	Oil & gas Gross $million	Total Gross $million
Strong	896	5,878	1,730	9,581	731	3,594	22,410
Satisfactory	2,257	2,788	1,781	9,735	1,353	2,892	20,806
Higher risk	141	11	22	151	200	108	633
Defaulted	239	713	219	833	182	486	2,672
Total Gross Balance	3,533	9,390	3,752	20,300	2,466	7,080	46,521
Strong	-	(1)	-	(92)	-	-	(93)
Satisfactory	(8)	(5)	(14)	(21)	(4)	(24)	(76)
Higher risk	(3)	(3)	(4)	(5)	(6)	(15)	(36)
Defaulted	(64)	(649)	(118)	(335)	(66)	(215)	(1,447)
Total Credit Impairment	(75)	(658)	(136)	(453)	(76)	(254)	(1,652)
Strong	0.0%	0.0%	0.0%	1.0%	0.0%	0.0%	0.4%
Satisfactory	0.4%	0.2%	0.8%	0.2%	0.3%	0.8%	0.4%
Higher risk	2.1%	27.3%	18.2%	3.3%	3.0%	13.9%	5.7%
Defaulted	26.8%	91.0%	53.9%	40.2%	36.3%	44.2%	54.2%
Cover Ratio	2.1%	7.0%	3.6%	2.2%	3.1%	3.6%	3.6%

Page 36

IFRS 9 expected credit loss methodology (reviewed)

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

Composition of credit impairment provisions (reviewed)

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

Modelled ECL provisions, which includes post model adjustments, management overlays and the impact of multiple economic scenarios, reduced to 22 per cent (31 December 2021: 23 per cent) of total credit impairment provisions at
30 June 2022. 18 per cent of the modelled ECL provisions at 30 June 2022 related to judgemental adjustments compared with 25 per cent at 31 December 2021 primarily due to releases of the COVID-19 overlay.

30 June 2022	Corporate, Commercial & Institutional Banking $ million	Consumer, Private & Business Banking $ million	Ventures $ million	Central & other items ³ $ million	Total $ million
Modelled ECL provisions (base forecast)	371	494	2	82	949
Impact of multiple economic scenarios1	39	36	-	21	96
Total ECL provisions before management judgements	410	530	2	103	1,045
Judgemental post model adjustments	-	17	-	-	17
Management overlays2
- COVID-19	29	61	-	-	90
- China Commercial Real Estate	126	-	-	-	126
Total modelled provisions	565	608	2	103	1,278
Of which: Stage 1	194	367	2	61	624
Stage 2	314	129	-	42	485
Stage 3	57	112	-	-	169
Stage 3 non-modelled provisions3	3,723	645	-	74	4,442
Total credit impairment provisions	4,288	1,253	2	177	5,720

31 December 2021	Corporate, Commercial & Institutional Banking $ million	Consumer, Private & Business Banking3 $ million	Ventures4 $ million	Central & other items3 $ million	Total $ million
Modelled ECL provisions (base forecast)	365	529	3	103	1,000
Impact of multiple economic scenarios1	32	14	-	9	55
Total ECL provisions before management judgements	397	543	3	112	1,055
Judgemental post model adjustments	-	7	-	-	7
Management overlays2
- COVID-19	102	147	-	-	249
- China Commercial Real Estate	95	-	-	-	95
Total modelled provisions	594	697	3	112	1,406
Of which: Stage 1	163	377	1	68	609
Stage 2	425	185	2	44	656
Stage 3	6	135	-	-	141
Stage 3 non-modelled provisions	4,073	662	-	68	4,803
Total credit impairment provisions	4,667	1,359	3	180	6,209

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

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

3  Includes $42 million (2021: nil) overlay

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

Page 37

Post model adjustments

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

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

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

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

Key assumptions and judgements in determining expected credit loss

Incorporation of forward-looking information

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

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

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

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

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

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

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

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

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

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

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	30.06.22
	China				Hong Kong
	GDP growth (YoY%)	Unemployment %	3-month interest rates %	House prices (YoY %)	GDP growth (YoY %)	Unemployment %	3-month interest rates %	House prices (YoY %)
Base forecast1
2022	4.1	4.0	1.8	0.8	0.2	4.6	1.3	2.5
2023	5.8	4.0	1.9	2.1	4.5	3.9	2.1	6.8
2024	5.4	4.0	2.3	4.3	2.5	3.9	2.5	3.1
2025	5.1	4.0	2.6	4.4	2.2	3.9	2.4	2.8
2026	4.7	3.9	2.8	4.4	2.6	3.9	2.4	2.7
5-year average2	5.1	4.0	2.4	3.5	2.8	3.9	2.3	3.8
Peak	6.2	4.0	2.9	4.4	6.9	4.2	2.5	8.9
Trough	3.6	3.9	1.8	(0.3)	1.4	3.9	1.6	2.7
Monte Carlo
Low3	2.69	3.85	1.23	(1.69)	(1.03)	2.93	0.52	(7.55)
High4	8.01	4.09	3.82	9.55	8.75	5.11	4.54	18.93

	30.06.22
	Singapore				Korea
	GDP growth (YoY%)	Unemployment %	3-month interest rates %	House prices (YoY%)	GDP growth (YoY%)	Unemployment %	3-month interest rates %	House prices (YoY %)
Base forecast1
2022	3.8	3.2	1.5	5.6	2.7	3.2	1.7	7.1
2023	2.8	3.1	2.1	1.8	2.5	3.4	2.2	0.0
2024	2.5	3.0	2.1	3.0	2.5	3.2	2.4	2.2
2025	2.1	3.0	2.3	3.5	2.2	3.1	2.5	2.8
2026	1.9	3.0	2.3	3.8	1.9	3.1	2.5	2.8
5-year average2	2.4	3.0	2.1	3.2	2.2	3.2	2.3	2.2
Peak	4.3	3.1	2.3	6.1	3.1	3.4	2.5	5.1
Trough	1.8	3.0	1.7	1.2	1.7	3.0	1.9	(0.3)
Monte Carlo
Low3	(2.31)	2.15	1.31	(4.37)	(0.56)	2.63	1.22	(2.80)
High4	7.01	4.15	3.25	10.70	5.89	3.85	3.76	9.31

	30.06.22
	India				Brent Crude $ pb
	GDP growth (YoY%)	Unemployment %	3month interest rates %	House prices (YoY%)
Base forecast1
2022	7.7	N/A	4.6	7.1	104.6
2023	5.5	N/A	5.1	7.2	90.7
2024	6.0	N/A	5.6	7.2	83.3
2025	5.8	N/A	6.0	7.2	89.3
2026	5.6	N/A	6.1	7.1	108.0
5-year average2	5.6	N/A	5.6	7.2	94.3
Peak	7.3	N/A	6.1	7.2	110.3
Trough	3.3	N/A	4.5	6.9	79.0
Monte Carlo
Low3	1.80	N/A	3.49	0.14	30.25
High4	16.80	N/A	7.40	16.80	206.49

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	31.12.21
	China				Hong Kong
	GDP growth (YoY%)	Unemployment %	3-month interest rates %	House prices (YoY%)	GDP growth (YoY%)	Unemployment %	3-month interest rates %	House prices (YoY%)
5-year average2	5.4	3.4	2.8	4.0	2.6	3.8	1.5	3.1
Peak	6.1	3.4	3.1	4.5	3.5	4.4	2.3	5.3
Trough	4.7	3.4	2.1	1.8	1.8	3.7	0.3	2.7
Monte Carlo
Low3	2.6	3.3	1.3	(2.8)	(1.7)	2.4	(0.3)	(12.4)
High4	8.3	3.5	4.6	11.1	6.9	5.8	5.0	22.8

	31.12.21
	Singapore				Korea
	GDP growth (YoY%)	Unemployment %	3-month interest rates %	House prices (YoY%)	GDP growth (YoY%)	Unemployment %	3-month interest rates %	House prices (YoY%)
5-year average2	2.5	3.1	1.4	3.6	2.5	3.3	1.6	2.7
Peak	4.8	3.4	2.2	4.2	2.8	3.7	2.2	10.9
Trough	1.8	3.0	0.5	3.3	2.4	3.1	1.2	(0.3)
Monte Carlo
Low3	(4.0)	2.1	0.1	(4.1)	(3.1)	2.7	0.5	(5.2)
High4	9.4	4.5	4.2	15.4	7.1	4.5	4.3	9.5

	31.12.21
	India				Brent crude $ pb
	GDP growth (YoY%)	Unemployment %	3-month interest rates %	House prices (YoY%)
5-year average2	6.4	N/A	5.4	7.1	63.7
Peak	16.6	N/A	6.2	7.2	73.5
Trough	4.2	N/A	4.0	5.8	60.0
Monte Carlo
Low3	2.0	N/A	3.2	(1.9)	8.9
High4	10.5	N/A	8.8	24.9	211.4

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

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

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

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

Impact of multiple economic scenarios

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

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

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

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

1 Includes judgemental post model adjustments

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

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

Judgemental adjustments

Post model adjustments

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

Management overlays

As at 30 June 2022, the Group held:

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

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

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

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

COVID-19 overlay

Corporate, Commercial and Institutional Banking

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

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Consumer, Private and Business Banking

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

China Commercial Real Estate overlay

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

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

Stage 3 assets

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

Sensitivity of expected credit loss calculation to macroeconomic variables

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

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

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

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

Period covered from Q3 2022 to Q2 2027

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

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

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

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

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

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

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

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

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

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

Modelled provisions

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

1 Includes $45 million of management overlays

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

Proportion of assets in stage 21

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

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

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

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Traded Risk

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

Market Risk (reviewed)

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

• Trading book:

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

• Non-trading book:

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

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

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

The primary categories of Market Risk for the Group are:

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

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

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

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

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

Market Risk movements (reviewed)

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

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

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

Page 46

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

Trading1 and non-trading2	6 months ended 30.06.22				6 months ended 31.12.21				6 months ended 30.06.21
	Average $million	High3 $million	Low3 $million	Half Year $million	Average $million	High3 $million	Low3 $million	Year End $million	Average $million	High3 $million	Low3 $million	Half Year $million
Interest Rate Risk6	30.8	42.1	23.3	24.0	24.2	29.7	16.4	26.0	38.6	68.3	20.8	20.8
Credit Spread Risk6	32.5	45.1	20.3	44.9	19.1	29.3	14.8	21.5	49.4	97.6	17.2	21.3
Foreign Exchange Risk	6.5	8.0	5.4	5.7	6.4	8.3	4.2	7.0	8.2	19.0	4.8	5.7
Commodity Risk	6.3	11.9	3.5	6.6	3.6	8.6	2.5	3.6	5.9	10.4	2.9	3.3
Equity Risk	0.1	0.2	-	0.2	1.2	1.5	1.1	1.4	1.4	1.7	1.0	1.3
Total4	50.5	61.1	40.3	59.2	37.8	46.2	30.7	43.4	72.4	140.7	33.3	33.5

Trading1	6 months ended 30.06.22				6 months ended 31.12.21				6 months ended 30.06.21
	Average $million	High3 $million	Low3 $million	Half Year $million	Average $million	High3 $million	Low3 $million	Year End $million	Average $million	High3 $million	Low3 $million	Half Year $million
Interest Rate Risk5	7.9	10.5	5.8	9.0	7.1	9.6	5.2	7.2	8.1	10.2	6.1	8.0
Credit Spread Risk5	9.3	14.9	5.0	13.1	6.0	9.3	4.1	6.2	11.1	19.2	5.7	6.2
Foreign Exchange Risk	6.5	8.0	5.4	5.7	6.4	8.3	4.2	7.0	8.2	19.0	4.8	5.7
Commodity Risk	6.3	11.9	3.5	6.6	3.6	8.6	2.5	3.6	5.9	10.4	2.9	3.3
Equity Risk	-	-	-	-	-	-	-	-	-	-	-	-
Total4	17.2	24.4	12.6	19.2	14.9	18.1	12.3	15.3	19.5	28.4	13.5	14.0

Non-trading2	6 months ended 30.06.22				6 months ended 31.12.21				6 months ended 30.06.21
	Average $million	High3 $million	Low3 $million	Half Year $million	Average $million	High3 $million	Low3 $million	Year End $million	Average $million	High3 $million	Low3 $million	Half Year $million
Interest Rate Risk	30.9	44.5	22.9	22.9	24.3	29.3	18.2	24.3	40.7	68.2	21.3	22.2
Credit Spread Risk	27.5	36.8	18.7	36.4	17.3	26.1	14.4	20.2	41.5	80.0	16.8	19.2
Equity Risk6	0.1	0.2	-	0.2	1.2	1.5	1.1	1.4	1.4	1.7	1.0	1.3
Total4	45.9	52.5	36.3	48.1	33.0	41.0	25.3	38.3	61.7	106.3	28.4	30.3

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

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

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

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

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

6  Non-trading Equity Risk VaR includes only listed equities

Risks not in VaR

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

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

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

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

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

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

Backtesting

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

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

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

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

Page 47

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

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

Average daily income earned from Market Risk-related activities¹ (reviewed)

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

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

Non-trading2	6 months ended 30.06.22 $million	6 months ended 31.12.21 $million	6 months ended 30.06.21 $million
Interest Rate Risk	0.4	0.1	0.8
Credit Spread Risk	1.1	0.1	0.3
Equity Risk	-	-	-
Total	1.5	0.2	1.1

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

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

Counterparty Credit Risk

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

Derivative financial instruments Credit Risk mitigation

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

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

Page 48

Liquidity and Funding Risk

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

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

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

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

Liquidity and Funding Risk metrics

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

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

Liquidity coverage ratio (LCR)

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

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

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

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

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

Stressed coverage

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

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

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

Page 49

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

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

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

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

All scenarios include, but are not limited to, modelled outflows for retail and wholesale funding, Off-Balance Sheet
Funding Risk, Cross-currency Funding Risk, Intraday Risk, Franchise Risk and risks associated with a deterioration of a
firm's credit rating.

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

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

External wholesale borrowing

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

Advances-to-deposits ratio

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

The Group's advances-to-deposits ratio has increased by 0.5 per cent to 59.6 per cent, mainly driven by a reduction of
4 per cent in customer deposits and 3 per cent in customer loans and advances.

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

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

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

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

Net stable funding ratio (NSFR)

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

Page 50

Liquidity pool

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

	30.06.22
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Level 1 securities
Cash and balances at central banks	30,307	1,685	43,140	75,132
Central banks, governments /public sector entities	43,756	1,952	26,038	71,746
Multilateral development banks and international organisations	7,013	788	12,055	19,856
Other	18	21	1,511	1,550
Total Level 1 securities	81,094	4,446	82,744	168,284
Level 2A securities	5,556	173	5,481	11,210
Level 2B securities	89	21	744	854
Total LCR eligible assets	86,739	4,640	88,969	180,348

	31.12.21
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Total $million
Level 1 securities
Cash and balances at central banks	28,076	890	46,973	75,939
Central banks, governments /public sector entities	40,328	2,096	27,389	69,813
Multilateral development banks and international organisations	7,812	356	7,366	15,534
Other	-	-	478	478
Total Level 1 securities	76,216	3,342	82,206	161,764
Level 2A securities	3,447	186	5,047	8,680
Level 2B securities	114	-	1,620	1,734
Total LCR eligible assets	79,777	3,528	88,873	172,178

Encumbrance

Encumbered assets

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

Unencumbered - readily available for encumbrance

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

Unencumbered - other assets capable of being encumbered

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

Unencumbered - cannot be encumbered

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

Page 51

Derivatives, reverse repurchase assets and stock lending

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

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

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

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

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

Page 52

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

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

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

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

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

Contractual maturity of assets and liabilities

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

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

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

Page 53

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

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

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

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

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

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

Page 54

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

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

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

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

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

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

Behavioural maturity of financial assets and liabilities

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

Maturity of financial liabilities on an undiscounted basis (reviewed)

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

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

Page 55

	30.06.22
	One month or less $million	Between one month and three months $million	Between three months and six months $million	Between six months and nine months $million	Between nine months and one year $million	Between one year and two years $million	Between two years and five years $million	More than five years and undated $million	Total $million
Deposits by banks	39,390	3,446	2,063	804	931	643	23	7	47,307
Customer accounts	408,607	42,669	23,280	10,166	11,397	7,408	2,974	2,137	508,638
Derivative financial instruments1	73,199	8	169	164	4	513	938	1,102	76,097
Debt securities in issue	3,334	7,606	9,520	3,614	3,070	8,525	20,070	23,796	79,535
Subordinated liabilities and other borrowed funds	99	173	848	2,222	49	1,506	3,159	15,025	23,081
Other liabilities	26,054	31,008	1,872	686	1,192	562	1,332	10,274	72,980
Total liabilities	550,683	84,910	37,752	17,656	16,643	19,157	28,496	52,341	807,638

	31.12.21
	One month or less $million	Between one month and three months $million	Between three months and six months $million	Between six months and nine months $million	Between nine months and one year $million	Between one year and two years $million	Between two years and five years $million	More than five years and undated $million	Total $million
Deposits by banks	34,866	1,140	1,246	409	481	117	208	3	38,470
Customer accounts	430,190	52,112	27,510	11,813	12,120	4,930	2,212	2,495	543,382
Derivative financial instruments1	52,783	9	22	12	106	76	212	179	53,399
Debt securities in issue	2,526	13,618	9,015	3,586	3,891	6,743	17,966	17,659	75,004
Subordinated liabilities and other borrowed funds	1,114	134	48	261	928	2,546	3,030	16,044	24,105
Other liabilities	17,759	22,460	1,952	1,133	1,170	797	990	9,955	56,216
Total liabilities	539,238	89,473	39,793	17,214	18,696	15,209	24,618	46,335	790,576

1  Derivatives are on a discounted basis

Interest Rate Risk in the Banking Book

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

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

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

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

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

The interest rate sensitivities are indicative stress tests and based on simplified scenarios, estimating the aggregate
impact of an unanticipated, instantaneous parallel shock across all yield curves over a one-year horizon, including the
time taken to implement changes to pricing before becoming effective. The assessment assumes that the size and mix of the balance sheet remain constant and that there are no specific management actions in response to the change in rates. No assumptions are made in relation to the impact on credit spreads in a changing rate environment.

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

Page 56

Estimated one-year impact to earnings from a parallel shift in yield curves at the beginning of the period of:	30.06.22
	USD bloc $million	HKD bloc $million	SGD bloc $million	KRW bloc $million	CNY bloc $million	Other currency bloc $million	Total $million
+ 50 basis points	40	40	70	40	10	190	390
- 50 basis points	(40)	(40)	(70)	(30)	(10)	(190)	(380)
+ 100 basis points	80	80	140	70	20	360	750

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

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

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

Operational and Technology Risk

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

Operational and Technology Risk profile

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

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

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

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

Other principal risks

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

Page 57

Capital review

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

Capital summary

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

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

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

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

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

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

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

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

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

• The Group is a G-SII, with a 1.0 per cent G-SII CET1 buffer. The Standard Chartered PLC G-SII disclosure is published at:
sc.com/en/investors/financial-results

Page 58

CRD Capital base1 (reviewed)

	30.06.22 $million	31.12.21 $million
CET1 instruments and reserves
Capital instruments and the related share premium accounts	5,472	5,528
Of which: share premium accounts	3,989	3,989
Retained earnings2	26,266	24,968
Accumulated other comprehensive income (and other reserves)	8,837	11,805
Non-controlling interests (amount allowed in consolidated CET1)	188	201
Independently reviewed interim and year-end profits	2,092	2,346
Foreseeable dividends	(303)	(493)
CET1 capital before regulatory adjustments	42,552	44,355
CET1 regulatory adjustments
Additional value adjustments (prudential valuation adjustments)	(766)	(665)
Intangible assets (net of related tax liability)	(5,468)	(4,392)
Deferred tax assets that rely on future profitability (excludes those arising from temporary differences)	(120)	(150)
Fair value reserves related to net losses on cash flow hedges	475	34
Deduction of amounts resulting from the calculation of excess expected loss	(702)	(580)
Net gains on liabilities at fair value resulting from changes in own credit risk	(100)	15
Defined-benefit pension fund assets	(184)	(159)
Fair value gains arising from the institution's own credit risk related to derivative liabilities	(165)	(60)
Exposure amounts which could qualify for risk weighting of 1,250%	(138)	(36)
Other regulatory adjustments to CET1 capital³	(11)	-
Total regulatory adjustments to CET1	(7,179)	(5,993)
CET1 capital	35,373	38,362
Additional Tier 1 capital (AT1) instruments	5,264	6,811
AT1 regulatory adjustments	(20)	(20)
Tier 1 capital	40,617	45,153
Tier 2 capital instruments	13,050	12,521
Tier 2 regulatory adjustments	(30)	(30)
Tier 2 capital	13,020	12,491
Total capital	53,637	57,644
Total risk-weighted assets (unreviewed)	255,082	271,233

1 CRD capital is prepared on the regulatory scope of consolidation

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

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

Page 59

Movement in total capital (reviewed)

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

The main movements in capital in the period were:

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

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

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

Page 60

Risk-weighted assets by business

	30.06.22
	Credit risk $million	Operational risk $million	Market risk $million	Total risk $million
Corporate, Commercial & Institutional Banking	117,789	17,038	19,350	154,177
Consumer, Private & Business Banking	43,879	8,639	-	52,518
Ventures	1,034	6	3	1,043
Central & Other items	42,477	1,494	3,373	47,344
Total risk-weighted assets	205,179	27,177	22,726	255,082

	31.12.211
	Credit risk $million	Operational risk $million	Market risk $million	Total risk $million
Corporate, Commercial & Institutional Banking2	125,813	16,595	20,789	163,197
Consumer, Private & Business Banking2	42,731	8,501	-	51,232
Ventures	756	5	-	761
Central & Other items	50,288	2,015	3,740	56,043
Total risk-weighted assets	219,588	27,116	24,529	271,233

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

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

Risk-weighted assets by geographic region

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

Page 61

Movement in risk-weighted assets

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

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

Movements in risk-weighted assets

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

Corporate, Commercial & Institutional Banking

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

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

• $6.2 billion decrease from other business efficiency actions

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

• $4.1 billion decrease from foreign currency translation

• $10.7 billion increase from asset balance growth

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

• $2.0 billion increase from revised rules on capital requirements

Page 62

Consumer, Private & Business Banking

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

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

• $1.5 billion decrease from foreign currency translation

Ventures

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

Central & Other items

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

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

• $2.9 billion decrease in asset balance

• $2.4 billion decrease from foreign currency translation

• $1.3 billion decrease from credit protection on certain products

• $1.0 billion decrease due to cessation of software relief

Market risk

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

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

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

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

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

• $0.2 billion increase of other individually smaller movements

Operational risk

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

Page 63

Leverage ratio

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

Leverage ratio

	30.06.22 $million	31.12.21 $million
Tier 1 capital (transitional)	40,617	45,153
Additional Tier 1 capital subject to phase out	-	(557)
Tier 1 capital (end point)	40,617	44,596
Derivative financial instruments	76,676	52,445
Derivative cash collateral	11,459	9,217
Securities financing transactions (SFTs)	83,087	88,418
Loans and advances and other assets	664,695	677,738
Total on-balance sheet assets	835,917	827,818
Regulatory consolidation adjustments¹	(70,350)	(63,704)
Derivatives adjustments
Derivatives netting	(56,040)	(34,819)
Adjustments to cash collateral	(9,831)	(17,867)
Net written credit protection	128	1,534
Potential future exposure on derivatives	41,103	50,857
Total derivatives adjustments	(24,640)	(295)
Counterparty risk leverage exposure measure for SFTs	13,318	13,724
Off-balance sheet items	146,745	139,505
Regulatory deductions from Tier 1 capital	(6,856)	(5,908)
Total exposure measure excluding claims on central banks	894,134	911,140
Leverage ratio excluding claims on central banks (%)	4.5%	4.9%
Average leverage exposure measure excluding claims on central banks	918,391	897,992
Average leverage ratio excluding claims on central banks (%)	4.4%	5.0%
Countercyclical leverage ratio buffer	0.1%	0.1%
G-SII additional leverage ratio buffer	0.4%	0.4%

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

Page 64

Statement of directors' responsibilities

We confirm that to the best of our knowledge:

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

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

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

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

By order of the Board

Andy Halford

Group Chief Financial Officer

29 July 2022

Page 65

Independent review report to Standard Chartered PLC

Conclusion

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

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

Basis for Conclusion

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

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

Conclusions Relating to Going Concern

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

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

Responsibilities of the directors

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

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

Auditor's Responsibilities for the review of the financial information

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

Use of our report

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

Ernst & Young LLP

London

29 July 2022

Page 66

Condensed consolidated interim income statement

For the six months ended 30 June 2022

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

		cents	cents
Earnings per share:
Basic earnings per ordinary share	12	62.1	54.8
Diluted earnings per ordinary share	12	61.0	53.9

The notes form an integral part of these financial statements.

Page 67

Condensed consolidated interim statement of comprehensive income

For the six months ended 30 June 2022

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

Page 68

Condensed consolidated interim balance sheet

As at 30 June 2022

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

The notes form an integral part of these financial statements.

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

Andy Halford

Group Chief Financial Officer

Page 69

Condensed consolidated interim statement of changes in equity

For the six months ended 30 June 2022

	Ordinary share capital and share premium account $million	Preference share capital and share premium account $million	Capital and merger reserves¹ $million	Own credit adjustment reserve $million	Fair value through other compre-hensive income reserve - debt $million	Fair value through other compre-hensive income reserve - equity $million	Cash flow hedge reserve $million	Translation reserve $million	Retained earnings $million	Parent company share-holders' equity $million	Other equity instru-ments $million	Non-controlling interests $million	Total $million
As at 1 January 2021	5,564	1,494	17,207	(52)	529	148	(52)	(5,092)	26,140	45,886	4,518	325	50,729
Profit for the period	-	-	-	-	-	-	-	-	1,914	1,914	-	14	1,928
Other comprehensive (loss)/income	-	-	-	(1)	(282)	142	14	(302)	106²	(323)	-	2	(321)
Distributions	-	-	-	-	-	-	-	-	-	-	-	(12)	(12)
Other equity instruments issued, net of expenses	-	-	-	-	-	-	-	-	-	-	1,239	-	1,239
Treasury shares net movement	-	-	-	-	-	-	-	-	(80)	(80)	-	-	(80)
Share option expenses	-	-	-	-	-	-	-	-	88	88	-	-	88
Dividends on ordinary shares	-	-	-	-	-	-	-	-	(282)	(282)	-	-	(282)
Dividends on preference shares and AT1 securities	-	-	-	-	-	-	-	-	(196)	(196)	-	-	(196)
Share buy-back3	(19)	-	19	-	-	-	-	-	(255)	(255)	-	-	(255)
Other movements	3	-	-	-	-	-	-	-	(3)	-	-	19⁴	19
As at 30 June 2021	5,548	1,494	17,226	(53)	247	290	(38)	(5,394)	27,432	46,752	5,757	348	52,857
Profit/(loss) for the period	-	-	-	-	-	-	-	-	401	401	-	(16)	385
Other comprehensive income/(loss)	-	-	-	38	(144)	(41)	4	(360)	69²	(434)	-	(17)	(451)
Distributions	-	-	-	-	-	-	-	-	-	-	-	(19)	(19)
Other equity instruments issued, net of expenses	-	-	-	-	-	-	-	-	-	-	1,489	-	1,489
Redemption of other equity instruments	-	-	-	-	-	-	-	-	(51)	(51)	(992)	-	(1,043)
Treasury shares net movement	-	-	-	-	-	-	-	-	(155)	(155)	-	-	(155)
Share option expenses	-	-	-	-	-	-	-	-	59	59	-	-	59
Dividends on ordinary shares	-	-	-	-	-	-	-	-	(92)	(92)	-	-	(92)
Dividends on preference shares and AT1 securities	-	-	-	-	-	-	-	-	(214)	(214)	-	-	(214)
Share buy-back5	(20)	-	20	-	-	-	-	-	(251)	(251)	-	-	(251)
Other movements	-	-	-	-	-	-	-	10	(14)⁶	(4)	-	75⁷	71
As at 31 December 2021	5,528	1,494	17,246	(15)	103	249	(34)	(5,744)	27,184	46,011	6,254	371	52,636
Profit/(loss) for the period	-	-	-	-	-	-	-	-	2,089	2,089	-	(1)	2,088
Other comprehensive income/(loss)	-	-	-	115	(1,261)	(43)	(441)	(1,382)	72²	(2,940)	-	(31)	(2,971)
Distributions	-	-	-	-	-	-	-	-	-	-	-	(26)	(26)
Redemption of other equity instruments	-	-	-	-	-	-	-	-	-	-	(990)	-	(990)
Treasury shares net movement	-	-	-	-	-	-	-	-	11	11	-	-	11
Share option expenses	-	-	-	-	-	-	-	-	104	104	-	-	104
Dividends on ordinary shares	-	-	-	-	-	-	-	-	(274)	(274)	-	-	(274)
Dividends on preference shares and AT1 securities	-	-	-	-	-	-	-	-	(216)	(216)	-	-	(216)
Share buy-back8	(56)	-	56	-	-	-	-	-	(754)	(754)	-	-	(754)
Other movements	-	-	-	-	-	-	-	(12)	35⁹	23	-	61¹	84
As at 30 June 2022	5,472	1,494	17,302	100	(1,158)	206	(475)	(7,138)	28,251	44,054	5,264	374	49,692

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

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

3  On 25 February 2021, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases
was $19 million, and the total consideration paid was $255 million (including $2 million of fees). The total number of shares purchased was 37,148,399 representing
1.18 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account

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

5  On 3 August 2021, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was
$20 million, and the total consideration paid was $251 million (including $1 million of fees and stamp duty). The total number of shares purchased was 39,914,763 representing 1.28 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption
reserve account

6  Movement related to Translation adjustment and AT1 securities charges

7  Movements related to non-controlling interest from Mox Bank Limited ($2 million), Trust Bank Singapore Limited ($70 million) and Zodia Markets Holdings Limited
($3 million)

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

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

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

Note 25 includes a description of each reserve.

The notes form an integral part of these financial statements.

 Page 70

Condensed consolidated interim cash flow statement

For the six months ended 30 June 2022

	Notes	6 months ended 30.06.22 $million	6 months ended 30.06.21 $million
Cash flows from operating activities:
Profit before taxation		2,772	2,559
Adjustments for non-cash items and other adjustments included within income statement	31	700	593
Change in operating assets	31	(24,285)	(7,031)
Change in operating liabilities	31	26,042	5,403
Contributions to defined benefit schemes		(15)	(20)
UK and overseas taxes paid		(252)	(534)
Net cash from /(used in) operating activities		4,962	970
Cash flows from investing activities:
Internally generated capitalised software	16	(486)	(416)
Purchase of property, plant and equipment	17	(553)	(185)
Disposal of property, plant and equipment	17	139	355
Disposal of held for sale property, plant and equipment	20	79	140
Acquisition of investment in subsidiaries, associates, and joint ventures, net of cash acquired	19	(4)	(4)
Dividends received from associates and joint ventures	19	58	38
Purchase of investment securities		(145,272)	(157,290)
Disposal and maturity of investment securities		135,373	159,859
Net cash (used in)/from investing activities		(10,666)	2,497
Cash flows from financing activities:
Exercise of share options		11	5
Purchase of own shares		-	(85)
Cancellation of shares including share buy-back		(754)	(255)
Premises and equipment lease liability principal payment		(164)	(253)
Issue of Additional Tier 1 capital, net of expenses	25	-	1,239
Redemption of Tier 1 capital	25	(990)	-
Gross proceeds from issue of subordinated liabilities	31	750	1,186
Interest paid on subordinated liabilities	31	(310)	(293)
Repayment of subordinated liabilities	31	(1,048)	(530)
Proceeds from issue of senior debts	31	6,511	8,276
Repayment of senior debts	31	(3,618)	(4,865)
Interest paid on senior debts	31	(487)	(366)
Net cash inflow due to non-controlling interest		82	19
Dividends paid to non-controlling interests, preference shareholders and AT1 securities		(242)	(208)
Dividends paid to ordinary shareholders		(274)	(282)
Net cash (used in)/from financing activities		(533)	3,588
Net (decrease) /increase in cash and cash equivalents		(6,237)	7,055
Cash and cash equivalents at beginning of the period		99,605	97,874
Effect of exchange rate movements on cash and cash equivalents		(2,553)	(769)
Cash and cash equivalents at end of the period¹		90,815	104,160

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

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

Page 71

Contents - Notes to the financial statements

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

Page 72

Notes to the financial statements

1. Accounting policies

Statement of compliance

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

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

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

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

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

Basis of preparation

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

Significant accounting estimates and judgements

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

• Note 4 Net fees and commission

IFRS and Hong Kong accounting requirements

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

Comparatives

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

• Note 2 Segmental information

• Note 4 Net fees and commission

• Note 13 Financial instruments

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

• Risk review: Credit quality by industry

Page 73

New accounting standards in issue but not yet effective

IFRS 17 Insurance Contracts

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

Going concern

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

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

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

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

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

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

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

• A detailed review of all principal and emerging risks

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

2. Segmental information

Basis of preparation

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

Page 74

Segments and regions

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

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

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

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

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

The changes above require comparative periods to be restated.

Restructuring items excluded from underlying results

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

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

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

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

Profit before taxation (PBT)

	6 months ended 30.06.22
	Underlying $million	Restructuring $million	Statutory $million
Operating income	8,200	25	8,225
Operating expenses	(5,267)	(61)	(5,328)
Operating profit/(loss) before impairment losses and taxation	2,933	(36)	2,897
Credit impairment	(267)	4	(263)
Other impairment	(2)	(13)	(15)
Profit from associates and joint ventures	153	-	153
Profit/(loss) before taxation	2,817	(45)	2,772

	6 months ended  30.06.21
	Underlying $million	Restructuring $million	Statutory $million
Operating income	7,618	10	7,628
Operating expenses	(5,092)	(129)	(5,221)
Operating profit/(loss) before impairment losses and taxation	2,526	(119)	2,407
Credit impairment	47	4	51
Other impairment	(25)	(15)	(40)
Profit from associates and joint ventures	134	7	141
Profit/(loss) before taxation	2,682	(123)	2,559

 

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Underlying performance by client segment

	6 months ended 30.06.22
	Corporate, Commercial & Institutional Banking $million	Consumer, Private & Business Banking $million	Ventures $million	Central & other items $million	Total $million
Operating income	4,877	2,871	5	447	8,200
External	4,581	2,612	5	1,002	8,200
Inter-segment	296	259	-	(555)	-
Operating expenses	(2,714)	(2,071)	(146)	(336)	(5,267)
Operating profit/(loss) before impairment losses and taxation	2,163	800	(141)	111	2,933
Credit impairment	(196)	(79)	(3)	11	(267)
Other impairment	-	(1)	-	(1)	(2)
Profit/(loss) from associates and joint ventures	-	-	(7)	160	153
Underlying profit/(loss) before taxation	1,967	720	(151)	281	2,817
Restructuring	(4)	(21)	(1)	(19)	(45)
Statutory profit/(loss) before taxation	1,963	699	(152)	262	2,772
Total assets	427,483	134,979	1,371	272,084	835,917
Of which: loans and advances to customers2	192,439	132,275	342	29,418	354,474
loans and advances to customers	134,154	132,233	342	26,779	293,508
loans held at fair value through profit or loss (FVTPL)	58,285	42	-	2,639	60,966
Total liabilities	500,400	179,637	770	105,418	786,225
Of which: customer accounts2	321,517	175,747	689	9,058	507,011

	6 months ended 30.06.21 (Restated)¹
	Corporate, Commercial & Institutional Banking¹ $million	Consumer, Private & Business Banking¹ $million	Ventures¹ $million	Central & other items¹ $million	Total $million
Operating income	4,292	2,971	(3)	358	7,618
External	4,087	2,775	(3)	759	7,618
Inter-segment	205	196	-	(401)	-
Operating expenses	(2,582)	(2,025)	(118)	(367)	(5,092)
Operating profit/(loss) before impairment losses and taxation	1,710	946	(121)	(9)	2,526
Credit impairment	136	(93)	-	4	47
Other impairment	(25)	-	-	-	(25)
Profit/(loss) from associates and joint ventures	-	-	(2)	136	134
Underlying profit/(loss) before taxation	1,821	853	(123)	131	2,682
Restructuring	(38)	(22)	-	(63)	(123)
Statutory profit/(loss) before taxation	1,783	831	(123)	68	2,559
Total assets	387,542	137,190	624	270,554	795,910
Of which: loans and advances to customers2	197,732	134,281	10	23,153	355,176
loans and advances to customers	141,205	134,182	10	22,606	298,003
loans held at fair value through profit or loss (FVTPL)	56,527	99	-	547	57,173
Total liabilities	452,449	179,249	757	110,598	743,053
Of which: customer accounts2	307,619	174,862	695	8,416	491,592

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

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

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Operating income by client segment

	6 months ended 30.06.22
	Corporate, Commercial & Institutional Banking $million	Consumer Private & Business Banking $million	Ventures $million	Central & other items (segment) $million	Total $million
Underlying operating income	4,877	2,871	5	447	8,200
Restructuring	25	-	-	-	25
Statutory operating income	4,902	2,871	5	447	8,225

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

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

Underlying performance by region

	6 months ended 30.06.22
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Operating income	5,522	1,291	1,445	(58)	8,200
Operating expenses	(3,417)	(808)	(771)	(271)	(5,267)
Operating profit/(loss) before impairment losses and taxation	2,105	483	674	(329)	2,933
Credit impairment	(398)	99	29	3	(267)
Other impairment	(2)	(1)	1	-	(2)
Profit/(loss) from associates and joint ventures	157	-	-	(4)	153
Underlying profit/(loss) before taxation	1,862	581	704	(330)	2,817
Restructuring	(19)	(7)	(6)	(13)	(45)
Statutory profit/(loss) before taxation	1,843	574	698	(343)	2,772
Total assets	477,485	57,859	291,264	9,309	835,917
Of which: loans and advances to customers1	259,484	28,003	66,987	-	354,474
loans and advances to customers	243,169	26,656	23,683	-	293,508
loans held at fair value through profit or loss (FVTPL)	16,315	1,347	43,304	-	60,966
Total liabilities	431,424	42,672	243,877	68,252	786,225
Of which: customer accounts1	332,705	33,480	140,826	-	507,011

	6 months ended 30.06.21
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Operating income	5,463	1,250	993	(88)	7,618
Operating expenses	(3,298)	(815)	(725)	(254)	(5,092)
Operating profit/(loss) before impairment losses and taxation	2,165	435	268	(342)	2,526
Credit impairment	(47)	40	62	(8)	47
Other impairment	(15)	-	7	(17)	(25)
Profit/(loss) from associates and joint ventures	136	-	-	(2)	134
Underlying profit/(loss) before taxation	2,239	475	337	(369)	2,682
Restructuring	(27)	(3)	(20)	(73)	(123)
Statutory profit/(loss) before taxation	2,212	472	317	(442)	2,559
Total assets	467,933	57,797	261,041	9,139	795,910
Of which: loans and advances to customers1	255,630	29,825	69,721	-	355,176
loans and advances to customers	240,297	27,256	30,450	-	298,003
loans held at fair value through profit or loss (FVTPL)	15,333	2,569	39,271	-	57,173
Total liabilities	418,583	39,464	213,713	71,293	743,053
Of which: customer accounts1	334,639	32,847	124,106	-	491,592

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

Page 77

Operating income by region

	6 months ended 30.06.22
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Underlying operating income	5,522	1,291	1,445	(58)	8,200
Restructuring	10	1	(1)	15	25
Statutory operating income	5,532	1,292	1,444	(43)	8,225

	6 months ended 30.06.21
	Asia1 $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Underlying operating income	5,463	1,250	993	(88)	7,618
Restructuring	25	2	-	(17)	10
Statutory operating income	5,488	1,252	993	(105)	7,628

Additional segmental information (statutory)

	6 months ended 30.06.22
	Corporate, Commercial & Institutional Banking $million	Consumer Private & Business Banking $million	Ventures $million	Central & other items (segment) $million	Total $million
Net interest income	1,579	1,735	4	320	3,638
Net fees and commission income	788	868	3	5	1,664
Net trading and other income	2,535	268	(2)	122	2,923
Operating income	4,902	2,871	5	447	8,225

	6 months ended 30.06.21 (Restated)¹
	Corporate, Commercial & Institutional Banking1 $million	Consumer Private & Business Banking1 $million	Ventures1 $million	Central & other items (segment) $million	Total $million
Net interest income	1,596	1,611	(2)	165	3,370
Net fees and commission income	882	1,078	-	(21)	1,939
Net trading and other income	1,826	282	(1)	212	2,319
Operating income	4,304	2,971	(3)	356	7,628

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

	6 months ended 30.06.22
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Net interest income	2,668	577	357	36	3,638
Net fees and commission income	1,167	271	301	(75)	1,664
Net trading and other income	1,697	444	786	(4)	2,923
Operating income	5,532	1,292	1,444	(43)	8,225

	6 months ended 30.06.21
	Asia $million	Africa & Middle East $million	Europe & Americas $million	Central & other items $million	Total $million
Net interest income	2,549	585	233	3	3,370
Net fees and commission income	1,464	310	256	(91)	1,939
Net trading and other income	1,475	357	504	(17)	2,319
Operating income	5,488	1,252	993	(105)	7,628

Page 78

	6 months ended 30.06.22
	Hong Kong $million	Korea $million	China $million	Taiwan $million	Singapore $million	India $million	Indonesia $million	UAE $million	UK $million	US $million
Net interest income	819	384	273	92	407	315	43	109	122	189
Net fees and commission income	307	89	75	86	307	135	30	53	42	198
Net trading and other income	620	138	251	58	161	227	38	143	609	145
Operating income	1,746	611	599	236	875	677	111	305	773	532

	6 months ended 30.06.21
	Hong Kong $million	Korea $million	China $million	Taiwan $million	Singapore $million	India $million	Indonesia $million	UAE $million	UK $million	US $million
Net interest income	702	365	305	88	369	317	45	109	101	89
Net fees and commission income	465	124	111	113	353	128	26	45	28	170
Net trading and other income	696	99	153	57	94	168	38	122	355	130
Operating income	1,863	588	569	258	816	613	109	276	484	389

3. Net interest income

	6 months ended 30.06.22 $million	6 months ended 30.06.21 $million
Balances at central banks	146	42
Loans and advances to banks	326	247
Loans and advances to customers	3,962	3,665¹
Debt securities	1,080	904
Other eligible bills	206	149
Accrued on impaired assets (discount unwind)	65	115
Interest income	5,785	5,122
Of which: financial instruments held at fair value through other comprehensive income	833	783
Deposits by banks	92	74
Customer accounts	1,438	1,121
Debt securities in issue	347	284
Subordinated liabilities and other borrowed funds	247	246
Interest expense on IFRS 16 lease liabilities	23	27
Interest expense	2,147	1,752
Net interest income	3,638	3,370

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

Page 79

4. Net fees and commission

Significant accounting estimates and judgements

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

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

	6 months ended 30.06.22 $million	6 months ended 30.06.21 $million
Fees and commissions income	2,023	2,300
Of which:
Financial instruments that are not fair valued through profit or loss	650	660
Trust and other fiduciary activities	284	385
Fees and commissions expense	(359)	(361)
Of which:
Financial instruments that are not fair valued through profit or loss	(114)	(104)
Trust and other fiduciary activities	(24)	(23)
Net fees and commission	1,664	1,939

	6 months ended 30.06.22
	Corporate, Commercial & Institutional Banking $million	Consumer Private & Business Banking $million	Ventures $million	Central & other Items (Segment) $million	Total $million
Transaction Banking	558	16	-	-	574
Trade & Working Capital2	299	13	-	-	312
Cash Management	259	3	-	-	262
Financial Markets	178	-	-	-	178
Lending & Portfolio Management2	52	3	-	-	55
Wealth Management	-	658	-	-	658
Retail Products	-	191	2	-	193
Treasury	-	-	-	(20)	(20)
Others	-	-	1	25	26
Net fees and commission	788	868	3	5	1,664

	6 months ended 30.06.21 (Restated)¹
	Corporate, Commercial & Institutional Banking $million	Consumer Private & Business Banking1 $million	Ventures1 $million	Central & other Items (Segment) $million	Total $million
Transaction Banking	547	20	-	-	567
Trade & Working Capital2	298	14	-	-	312
Cash Management	249	6	-	-	255
Financial Markets	268	-	-	-	268
Lending & Portfolio Management2	66	1	-	-	67
Wealth Management	1	849	-	-	850
Retail Products	-	208	(1)	-	207
Treasury	-	-	-	(19)	(19)
Others	-	-	1	(2)	(1)
Net fees and commission	882	1,078	-	(21)	1,939

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

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

Page 80

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

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

5. Net trading income

	6 months ended 30.06.22 $million	6 months ended 30.06.21 $million
Net trading income	2,679	1,870
Significant items within net trading income include:
Gains on instruments held for trading¹	2,480	1,865
Gains on financial assets mandatorily at fair value through profit or loss	157	81
Losses on financial assets designated at fair value through profit or loss	(6)	(9)
Gains/(losses) on financial liabilities designated at fair value through profit or loss	178	(25)

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

6. Other operating income

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

7. Operating expenses

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

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

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

	Business	Support services	Total
At 30 June 2022	31,436	51,797	83,233
At 31 December 2021¹	30,940	51,017	81,957

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

Page 81

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

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

8. Credit impairment

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

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

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

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

Page 82

10. Taxation

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

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

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

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

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

Deferred tax comprises assets and liabilities as follows:

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

 

Page 83

11. Dividends

Ordinary equity shares

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

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

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

2022 recommended interim dividend

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

Preference shares and Additional Tier 1 securities

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

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

12. Earnings per ordinary share

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

Page 84

13. Financial instruments

Classification and measurement

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

Assets	Notes	Assets at fair value						Assets held at amortised cost $million	Total $million
		Trading $million	Derivatives held for hedging $million	Non-trading mandatorily at fair value through profit or loss $million	Designated at fair value through profit or loss $million	Fair value through other compre-hensive income $million	Total financial assets at fair value $million
Cash and balances at central banks		-	-	-	-	-	-	67,005	67,005
Financial assets held at fair value through profit or loss
Loans and advances to banks¹		1,884	-	2,678	-	-	4,562	-	4,562
Loans and advances to customers¹		5,223	-	3,222	-	-	8,445	-	8,445
Reverse repurchase agreements and other similar secured lending	15	528	-	73,870	-	-	74,398	-	74,398
Debt securities, alternative tier one and other eligible bills		27,665	-	646	75	-	28,386	-	28,386
Equity shares		2,105	-	220	-	-	2,325	-	2,325
Other assets	18	-	-	25	-	-	25	-	25
		37,405	-	80,661	75	-	118,141	-	118,141
Derivative financial instruments	14	73,448	3,228	-	-	-	76,676	-	76,676
Loans and advances to banks¹		-	-	-	-	-	-	36,201	36,201
Of which: reverse repurchase agreements and other similar secured lending	15	-	-	-	-	-	-	795	795
Loans and advances to customers¹		-	-	-	-	-	-	293,508	293,508
Of which: reverse repurchase agreements and other similar secured lending	15	-	-	-	-	-	-	7,894	7,894
Investment securities
Debt securities, alternative tier one and other eligible bills		-	-	-	-	112,271	112,271	51,866	164,137
Equity shares		-	-	-	-	755	755	-	755
		-	-	-	-	113,026	113,026	51,866	164,892
Other assets	18	-	-	-	-	-	-	51,135	51,135
Assets held for sale	20	-	-	-	1	-	1	60	61
Total at 30 June 2022		110,853	3,228	80,661	76	113,026	307,844	499,775	807,619

1 Further analysed in Risk review and Capital review

Page 85

Assets	Notes	Assets at fair value						Assets held at amortised cost $million	Total $million
		Trading $million	Derivatives held for hedging $million	Non-trading mandatorily at fair value through profit or loss $million	Designated at fair value through profit or loss $million	Fair value through other compre-hensive income $million	Total financial assets at fair value $million
Cash and balances at central banks		-	-	-	-	-	-	72,663	72,663
Financial assets held at fair value through profit or loss
Loans and advances to banks¹		1,491	-	2,356	-	-	3,847	-	3,847
Loans and advances to customers¹		5,813	-	4,140	-	-	9,953	-	9,953
Reverse repurchase agreements and other similar secured lending	15	-	-	80,009	-	-	80,009	-	80,009
Debt securities, alternative tier one and other eligible bills		28,801	-	463	161	-	29,425	-	29,425
Equity shares		5,653	-	208	-	-	5,861	-	5,861
Other assets	18	-	-	26	-	-	26	-	26
		41,758	-	87,202	161	-	129,121	-	129,121
Derivative financial instruments	14	51,002	1,443	-	-	-	52,445	-	52,445
Loans and advances to banks¹		-	-	-	-	-	-	44,383	44,383
Of which: reverse repurchase agreements and other similar secured lending	15	-	-	-	-	-	-	1,079	1,079
Loans and advances to customers¹		-	-	-	-	-	-	298,468	298,468
Of which: reverse repurchase agreements and other similar secured lending	15	-	-	-	-	-	-	7,331	7,331
Investment securities
Debt securities, alternative tier one and other eligible bills		-	-	-	-	121,375	121,375	41,325	162,700
Equity shares		-	-	-	-	737	737	-	737
		-	-	-	-	122,112	122,112	41,325	163,437
Other assets	18	-	-	-	-	-	-	40,068	40,068
Assets held for sale	20	-	-	-	43	-	43	52	95
Total at 31 December 2021		92,760	1,443	87,202	204	122,112	303,721	496,959	800,680

1 Further analysed in Risk review and Capital review

Page 86

Liabilities	Notes	Liabilities at fair value				Amortised cost $million	Total $million
		Trading $million	Derivatives held for hedging $million	Designated at fair value through profit or loss $million	Total financial liabilities at fair value $million
Financial liabilities held at fair value through profit or loss
Deposits by banks		63	-	1,527	1,590	-	1,590
Customer accounts		98	-	10,937	11,035	-	11,035
Repurchase agreements and other similar secured borrowing	15	-	-	55,320	55,320	-	55,320
Debt securities in issue		-	-	6,807	6,807	-	6,807
Short positions		8,218	-	-	8,218	-	8,218
Other liabilities		9	-	4	13	-	13
		8,388	-	74,595	82,983	-	82,983
Derivative financial instruments	14	73,196	2,901	-	76,097	-	76,097
Deposits by banks		-	-	-	-	31,173	31,173
Customer accounts		-	-	-	-	453,742	453,742
Repurchase agreements and other similar secured borrowing	15	-	-	-	-	1,723	1,723
Debt securities in issue		-	-	-	-	58,043	58,043
Other liabilities	21	-	-	-	-	60,102	60,102
Subordinated liabilities and other borrowed funds	24	-	-	-	-	14,933	14,933
Total at 30 June 2022		81,584	2,901	74,595	159,080	619,716	778,796

Liabilities	Notes	Liabilities at fair value				Amortised cost $million	Total $million
		Trading $million	Derivatives held for hedging $million	Designated at fair value through profit or loss $million	Total financial liabilities at fair value $million
Financial liabilities held at fair value through profit or loss
Deposits by banks		-	-	1,352	1,352	-	1,352
Customer accounts		198	-	9,093	9,291	-	9,291
Repurchase agreements and other similar secured borrowing	15	-	-	62,388	62,388	-	62,388
Debt securities in issue		-	-	5,597	5,597	-	5,597
Short positions		6,562	-	-	6,562	-	6,562
Other liabilities		6	-	1	7	-	7
		6,766	-	78,431	85,197	-	85,197
Derivative financial instruments	14	52,706	693	-	53,399	-	53,399
Deposits by banks		-	-	-	-	30,041	30,041
Customer accounts		-	-	-	-	474,570	474,570
Repurchase agreements and other similar secured borrowing	15	-	-	-	-	3,260	3,260
Debt securities in issue		-	-	-	-	61,293	61,293
Other liabilities	21	-	-	-	-	43,432	43,432
Subordinated liabilities and other borrowed funds	24	-	-	-	-	16,646	16,646
Total at 31 December 2021		59,472	693	78,431	138,596	629,242	767,838

Financial liabilities designated at fair value through profit or loss

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

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

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Interest rate benchmark reform

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

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

Valuation of financial instruments

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

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

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

Significant accounting estimates and judgements

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

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

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

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

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

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Valuation techniques

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

Financial instruments held at fair value

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

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

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

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

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

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

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Financial instruments held at amortised cost

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

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

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

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

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

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

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

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Fair value adjustments

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

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

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

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

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

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

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

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

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

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

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

Fair value hierarchy - financial instruments held at fair value

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

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

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

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

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

Assets	Level 1 $million	Level 2 $million	Level 3 $million	Total $million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	-	4,476	86	4,562
Loans and advances to customers	4	7,456	985	8,445
Reverse repurchase agreements and other similar secured lending	-	72,784	1,614	74,398
Debt securities and other eligible bills	12,714	15,135	537	28,386
Of which:
Issued by central banks & governments	12,254	5,283	-	17,537
Issued by corporates other than financial institutions¹	52	4,087	504	4,643
Issued by financial institutions¹	408	5,765	33	6,206
Equity shares	2,069	11	245	2,325
Derivative financial instruments	1,681	74,891	104	76,676
Of which:
Foreign exchange	130	62,947	62	63,139
Interest rate	24	7,356	20	7,400
Credit	-	2,115	1	2,116
Equity and stock index options	-	210	1	211
Commodity	1,527	2,263	20	3,810
Investment securities
Debt securities and other eligible bills	50,959	61,298	14	112,271
Of which:
Issued by central banks & governments	38,265	23,727	14	62,006
Issued by corporates other than financial institutions¹	1,544	4,164	-	5,708
Issued by financial institutions¹	11,150	33,407	-	44,557
Equity shares	182	6	567	755
Other assets	-	-	25	25
Total financial instruments at 30 June 2022²	67,609	236,057	4,177	307,843
Liabilities
Financial instruments held at fair value through profit or loss
Deposits by banks	-	1,271	319	1,590
Customer accounts	-	10,350	685	11,035
Repurchase agreements and other similar secured borrowing	-	55,320	-	55,320
Debt securities in issue	-	6,162	645	6,807
Short positions	5,154	2,967	97	8,218
Derivative financial instruments	1,636	74,265	196	76,097
Of which:
Foreign exchange	139	59,525	16	59,680
Interest rate	22	9,031	53	9,106
Credit	-	2,695	5	2,700
Equity and stock index options	-	126	122	248
Commodity	1,475	2,888	-	4,363
Other liabilities	-	9	4	13
Total financial instruments at 30 June 2022²	6,790	150,344	1,946	159,080

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

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

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

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

Page 93

Assets	Level 1 $million	Level 2 $million	Level 3 $million	Total $million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	-	3,838	9	3,847
Loans and advances to customers	-	8,596	1,357	9,953
Reverse repurchase agreements and other similar secured lending	-	78,443	1,566	80,009
Debt securities and other eligible bills	12,057	17,019	349	29,425
Of which:
Issued by central banks & governments	10,731	7,201	-	17,932
Issued by corporates other than financial institutions¹	1	3,750	111	3,862
Issued by financial institutions¹	1,325	6,068	238	7,631
Equity shares	5,637	38	186	5,861
Derivative financial instruments	1,066	51,289	90	52,445
Of which:
Foreign exchange	161	41,577	10	41,748
Interest rate	9	6,314	53	6,376
Credit	-	2,265	24	2,289
Equity and stock index options	-	133	3	136
Commodity	896	1,000	-	1,896
Investment securities
Debt securities and other eligible bills	51,298	70,037	40	121,375
Of which:
Issued by central banks & governments	39,590	24,651	40	64,281
Issued by corporates other than financial institutions¹	-	1,963	-	1,963
Issued by financial institutions¹	11,708	43,423	-	55,131
Equity shares	227	17	493	737
Other Assets	-	-	26	26
Total financial instruments at 31 December 2021²	70,285	229,277	4,116	303,678
Liabilities
Financial instruments held at fair value through profit or loss
Deposits by banks	-	1,069	283	1,352
Customer accounts	-	8,837	454	9,291
Repurchase agreements and other similar secured borrowing	-	62,388	-	62,388
Debt securities in issue	-	4,776	821	5,597
Short positions	4,187	2,375	-	6,562
Derivative financial instruments	949	52,356	94	53,399
Of which:
Foreign exchange	169	41,555	3	41,727
Interest rate	7	6,448	16	6,471
Credit	-	3,084	41	3,125
Equity and stock index options	-	126	34	160
Commodity	773	1,143	-	1,916
Other Liabilities	-	6	1	7
Total financial instruments at 31 December 2021²	5,136	131,807	1,653	138,596

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

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

Page 94

Fair value hierarchy - financial instruments measured at amortised cost

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

	Carrying value $million	Fair value
		Level 1 $million	Level 2 $million	Level 3 $million	Total $million
Assets
Cash and balances at central banks¹	67,005	-	67,005	-	67,005
Loans and advances to banks	36,201	-	36,146	32	36,178
Of which: reverse repurchase agreements and other similar secured lending	795	-	795	-	795
Loans and advances to customers	293,508	-	53,961	239,075	293,036
Of which: reverse repurchase agreements and other similar secured lending	7,894	-	3,189	4,705	7,894
Investment securities²	51,866	-	50,627	25	50,652
Other assets¹	51,135	-	51,135	-	51,135
Assets held for sale	60	-	-	60	60
At 30 June 2022	499,775	-	258,874	239,192	498,066
Liabilities
Deposits by banks	31,173	-	31,248	-	31,248
Customer accounts	453,742	-	453,691	-	453,691
Repurchase agreements and other similar secured borrowing	1,723	-	1,723	-	1,723
Debt securities in issue	58,043	25,231	32,400	-	57,631
Subordinated liabilities and other borrowed funds	14,933	14,143	68	-	14,211
Other liabilities¹	60,102	-	60,101	1	60,102
At 30 June 2022	619,716	39,374	579,231	1	618,606

	Carrying value $million	Fair value
		Level 1 $million	Level 2 $million	Level 3 $million	Total $million
Assets
Cash and balances at central banks¹	72,663	-	72,663	-	72,663
Loans and advances to banks	44,383	-	44,383	-	44,383
Of which: reverse repurchase agreements and other similar secured lending	1,079	-	1,079	-	1,079
Loans and advances to customers	298,468	-	42,136	256,289	298,425
Of which: reverse repurchase agreements and other similar secured lending	7,331	-	3,764	3,567	7,331
Investment securities²	41,325	-	41,864	-	41,864
Other assets¹	40,068	-	40,067	1	40,068
Assets held for sale	52	-	-	52	52
At 31 December 2021	496,959	-	241,113	256,342	497,455
Liabilities
Deposits by banks	30,041	-	30,041	-	30,041
Customer accounts	474,570	-	474,645	-	474,645
Repurchase agreements and other similar secured borrowing	3,260	-	3,260	-	3,260
Debt securities in issue	61,293	26,073	35,503	-	61,576
Subordinated liabilities and other borrowed funds	16,646	16,811	519	-	17,330
Other liabilities¹	43,432	-	43,431	1	43,432
At 31 December 2021	629,242	42,884	587,399	1	630,284

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

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

Page 95

Fair value of financial instruments

Level 3 Summary and significant unobservable inputs

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

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

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

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

Page 96

Instrument	Value as at 31 December 2021			Principal valuation technique	Significant unobservable inputs	Range1	Weighted average²
	Assets $million	Liabilities $million
Loans and advances to banks	9	-		Discounted cash flows	Recovery rates	87.3%-100%	93.6%
Loans and advances to customers	1,357	-		Discounted cash flows	Price/yield	0.2% - 11.8%	3.1%
					Recovery rates	10.6% - 100%	87.8%
Reverse repurchase agreements and other similar secured lending	1,566	-		Discounted cash flows	Repo curve	0.3%-3.0%	2.4%
Debt securities, alternative tier one and other eligible securities	349	-		Discounted cash flows	Price/yield	5.1% - 12.4%	7.5%
					Recovery rates	0.01% - 1.0%	0.2%
Government bonds and treasury bills	40	-		Discounted cash flows	Price/yield	2.7% - 5.5%	3.7%
Asset-backed securities	-	-		Discounted cash flows	Price/yield	N/A	N/A
Equity shares (includes private equity investments)	679	-		Comparable pricing/yield	EV/EBITDA multiples	6.1x-15.3x	8.6x
					EV/Revenue multiples	10.1x	10.1x
					P/E multiples	12.6x-25.3x	14.9x
					P/B multiples	0.4x-3.3x	1.4x
					P/S multiples	1.8x-2.6x	1.8x
					Liquidity discount	7.9%-29.2%	16.5%
				Discounted cash flows	Discount rates	6.0%-17.4%	8.6%
				Option pricing model	EV/Revenue multiples	4.0x-85.5x	12.1x
					Volatility	55.0%-65.0%	60.3%
Other Assets	26	-		NAV	N/A	N/A	N/A
Derivative financial instruments of which:
Foreign exchange	10	3		Option pricing model	Foreign exchange option implied volatility	3.1% - 6.1%	5.1%
				Discounted cash flows	Foreign exchange curves	(16.4)% - 57.3%	9.0%
Interest rate	53	16		Discounted cash flows	Interest rate curves	(16.4)%-18.8%	5.0%
				Option pricing model	Bond option implied volatility	N/A	N/A
Credit	24	41		Discounted cash flows	Credit spreads	0.1%-11.5%	1.0%
					Price/yield	5.9% -7.3%	6.6%
Equity and stock index	3	34		Internal pricing model	Equity correlation	8.0% - 96.0%	70.0%
					Equity-FX correlation	(70.0)%-85.0%	(33.0)%
Deposits by banks	-	283		Discounted cash flows	Credit spreads	0.4% - 3.0%	1.4%
					Price/yield	6.8%-8.3%	7.5%
Customer accounts	-	454		Discounted cash flows	Credit spreads	1.0% - 2.0%	1.2%
					Interest rate curves	0.9%-5.6%	4.7%
					Price/yield	8.9%-12.1%	10.1%
Debt securities in issue	-	821		Discounted cash flows	Credit spreads	0.9%-2.2%	1.0%
					Interest rate curves	0.9% - 5.6%	4.9%
				Internal pricing model	Equity correlation	8.0% - 96.0%	70.0%
					Equity-FX correlation	(70.0)%-85.0%	(33.0)%
Short positions	-	-		N/A	N/A	N/A	N/A
Other Liabilities	-	1		Comparable pricing/yield	EV/EBITDA multiples	3.07x-9.95x	6.84x
Total	4,116	1,653

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

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

Page 97

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

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

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

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

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

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

• EV/EBITDA multiple is the ratio of Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA). EV is the aggregate market capitalisation and debt minus the cash and cash equivalents. An increase in
EV/EBITDA multiple will result in a favourable movement in the fair value of the unlisted firm

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

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

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

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

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

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

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

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

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

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

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

Page 98

Level 3 movement tables - financial assets

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

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

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

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

Page 99

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

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

 

Page 100

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

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

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

Page 101

Level 3 movement tables - financial liabilities

	30.06.22
	Deposits by banks $million	Customer accounts $million	Debt securities in issue $million	Derivative financial instruments $million	Short  positions $million	Other Liabilities $million	Total $million
At 1 January 2022	283	454	821	94	-	1	1,653
Total (gains)/losses recognised in income statement - net trading income	(15)	(56)	(142)	104	(3)	3	(109)
Issues	223	934	387	89	100	-	1,733
Settlements	(172)	(647)	(473)	(89)	-	-	(1,381)
Transfers out1	-	-	(24)	(3)	-	-	(27)
Transfers in2	-	-	76	1	-	-	77
At 30 June 2022	319	685	645	196	97	4	1,946
Total unrealised (gains) recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 30 June 2022	-	(2)	(7)	(2)	-	-	(11)

	30.06.21
	Deposits by banks $million	Customer Accounts $million	Debt securities in issue $million	Derivative financial instruments $million	Short positions $million	Other Liabilities $million	Total $million
At 1 January 2021	146	21	160	119	-	-	446
Total losses/(gains) recognised in income statement - net trading income	8	11	-	(3)	-	-	16
Issues	268	228	734	100	-	-	1,330
Settlements	(146)	(52)	(361)	(107)	-	-	(666)
Transfers out1	-	-	(22)	(1)	-	-	(23)
Transfers in2	-	-	92	3	-	-	95
At 30 June 2021	276	208	603	111	-	-	1,198
Total unrealised losses/(gains) recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 30 June 2021	-	12	(7)	-	-	-	5

	31.12.21
	Deposits by banks $million	Customer Accounts $million	Debt securities in issue $million	Derivative financial instruments $million	Short positions $million	Other Liabilities $million	Total $million
At 1 July 2021	276	208	603	111	-	-	1,198
Total (gains) recognised in income statement - net trading income	-	(16)	(12)	(20)	-	-	(48)
Issues	1	575	881	66	-	-	1,523
Settlements	1	(313)	(625)	(74)	-	-	(1,011)
Transfers out1	-	-	(26)	(5)	-	-	(31)
Transfers in2	5	-	-	16	-	1	22
At 31 December 2021	283	454	821	94	-	1	1,653
Total unrealised (gains)/losses recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 31 December 2021	-	(12)	7	(14)	-	-	(19)

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

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

Page 102

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

Sensitivity analysis is performed on products with significant unobservable inputs. The Group applies a 10 per cent increase
or decrease on the values of these unobservable inputs, to generate a range of reasonably possible alternative valuations. The percentage shift is determined by statistical analysis performed on a set of reference prices based on the composition
of the Group's Level 3 inventory as the measurement date. Favourable and unfavourable changes (which show the balance adjusted for input change) are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable parameters. The Level 3 sensitivity analysis assumes a one-way market move and does not consider offsets for hedges.

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

The reasonably possible alternatives could have increased or decreased the fair values of financial instruments held at
fair value through profit or loss and those classified as fair value through other comprehensive income by the amounts disclosed below.

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

Page 103

14. Derivative financial instruments

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

Derivatives

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

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

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

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

Derivatives held for hedging

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

 

Page 104

Interest rate benchmark reform

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

	Fair value hedges $million	Cash flow hedges $million	Total $million	Weighted average exposure Years
Interest rate swaps
USD LIBOR	35,906	29,743	65,649	2.6
GBP LIBOR	-	-	-	-
JPY LIBOR	-	-	-	-
SGD SOR	-	-	-	-
	35,906	29,743	65,649	2.6
Cross-currency swaps
USD LIBOR vs Fixed rate foreign currency	1,646	3,079	4,725	0.7
Total notional of hedging instruments in scope of IFRS amendments as at 30 June 2022	37,552	32,822	70,374	2.5

	Fair value hedges $million	Cash flow hedges $million	Total $million	Weighted average exposure Years
Interest rate swaps
USD LIBOR	46,615	2,636	49,251	3.6
GBP LIBOR	1,444	-	1,444	0.1
JPY LIBOR	637	-	637	0.2
SGD SOR	-	-	-	-
	48,696	2,636	51,332	3.5
Cross-currency swaps
USD LIBOR vs Fixed rate foreign currency	2,262	3,681	5,943	0.9
Total notional of hedging instruments in scope of IFRS amendments as at 31 December 2021	50,958	6,317	57,275	3.2

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

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

Reverse repurchase agreements and other similar secured lending

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

Page 105

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

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

Repurchase agreements and other similar secured borrowing

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

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

Collateral pledged against repurchase agreements	30.06.22
	Fair value through profit or loss $million	Fair value  through other comprehensive income $million	Amortised cost $million	Off-balance sheet $million	Total $million
On-balance sheet
Debt securities and other eligible bills	4,368	2,014	3,492	-	9,874
Off-balance sheet
Repledged collateral received	-	-	-	48,520	48,520
At 30 June 2022	4,368	2,014	3,492	48,520	58,394

Collateral pledged against repurchase agreements	31.12.21
	Fair value through profit or loss $million	Fair value  through other comprehensive income $million	Amortised cost $million	Off-balance sheet $million	Total $million
On-balance sheet
Debt securities and other eligible bills	3,427	2,655	2,601	-	8,683
Off-balance sheet
Repledged collateral received	-	-	-	57,879	57,879
At 31 December 2021	3,427	2,655	2,601	57,879	66,562

 

Page 106

16. Goodwill and intangible assets

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

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

Outcome of impairment assessment

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

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

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

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

Page 107

17. Property, plant and equipment

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

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

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

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

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

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

Page 108

Operating lease assets

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

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

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

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

18. Other assets

	30.06.22 $million	31.12.21 $million
Financial assets held at amortised cost (Note 13):
Hong Kong SAR Government certificates of indebtedness (Note 21)¹	7,232	7,284
Cash collateral	11,459	9,217
Acceptances and endorsements	6,037	4,930
Unsettled trades and other financial assets	26,407	18,637
	51,135	40,068
Non-financial assets:
Commodities and emissions certificates²	10,506	9,265
Other assets	470	599
	62,111	49,932

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

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

19. Investment in associates and joint ventures

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

	30.06.22 $million	31.12.21 $million
Loss from investment in joint ventures	(3)	(2)
Profit from investment in associates	156	198
Total	153	196

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

Page 109

The Group's principal associate are:

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

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

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

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

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

Impairment testing

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

Bohai	30.06.22 $million	31.12.21 $million
VIU	1,881	1,917
Carrying amount¹	1,881	2,217
Fair value	491	1,114

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

Basis of recoverable amount

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

• short to medium term projections based on management's best estimates of future profits available to ordinary shareholders. These projections have been determined with reference to the latest published financial results and
historical performance. We have adjusted these cash flows as a result of continued market uncertainty in China;

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

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

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

Page 110

The key assumptions used in the VIU calculation:

	30.06.22 per cent	31.12.21 per cent
Pre-tax discount rate	14.90	14.83
Forecast profit long-term growth rate	4.00	4.75
Long-term RWA growth rate	4.00	4.75
Capital requirement adequacy ratio	7.50	7.50

Carrying amount $millions

Base case

Sensitivities - 30.06.22

VIU $million

Headroom $million

Pre-tax discount rate

GDP

Combined

Combined

GDP

Discount rate

Forecast profit

RWA

RWA -10%

RWA +10%

+1%

-1%

+1%

-1%

+10%

-10%

+10%

-10%

CF -10%

CF +10%

Headroom $million

Headroom $million

Headroom $million

Headroom $million

Headroom $million

Headroom $million

Headroom $million

Headroom $million

Headroom $million

Headroom $million

1,881

1,881

-

14.90%

4.00%

1

(5)

(197)

263

265

(265)

(180)

180

(85)

85

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

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

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

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

20. Assets held for sale and associated liabilities

Assets held for sale

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

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

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

Page 111

21. Other liabilities

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

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

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

22. Contingent liabilities and commitments

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

	30.06.22 $million	31.12.21 $million
Financial guarantees and trade credits
Financial guarantees, trade credits and irrevocable letters of credit	58,415	58,535
	58,415	58,535
Commitments
Undrawn formal standby facilities, credit lines and other commitments to lend
One year and over	72,055	69,542
Less than one year	28,341	27,306
Unconditionally cancellable	62,445	61,675
	162,841	158,523
Capital Commitments
Contracted capital expenditure approved by the directors but not provided for in these accounts¹	120	124

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

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

23. Legal and regulatory matters

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

Page 112

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

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

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

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

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

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24. Subordinated liabilities and other borrowed funds

	30.06.22
	USD $million	GBP $million	EUR $million	Total $million
Fixed rate subordinated debt	10,662	903	3,207	14,772
Floating rate subordinated debt	161	-	-	161
Total	10,823	903	3,207	14,933

	31.12.21
	USD $million	GBP $million	EUR $million	Total $million
Fixed rate subordinated debt	11,636	1,160	3,689	16,485
Floating rate subordinated debt	161	-	-	161
Total	11,797	1,160	3,689	16,646

Redemption during the year

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

Issuance during the year

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

25. Share capital, other equity instruments and reserves

Group and Company

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

1 Issued and fully paid ordinary shares of 50 cents each

2 Includes preference share capital of $75,000

Share buy-back

On 18 February 2022, the Group announced the buy-back programme for a share buy-back of its ordinary shares of
$0.50 each. Nominal value of share purchases was $56 million, and the total consideration paid was $754 million (including $4 million of fees and stamp duty), The buy-back completed on 19 May 2022. The total number of shares purchased was 111,295,408, representing 3.61% per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account. The shares were purchased by Standard Chartered PLC on various exchanges not including the Hong Kong Stock Exchange.

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

 

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Ordinary share capital

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

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

Preference share capital

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

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

Other equity instruments

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

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

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

2 Interest payable semi-annually in arrears

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

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

The AT1 issuances above are primarily purchased by institutional investors.

Page 115

The principal terms of the AT1 securities are described below:

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

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

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

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

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

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

Reserves

The constituents of the reserves are summarised as follows:

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

• The amounts in the "Capital and Merger Reserve" represents the premium arising on shares issued using a cash box financing structure, which required the Company to create a merger reserve under section 612 of the Companies Act
2006. Shares were issued using this structure in 2005 and 2006 to assist in the funding of Korea ($1.9 billion) and Taiwan ($1.2 billion) acquisitions, in 2008, 2010 and 2015 for the shares issued by way of a rights issue, primarily for capital maintenance requirements and for the shares issued in 2009 by way of an accelerated book build, the proceeds of which were used in the ordinary course of business of the Group. The funding raised by the 2008, 2010 and 2015 rights issues and 2009 share issue was fully retained within the Company. Of the 2015 funding, $1.5 billion was used to subscribe to additional equity in Standard Chartered Bank, a wholly owned subsidiary of the Company. Apart from the Korea, Taiwan and Standard Chartered Bank funding, the merger reserve is considered realised and distributable

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

• Fair value through other comprehensive income (FVOCI) debt reserve represents the unrealised fair value gains and
losses in respect of financial assets classified as FVOCI, net of expected credit losses and taxation. Gains and losses
are deferred in this reserve and are reclassified to the income statement when the underlying asset is sold, matures or becomes impaired

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

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

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

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

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

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

Own shares

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

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

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

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

Dividend waivers

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

Page 117

26. Retirement benefit obligations

Retirement benefit obligations comprise:

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

Retirement benefit charge comprises:

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

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

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

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

27. Related party transactions

Directors and officers

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

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

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Associate and joint ventures

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

	30.06.22 $million	31.12.21 $million
Assets
Loans and advances	-	-
Debt securities	-	-
Total assets	-	-
Liabilities
Deposits	702	984
Derivative liabilities	-	1
Total liabilities	702	985
Loan commitments and other guarantees¹	52	80

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

28. Post balance sheet events

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

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

29. Corporate governance

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

As previously announced, the following changes to the composition of the Board have taken place since 31 December
2021. On 30 April 2022, Naguib Kheraj, Deputy Chairman, Chair of the Board Risk Committee (BRC) and member of the Governance and Nomination Committee, retired from the Board. Phil Rivett was appointed as interim Chair of the BRC with effect from 1 May 2022, pending the appointment of Maria Ramos as Chair of the BRC receiving regulatory approval. Shirish Apte was appointed to the Board as an Independent Non-Executive Director (INED) and a member of each of the Audit Committee and BRC on 4 May 2022. Robin Lawther was appointed to the Board as an INED and a member of each of the BRC and Remuneration Committee on 1 July 2022. Biographies for each of the directors and a list of the committees' membership can be found at sc.com.

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

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

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30. Statutory accounts

The information in this Half Year Report is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This document was approved by the Board on 29 July 2022. The statutory accounts for the year ended 31 December 2021 have been audited and delivered to the Registrar of Companies in England and Wales. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under sections 498(2)
and 498(3) of the Companies Act 2006.

31. Cash flow note

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

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

Change in operating assets

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

Change in operating liabilities

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

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

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Disclosures

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

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Other supplementary financial information

Supplementary financial information

1. Average balance sheets and yields

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

Average assets

	6 months ended  30.06.22
	Average non-interest earning balance $million	Average interest earning balance $million	Interest income $million	Gross yield interest earning balance %	Gross yield total balance %
Cash and balances at central banks	23,650	55,603	146	0.53	0.37
Gross loans and advances to banks	28,854	41,945	326	1.57	0.93
Gross loans and advances to customers	62,985	305,280	4,027	2.66	2.21
Impairment provisions against loans and advances to banks and customers	-	(5,496)	-	-	-
Investment securities	32,943	168,003	1,286	1.54	1.29
Property, plant and equipment and intangible assets	8,727	-	-	-	-
Prepayments, accrued income and other assets	130,842	-	-	-	-
Investment associates and joint ventures	2,196	-	-	-	-
Total average assets	290,197	565,335	5,785	2.06	1.36

	6 months ended 31.12.21
	Average non-interest earning balance $million	Average interest earning balance $million	Interest income $million	Gross yield interest earning balance %	Gross yield total balance %
Cash and balances at central banks	24,043	55,517	50	0.18	0.12
Gross loans and advances to banks	21,869	45,294	243	1.06	0.72
Gross loans and advances to customers	59,776	309,765	3,796	2.43	2.04
Impairment provisions against loans and advances to banks and customers	-	(5,582)	-	-	-
Investment securities	32,884	156,571	1,037	1.31	1.09
Property, plant and equipment and intangible assets	8,779	-	-	-	-
Prepayments, accrued income and other assets	109,490	-	-	-	-
Investment associates and joint ventures	2,392	-	-	-	-
Total average assets	259,234	561,565	5,126	1.81	1.24

	6 months ended 30.06.21
	Average non-interest earning balance $million	Average interest earning balance $million	Interest income $million	Gross yield interest earning balance %	Gross yield total balance %
Cash and balances at central banks	23,174	56,473	42	0.15	0.11
Gross loans and advances to banks	22,809	46,623	247	1.07	0.72
Gross loans and advances to customers	53,335	305,302	3,780	2.50	2.13
Impairment provisions against loans and advances to banks and customers	-	(6,451)	-	-	-
Investment securities	31,605	155,268	1,053	1.37	1.14
Property, plant and equipment and intangible assets	8,960	-	-	-	-
Prepayments, accrued income and other assets	113,672	-	-	-	-
Investment associates and joint ventures	2,267	-	-	-	-
Total average assets	255,822	557,215	5,122	1.85	1.27

 

Page 122

Average liabilities

	6 months ended 30.06.22
	Average non-interest bearing balance $million	Average interest bearing balance $million	Interest expense $million	Rate paid interest bearing balance %	Rate paid total balance %
Deposits by banks	18,293	29,193	92	0.64	0.39
Customer accounts:
Current accounts and savings deposits	54,567	270,071	584	0.44	0.36
Time and other deposits	63,898	149,866	854	1.15	0.81
Debt securities in issue	6,228	61,288	347	1.14	1.04
Accruals, deferred income and other liabilities	132,958	1,127	23	4.12	0.03
Subordinated liabilities and other borrowed funds	-	15,559	247	3.20	3.20
Non-controlling interests	340	-	-	-	-
Shareholders' funds	49,493	-	-	-	-
	325,777	527,104	2,147	0.82	0.51
Adjustment for Financial Markets funding costs			(106)
Financial guarantee fees on interest earning assets			47
Total average liabilities and shareholders' funds	325,777	527,104	2,088	0.80	0.49

	6 months ended 31.12.21
	Average non-interest |bearing balance $million	Average interest bearing balance $million	Interest expense $million	Rate paid interest bearing balance %	Rate paid total balance %
Deposits by banks	19,731	28,218	62	0.44	0.26
Customer accounts:
Current accounts and savings deposits	53,310	267,231	460	0.34	0.28
Time and other deposits	55,727	147,441	615	0.83	0.60
Debt securities in issue	6,450	57,003	282	0.98	0.88
Accruals, deferred income and other liabilities	112,614	1,206	26	4.28	0.05
Subordinated liabilities and other borrowed funds	-	16,666	251	2.99	2.99
Non-controlling interests	356	-	-	-	-
Shareholders' funds	51,533	-	-	-	-
	299,722	517,766	1,696	0.65	0.41
Adjustment for Financial Markets funding costs			(97)
Financial guarantee fees on interest earning assets			156
Total average liabilities and shareholders' funds	299,722	517,766	1,755	0.67	0.43

	6 months ended 30.06.21
	Average non-interest bearing balance $million	Average interest bearing balance $million	Interest expense $million	Rate paid interest bearing balance %	Rate paid total balance %
Deposits by banks	17,261	26,599	74	0.56	0.34
Customer accounts:
Current accounts and savings deposits	48,934	257,233	388	0.30	0.26
Time and other deposits	53,606	151,262	733	0.98	0.72
Debt securities in issue	6,129	61,232	284	0.94	0.85
Accruals, deferred income and other liabilities	118,293	1,093	27	4.98	0.05
Subordinated liabilities and other borrowed funds	-	16,386	246	3.03	3.03
Non-controlling interests1	328	-	-	-	-
Shareholders' funds	51,088	-	-	-	-
	295,639	513,805	1,752	0.69	0.44
Adjustment for Financial Markets funding costs			(52)
Financial guarantee fees on interest earning assets			47
Total average liabilities and shareholders' funds	295,639	513,805	1,747	0.69	0.44

Page 123

Additional items

A. Our Fair Pay Charter

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

B. Group share plans

Discretionary share plans

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

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

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

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

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

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

All Employee 2013 Sharesave Plan

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

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

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Valuation of share awards

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

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

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

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

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

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

4  All Sharesave awards are in the form of options.  The exercise price of Sharesave options exercised was £3.67 for options granted in 2021, £3.14 for options granted in 2020, £4.98 for options granted in 2019 and £5.13 for options granted in 2018

5 No options were cancelled in the period

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

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

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

2. The beneficial interests of directors and their related parties in the ordinary shares of the Company are set out above. The directors do not have any non-beneficial interests in the Company's shares. None of the directors used ordinary shares as collateral for any loans. No director had either i) an interest in the Company's preference shares or loan stocks of any subsidiary or associated undertaking of the Group or ii) any corporate interests in the Company's ordinary shares. All figures
as at 30 June 2022

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

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

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

Scheme interests awarded, exercised and lapsed during the period

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

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

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

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

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The following table shows the changes in share interests.

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

Page 127

1. For the 2022-24 LTIP awards granted to Bill Winters and Andy Halford on 14 March 2022, the values granted were: Bill Winters: £3.1 million; Andy Halford £2.0 million.
The number of shares awarded in respect of the LTIP took into account the lack of dividend equivalents (calculated by reference to market consensus dividend yield) such that the overall value of the award was maintained. Performance measures apply to 2022-24 LTIP awards. The closing price on the day before grant was £4.876.

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

3. On 10 March 2022, 28,178 shares (before tax) were delivered to Bill Winters from the vesting element of the 2018-20 LTIP award and 17,448 shares (before tax) were delivered to Andy Halford from the vesting element of the 2018-20 LTIP award. The closing share price on the day before the shares were delivered was £4.931. On 14 March 2022, 48,428 shares (before tax) were delivered to Bill Winters from the vesting element of the 2017-19 LTIP award and 29,982 shares (before tax) were delivered to Andy Halford from the vesting element of the 2017-19 LTIP award. The closing share price on the day before the shares were delivered was £4.876. On 21 March 2022, 30,604 shares (before tax) were delivered to Bill Winters from the vesting element of the 2019-21 LTIP award and 19,571 shares (before tax) were delivered to Andy Halford from the vesting element of the 2019-21 LTIP award. The closing share price on the day before the delivery was £5.064. On 6 May 2022, Bill Winters 36,023 shares (before tax) were delivered to Bill Winters from the vesting element of the 2016-18 LTIP award and 21,510 shares (before tax) were delivered to Andy Halford from the vesting element of the 2016-18 LTIP award. The closing share price on the day before the delivery was £5.65.

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

5. The unvested Sharesave option held by Andy Halford is an option granted on 1 October 2019 under the 2013 Plan - to exercise this option, Andy has to pay an exercise price of £4.98 per share, which has been discounted by 20 per cent

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

Shareholdings and share interests

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

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

1. All figures are as of 30 June 2022 unless stated otherwise. The closing share price on 30 June 2022 was £6.186. No director had either: (i) an interest in Standard
Chartered PLC's preference shares or loan stocks of any subsidiary or associated undertaking of the Group; or (ii) any corporate interested in Standard Chartered PLC's ordinary shares

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

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

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

5. As Bill and Andy are both UK taxpayers: zero per cent tax is assumed to apply to Sharesave (as Sharesave is a UK tax qualified share plan) and 48.25 per cent tax
is assumed to apply to other unvested share awards (marginal combined PAYE rate of income tax at 45 per cent and employee social security contributions at
3.25 per cent) - rates may change

E. Share price information

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

F. Substantial shareholders

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

G. Code for Financial Reporting Disclosure

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

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

H. Employees

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

Page 128

Shareholder information

Dividend and interest payment dates

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

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

	2022 final dividend (provisional only)
Results and dividend announcement date	16 February 2023

Preference shares	Second half-yearly dividend
7 3/ 8 per cent Non-Cumulative Irredeemable preference shares of £1 each	1 October 2022
8 ¼ per cent Non-Cumulative Irredeemable preference shares of £1 each	1 October 2022
6.409 per cent Non-Cumulative preference shares of $5 each	30 July 2022, 30 October 2022
7.014 per cent Non-Cumulative preference shares of $5 each	30 July 2022

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

Dividend and financial year	Payment date	Dividend per ordinary share	Cost of one new ordinary share under share dividend scheme
Interim 2008	9 October 2008	25.67c/13.96133p/HK$1.995046	£14.00/$26.0148
Final 2008	15 May 2009	42.32c/28.4693p/HK$3.279597	£8.342/$11.7405
Interim 2009	8 October 2009	21.23c/13.25177p/HK$1.645304	£13.876/$22.799
Final 2009	13 May 2010	44.80c/29.54233p/HK$3.478306	£17.351/$26.252
Interim 2010	5 October 2010	23.35c/14.71618p/HK$1.811274/INR0.9841241	£17.394/$27.190
Final 2010	11 May 2011	46.65c/28.272513p/HK$3.623404/INR1.99751701	£15.994/$25.649
Interim 2011	7 October 2011	24.75c/15.81958125p/HK$1.928909813/INR1.137971251	£14.127/$23.140
Final 2011	15 May 2012	51.25c/31.63032125p/HK$3.9776083375/INR2.66670151	£15.723/$24.634
Interim 2012	11 October 2012	27.23c/16.799630190p/HK$2.111362463/INR1.3498039501	£13.417/$21.041
Final 2012	14 May 2013	56.77c/36.5649893p/HK$4.4048756997/INR2.9762835751	£17.40/$26.28792
Interim 2013	17 October 2013	28.80c/17.8880256p/HK$2.233204992/INR1.68131	£15.362/$24.07379
Final 2013	14 May 2014	57.20c/33.9211444p/HK$4.43464736/INR3.3546261	£11.949/$19.815
Interim 2014	20 October 2014	28.80c/17.891107200p/HK$2.2340016000/INR1.6718425601	£12.151/$20.207
Final 2014	14 May 2015	57.20c/37.16485p/HK$4.43329/INR3.5140591	£9.797/$14.374
Interim 2015	19 October 2015	14.40c/9.3979152p/HK$1.115985456/INR0.861393721	£8.5226/$13.34383
Final 2015	No dividend declared	N/A	N/A
Interim 2016	No dividend declared	N/A	N/A
Final 2016	No dividend declared	N/A	N/A
Interim 2017	No dividend declared	N/A	N/A
Final 2017	17 May 2018	11.00c/7.88046p/HK$0.86293/INR0.6536433401	£7.7600/$10.83451
Interim 2018	22 October 2018	6.00c/4.59747p/HK$0.46978/INR0.36961751	£6.7104/$8.51952
Final 2018	16 May 2019	15.00c/11.569905p/HK$1.176260/INR0.9576916501	N/A
Interim 2019	21 October 2019	7.00c/5.676776p/HK$0.548723/INR0.4250286001	N/A
Final 2019	Dividend withdrawn	N/A	N/A
Interim 2020	No dividend declared	N/A	N/A
Final 2020	25 February 2021	9.00c/6.472413p/HK$0.698501	N/A
Interim 2021	22 October 2021	3.00c/2.204877p/HK$0.233592	N/A
Final 2021	12 May 2022	9.00c/6.894144p/HK$0.705772	N/A

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

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

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ShareCare

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

Donating shares to ShareGift

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

Bankers' Automated Clearing System (BACS)

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

Registrars and shareholder enquiries

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

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

Chinese translation

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

本,地:香183號17M樓

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

Electronic communications

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

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Important notices

Forward-looking statements

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

By their very nature, forward-looking statements are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. The factors that could cause actual results to differ materially from those described in the forward-looking statements include (but are not limited to): changes in global, political, economic, business, competitive and market forces or conditions; future exchange and interest rates; changes in environmental, social or physical risks; legislative, regulatory and policy developments; the development of standards and interpretations; the ability of the Group to mitigate the impact of climate change effectively; risks arising out of health crisis and pandemics; changes in tax rates, future business combinations or dispositions; and other factors specific to the Group. Any forward-looking statement contained in this document is based on past or current trends and/or activities of the Group and should not be taken as a representation that such trends or activities will continue in the future.

No statement in this document is intended to be a profit forecast or to imply that the earnings of the Group for the current year or future years will necessarily match or exceed the historical or published earnings of the Group. Each forward-looking statement speaks only as of the date of the particular statement. Except as required by any applicable laws or regulations, the Group expressly disclaims any obligation to revise or update any forward-looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.

Financial instruments

Nothing in this document shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation or advice in respect of any securities or other financial instruments or any other matter.

Caution regarding climate and environment related information

Some of the climate and environment related information in this document is subject to certain limitations, and therefore the reader should treat the information provided, as well as conclusions, projections and assumptions drawn from such information, with caution. The information may be limited due to a number of factors, which include (but are not limited to): a lack of reliable data; a lack of standardisation of data; and future uncertainty. The information includes externally sourced data that may not have been verified. Furthermore, some of the data, models and methodologies used to create the information is subject to adjustment which is beyond our control, and the information is subject to change without notice. This disclaimer does not apply to the Group's condensed consolidated interim financial statements and notes as set out in Note 1 - Statement of compliance.

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Glossary

Absolute financed emissions

A measurement of our attributed share of our clients' greenhouse gas emissions.

AT1 or Additional Tier 1 capital

Additional Tier 1 capital consists of instruments other than Common Equity Tier 1 that meet the Capital Requirements Regulation (as it forms part of UK domestic law) criteria for inclusion in Tier 1 capital.

Additional value adjustment

See 'Prudent valuation adjustment'.

Advanced Internal Rating Based (AIRB) approach

The AIRB approach under the Basel framework is used to calculate credit risk capital based on the Group's own estimates of prudential parameters.

Alternative performance measures

A financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

ASEAN

Association of South East Asian Nations (ASEAN) which includes the Group's operations in Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

AUM or Assets under management

Total market value of assets such as deposits, securities and funds held by the Group on behalf of the clients.

Basel II

The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in June 2006 in the form of the International Convergence of Capital Measurement and Capital Standards.

Basel III

The global regulatory standards on bank capital adequacy and liquidity, originally issued in December 2010 and updated in June 2011. In December 2017, the BCBS published a document setting out the finalisation of the Basel III framework. The latest requirements issued in December 2017 will be implemented from 2022.

BCBS or Basel Committee on Banking Supervision

A forum on banking supervisory matters which develops global supervisory standards for the banking industry. Its members are officials from 45 central banks or prudential supervisors from 28 countries and territories.

Basic earnings per share (EPS)

Represents earnings divided by the basic weighted average number of shares.

Basis point (bps)

One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent.

Capital-lite income

Income derived from products with low RWA consumption or products which are non-funding in nature.

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CRD or Capital Requirements Directive

A capital adequacy legislative package adopted by the PRA. CRD comprises the Capital Requirements Directive and the UK onshored Capital Requirements Regulation (CRR). The package implements the Basel III framework together with transitional arrangements for some of its requirements. CRD IV came into force on 1 January 2014. The EU CRR II and CRD V amending the existing package came into force in June 2019 with most changes starting to apply from 28 June 2021. Only those parts of the EU CRR II that applied on or before 31 December 2020, when the UK was a member of the EU, have been implemented. The PRA recently finalised the UK's version of the CRR II for implementation into the PRA Rulebook on 1 January 2022.

Capital resources

Sum of Tier 1 and Tier 2 capital after regulatory adjustments.

CGU or Cash-generating unit

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Cash shortfall

The difference between the cash flows that are due in accordance with the contractual terms of the instrument and the cash flows that the Group expects to receive over the contractual life of the instrument.

Clawback

An amount an individual is required to pay back to the Group, which has to be returned to the Group under certain circumstances.

Commercial real estate

Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multi-family housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets.

CET1 or Common Equity Tier 1 capital

Common Equity Tier 1 capital consists of the common shares issued by the Group and related share premium, retained earnings, accumulated other comprehensive income and other disclosed reserves, eligible non-controlling interests and regulatory adjustments required in the calculation of Common Equity Tier 1.

CET1 ratio

A measure of the Group's CET1 capital as a percentage of risk-weighted assets.

Contractual maturity

Contractual maturity refers to the final payment date of a loan or other financial instrument, at which point all the remaining outstanding principal and interest is due to be paid.

Countercyclical capital buffer

The countercyclical capital buffer (CCyB) is part of a set of macroprudential instruments, designed to help counter procyclicality in the financial system. CCyB as defined in the Basel III standard provides for an additional capital requirement of up to 2.5 per cent of risk-weighted assets in a given jurisdiction. The Bank of England's Financial Policy Committee has the power to set the CCyB rate for the United Kingdom. Each bank must calculate its 'institution-specific' CCyB rate, defined as the weighted average of the CCyB rates in effect across the jurisdictions in which it has credit exposures. The institution-specific CCyB rate is then applied to a bank's total risk-weighted assets.

Counterparty credit risk

The risk that a counterparty defaults before satisfying its obligations under a derivative, a securities financing transaction (SFT) or a similar contract.

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CCF or Credit conversion factor

An estimate of the amount the Group expects a customer to have drawn further on a facility limit at the point of default. This is either prescribed by CRR or modelled by the bank.

CDS or Credit default swaps

A credit derivative is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.

Credit institutions

An institution whose business is to receive deposits or other repayable funds from the public and to grant credits for its
own account.

Credit risk mitigation

Credit risk mitigation is a process to mitigate potential credit losses from any given account, customer or portfolio by using a range of tools such as collateral, netting agreements, credit insurance, credit derivatives and guarantees.

CVA or Credit valuation adjustments

An adjustment to the fair value of derivative contracts that reflects the possibility that the counterparty may default such that the Group would not receive the full market value of the contracts.

Customer accounts

Money deposited by all individuals and companies which are not credit institutions including securities sold under
repurchase agreement (see repo/reverse repo). Such funds are recorded as liabilities in the Group's balance sheet under customer accounts.

Days past due

One or more days that interest and/or principal payments are overdue based on the contractual terms.

DVA or Debit valuation adjustment

An adjustment to the fair value of derivative contracts that reflects the possibility that the Group may default and not pay the full market value of contracts.

Debt securities

Debt securities are assets on the Group's balance sheet and represent certificates of indebtedness of credit institutions, public bodies or other undertakings excluding those issued by central banks.

Debt securities in issue

Debt securities in issue are transferable certificates of indebtedness of the Group to the bearer of the certificate. These are liabilities of the Group and include certificates of deposits.

Default

Financial assets in default represent those that are at least 90 days past due in respect of principal or interest and/or where the assets are otherwise considered to be unlikely to pay, including those that are credit-impaired.

Deferred tax asset

Income taxes recoverable in future periods in respect of deductible temporary differences between the accounting and tax base of an asset or liability that will result in tax deductible amounts in future periods, the carry-forward of tax losses or the carry-forward of unused tax credits.

Deferred tax liability

Income taxes payable in future periods in respect of taxable temporary differences between the accounting and tax base of an asset or liability that will result in taxable amounts in future periods.

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Defined benefit obligation

The present value of expected future payments required to settle the obligations of a defined benefit scheme resulting from employee service.

Defined benefit scheme

Pension or other post-retirement benefit scheme other than a defined contribution scheme.

Defined contribution scheme

A pension or other post-retirement benefit scheme where the employer's obligation is limited to its contributions to the fund.

Delinquency

A debt or other financial obligation is considered to be in a state of delinquency when payments are overdue. Loans and advances are considered to be delinquent when consecutive payments are missed. Also known as arrears.

Deposits by banks

Deposits by banks comprise amounts owed to other domestic or foreign credit institutions by the Group including securities sold under repo.

Diluted earnings per share (EPS)

Represents earnings divided by the weighted average number of shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

Dividend per share

Represents the entitlement of each shareholder in the share of the profits of the Company. Calculated in the lowest unit of currency in which the shares are quoted.

Early alert, purely and non-purely precautionary

A borrower's account which exhibits risks or potential weaknesses of a material nature requiring closer monitoring, supervision, or attention by management. Weaknesses in such a borrower's account, if left uncorrected, could result in deterioration of repayment prospects and the likelihood of being downgraded to credit grade 12 or worse. When an account is on early alert, it is classified as either purely precautionary or non-purely precautionary. A purely precautionary account is one that exhibits early alert characteristics, but these do not present any imminent credit concern. If the symptoms present an imminent credit concern, an account will be considered for classification as non-purely precautionary.

Effective tax rate

The tax on profit/(losses) on ordinary activities as a percentage of profit/ (loss) on ordinary activities before taxation.

Encumbered assets

On-balance sheet assets pledged or used as collateral in respect of certain of the Group's liabilities.

EU or European Union

The European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe.

Eurozone

Represents the 19 EU countries that have adopted the euro as their common currency.

ECL or Expected credit loss

Represents the present value of expected cash shortfalls over the residual term of a financial asset, undrawn commitment or financial guarantee.

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Expected loss

The Group measure of anticipated loss for exposures captured under an internal ratings-based credit risk approach for capital adequacy calculations. It is measured as the Group-modelled view of anticipated loss based on probability of default, loss given default and exposure at default, with a one-year time horizon.

EAD or Exposure at default

The estimation of the extent to which the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty's default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit.

Exposures

Credit exposures represent the amount lent to a customer, together with any undrawn commitments.

ECAI or External Credit Assessment Institution

External credit ratings are used to assign risk-weights under the standardised approach for sovereigns, corporates and institutions. The external ratings are from credit rating agencies that are registered or certified in accordance with the credit rating agencies regulation or from a central bank issuing credit ratings which is exempt from the application of this regulation.

ESG

Environmental, Social and Governance.

FCA or Financial Conduct Authority

The Financial Conduct Authority regulates the conduct of financial firms and, for certain firms, prudential standards in the UK. It has a strategic objective to ensure that the relevant markets function well.

Forbearance

Forbearance takes place when a concession is made to the contractual terms of a loan in response to an obligor's financial difficulties. The Group classifies such modified loans as either 'Forborne - not impaired loans' or 'Loans subject to forbearance - impaired'. Once a loan is categorised as either of these, it will remain in one of these two categories until the loan matures or satisfies the 'curing' conditions described in Note 8 to the financial statements.

Forborne - not impaired loans

Loans where the contractual terms have been modified due to financial difficulties of the borrower, but the loan is not considered to be impaired. See 'Forbearance'.

Funded/unfunded exposures

Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where a commitment to provide future funding is made but funds have been released/ not released.

FVA or Funding valuation adjustments

FVA reflects an adjustment to fair value in respect of derivative contracts that reflects the funding costs that the market participant would incorporate when determining an exit price.

G-SIBs or Global Systemically Important Banks

Global banking financial institutions whose size, complexity and systemic interconnectedness mean that their distress or failure would cause significant disruption to the wider financial system and economic activity. The list of G-SIBs is assessed under a framework established by the Financial Stability Board (FSB) and the BCBS. In the UK, the G-SIB framework is implemented via the CRD and G-SIBs are referred to as Global Systemically Important Institutions (G-SIIs).

G-SIB buffer

A CET1 capital buffer which results from designation as a G-SIB. The G-SIB buffer is between 1 per cent and 3.5 per cent, depending on the allocation to one of five buckets based on the annual scoring. In the UK, the G-SIB buffer is implemented via the CRD as Global Systemically Important Institutions (G-SII) buffer requirement.

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Green and Sustainable Product Framework

Sets out underlying eligible qualifying themes and activities that may be considered ESG. This has been developed with the support of external experts, has been informed by industry and supervisory principles and standards such as the Green Bond Principles and EU Taxonomy for sustainable activities.

Hong Kong regional hub

Standard Chartered Bank (Hong Kong) Limited and its subsidiaries including the primary operating entities in China, Korea and Taiwan. Standard Chartered PLC is the ultimate parent company of Standard Chartered Bank (Hong Kong) Limited.

Interest rate risk

The risk of an adverse impact on the Group's income statement due to changes in interest rates.

Internal model approach

The approach used to calculate market risk capital and RWA with an internal market risk model approved by the PRA under the terms of CRD/CRR.

IRB or internal ratings-based approach

Risk-weighting methodology in accordance with the Basel Capital Accord where capital requirements are based on a firm's own estimates of prudential parameters.

IAS or International Accounting Standard

A standard that forms part of the International Financial Reporting Standards framework.

IASB or International Accounting Standards Board

An independent standard-setting body responsible for the development and publication of IFRS, and approving interpretations of IFRS standards that are recommended by the IFRS Interpretations Committee (IFRIC).

IFRS or International Financial Reporting Standards

A set of international accounting standards developed and issued by the International Accounting Standards Board, consisting of principles-based guidance contained within IFRSs and IASs. All companies that have issued publicly traded securities in the EU are required to prepare annual and interim reports under IFRS and IAS standards that have been endorsed by the EU.

IFRIC

The IFRS Interpretations Committee supports the IASB in providing authoritative guidance on the accounting treatment of issues not specifically dealt with by existing IFRSs and IASs.

Investment grade

A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB.

Leverage ratio

A ratio that compares Tier 1 capital to total exposures, including certain exposures held off-balance sheet as adjusted by stipulated credit conversion factors. Intended to be a simple, non-risk-based backstop measure.

Liquidation portfolio

A portfolio of assets which is beyond our current risk appetite metrics and is held for liquidation.

LCR or Liquidity coverage ratio

The ratio of the stock of high-quality liquid assets to expected net cash outflows over the following 30 days. High-quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible.

Loan exposure

Loans and advances to customers reported on the balance sheet held at amortised cost or FVOCI, non-cancellable credit commitments and cancellable credit commitments for credit cards and overdraft facilities.

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Loans and advances to customers

This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument.

Loans and advances to banks

Amounts loaned to credit institutions including securities bought under Reverse repo.

LTV or loan-to-value ratio

A calculation which expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. The loan-to-value ratio is used in determining the appropriate level of risk for the loan and therefore the correct price of the loan to the borrower.

Loans past due

Loans on which payments have been due for up to a maximum of 90 days including those on which partial payments are being made.

Loans subject to forbearance - impaired

Loans where the terms have been renegotiated on terms not consistent with current market levels due to financial difficulties of the borrower. Loans in this category are necessarily impaired. See 'Forbearance'.

LGD or Loss given default

The percentage of an exposure that a lender expects to lose in the event of obligor default.

Loss rate

Uses an adjusted gross charge-off rate, developed using monthly write-off and recoveries over the preceding 12 months and total outstanding balances.

Low returning clients

See 'Perennial sub-optimal clients'.

Malus

An arrangement that permits the Group to prevent vesting of all or part of the amount of an unvested variable remuneration award, due to a specific crystallised risk, behaviour, conduct or adverse performance outcome.

Master netting agreement

An agreement between two counterparties that have multiple derivative contracts with each other that provides for the net settlement of all contracts through a single payment, in a single currency, in the event of default on, or termination of, any one contract.

Mezzanine capital

Financing that combines debt and equity characteristics. For example, a loan that also confers some profit participation to the lender.

MREL or minimum requirement for own funds and eligible liabilities

A requirement under the Bank Recovery and Resolution Directive for EU resolution authorities to set a minimum requirement for own funds and eligible liabilities for banks, implementing the FSB's Total Loss Absorbing Capacity (TLAC) standard. MREL is intended to ensure that there is sufficient equity and specific types of liabilities to facilitate an orderly resolution that minimises any impact on financial stability and ensures the continuity of critical functions and avoids exposing taxpayers to loss.

Net asset value (NAV) per share

Ratio of net assets (total assets less total liabilities) to the number of ordinary shares outstanding at the end of a reporting period.

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Net exposure

The aggregate of loans and advances to customers/loans and advances to banks after impairment provisions, restricted balances with central banks, derivatives (net of master netting agreements), investment debt and equity securities, and letters of credit and guarantees.

Net zero

The commitment to reaching net zero carbon emissions from our operations by 2025 and from our financing by 2050.

NII or Net interest income

The difference between interest received on assets and interest paid on liabilities.

NSFR or Net stable funding ratio

The ratio of available stable funding to required stable funding over a one-year time horizon, assuming a stressed scenario. It is a longer-term liquidity measure designed to restrain the amount of wholesale borrowing and encourage stable funding over a one-year time horizon.

NPLs or non-performing loans

An NPL is any loan that is more than 90 days past due or is otherwise individually impaired. This excludes Retail loans renegotiated at or after 90 days past due, but on which there has been no default in interest or principal payments for more than 180 days since renegotiation, and against which no loss of principal is expected.

Non-linearity

Non-linearity of expected credit loss occurs when the average of expected credit loss for a portfolio is higher than the base case (median) due to the fact that a bad economic environment could have a larger impact on ECL calculation than a good economic environment.

Normalised items

See 'Underlying/Normalised'.

Operating expenses

Staff and premises costs, general and administrative expenses, depreciation and amortisation. Underlying operating expenses exclude expenses as described in 'Underlying earnings'. A reconciliation between underlying and statutory earnings is contained in Note 2 to the financial statements.

Operating income or operating profit

Net interest, net fee and net trading income, as well as other operating income. Underlying operating income represents the income line items above, on an underlying basis. See 'Underlying earnings'.

OTC or Over-the-counter derivatives

A bilateral transaction (e.g. derivatives) that is not exchange traded and that is valued using valuation models.

OCA or Own credit adjustment

An adjustment to the Group's issued debt designated at fair value through profit or loss that reflects the possibility that the Group may default and not pay the full market value of the contracts.

Perennial sub-optimal clients

Clients that have returned below 3 per cent return on risk-weighted assets for the last three years.

Physical risks

The risk of increased extreme weather events including flood, drought and sea level rise.

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Pillar 1

The first pillar of the three pillars of the Basel framework which provides the approach to calculation of the minimum
capital requirements for credit, market and operational risk. Minimum capital requirements are 8 per cent of the Group's risk-weighted assets.

Pillar 2

The second pillar of the three pillars of the Basel framework which requires banks to undertake a comprehensive assessment of their risks that are not already covered by Pillar 1 and to determine the appropriate amounts of capital to be held against these risks where other suitable mitigants are not available.

Pillar 3

The third pillar of the three pillars of the Basel framework which aims to provide a consistent and comprehensive disclosure framework that enhances comparability between banks and further promotes improvements in risk practices.

Priority Banking

Priority Banking customers are individuals who have met certain criteria for deposits, AUM, mortgage loans or monthly payroll. Criteria varies by country.

Private equity investments

Equity securities in operating companies generally not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.

PD or Probability of default

PD is an internal estimate for each borrower grade of the likelihood that an obligor will default on an obligation over a given time horizon.

Probability weighted

Obtained by considering the values the metric can assume, weighted by the probability of each value occurring.

Profit (loss) attributable to ordinary shareholders

Profit (loss) for the year after non-controlling interests and dividends declared in respect of preference shares classified as equity.

PVA or Prudent valuation adjustment

An adjustment to CET1 capital to reflect the difference between fair value and prudent value positions, where the application of prudence results in a lower absolute carrying value than recognised in the financial statements.

PRA or Prudential Regulation Authority

The Prudential Regulation Authority is the statutory body responsible for the prudential supervision of banks, building societies, credit unions, insurers and a small number of significant investment firms in the UK. The PRA is a part of the
Bank of England.

Regulatory or Prudential consolidation

The regulatory consolidation of Standard Chartered PLC differs from the statutory consolidation in that it only includes undertakings that are credit institutions, investment firms, other financial institutions, and ancillary service undertakings. Subsidiaries continue to be fully consolidated, whilst participations in undertakings that principally engage in these financial services activities are proportionally consolidated. These participations are considered associates for statutory accounting purposes. Insurance or corporate entities are excluded from the scope of prudential consolidation and recognised on an equity accounted basis.

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Repo/reverse repo

A repurchase agreement or repo is a short-term funding agreement, which allows a borrower to sell a financial asset, such as asset-backed securities or government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future), it is a reverse repurchase agreement or reverse repo.

Residential mortgage

A loan to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a home loan.

RoRWA or Return on risk-weighted assets

Profit before tax for year as a percentage of RWA. Profit may be statutory or underlying and is specified where used. See 'RWA' and 'Underlying earnings'.

Revenue-based carbon intensity

A measurement of the quantity of greenhouse gases emitted by our clients per USD of their revenue.

RWA or Risk-weighted assets

A measure of a bank's assets adjusted for their associated risks, expressed as a percentage of an exposure value in accordance with the applicable standardised or IRB approach provisions.

Risks-not-in-VaR (RNIV)

A framework for identifying and quantifying marginal types of market risk that are not captured in the Value at Risk (VaR) measure for any reason, such as being a far-tail risk or the necessary historical market data not being available.

Roll rate

Uses a matrix that gives average loan migration rate from delinquency states from period to period. A matrix multiplication is then performed to generate the final PDs by delinquency bucket over different time horizons.

Scope 1 emissions

Arise from the consumption of energy from direct sources during the use of property occupied by the Group. On-site combustion of fuels such as diesel, liquefied petroleum gas and natural gas is recorded using meters or, where metering is not available, collated from fuel vendor invoices. Emissions from the combustion of fuel in Group-operated transportation devices, as well as fugitive emissions, are excluded as being immaterial.

Scope 2 emissions

Arise from the consumption of indirect sources of energy during the use of property occupied by the Group. Energy generated off-site in the form of purchased electricity, heat, steam or cooling is collected as kilowatt hours consumed using meters or, where metering is not available, collated from vendor invoices. For leased properties we include all indirect and direct sources of energy consumed by building services (amongst other activities) within the space occupied by the Group. This can include base building services under landlord control but over which we typically hold a reasonable degree of influence. All data centre facilities with conditioning systems and hardware remaining under the operational control of the Group are included in the reporting. This does not include energy used at outsourced data centre facilities which are captured under Scope 3.

Scope 3 emissions

Occur as a consequence of the Group's activities but arising from sources not controlled by the Group. Business air travel data is collected as person kilometres travelled by seating class by employees of the Group. Data are drawn from country operations that have processes in place to gather accurate employee air travel data from travel management companies. Flights are categorised as short, medium or long haul trips. Emissions from other potential Scope 3 sources such as electricity transmission and distribution line losses are not currently accounted for on the basis that they cannot be calculated with an acceptable level of reliability or consistency. The Group does, however, capture Scope 3 emissions from outsourced data centres managed by third parties.

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Secured (fully and partially)

A secured loan is a loan in which the borrower pledges an asset as collateral for a loan which, in the event that the borrower defaults, the Group is able to take possession of. All secured loans are considered fully secured if the fair value of the collateral is equal to or greater than the loan at the time of origination. All other secured loans are considered to be partly secured.

Securitisation

Securitisation is a process by which credit exposures are aggregated into a pool, which is used to back new securities. Under traditional securitisation transactions, assets are sold to a structured entity which then issues new securities to investors at different levels of seniority (credit tranching). This allows the credit quality of the assets to be separated from the credit rating of the originating institution and transfers risk to external investors in a way that meets their risk appetite. Under synthetic securitisation transactions, the transfer of risk is achieved by the use of credit derivatives or guarantees, and the exposures being securitised remain exposures of the originating institution.

Senior debt

Debt that takes priority over other unsecured or otherwise more 'junior' debt owed by the issuer. Senior debt has greater seniority in the issuer's capital structure than subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment.

SICR or Significant increase in credit risk

Assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at origination (after considering the passage of time).

Solo

The solo regulatory group as defined in the Prudential Regulation Authority waiver letter dated 10 August 2020 differs from Standard Chartered Bank Company in that it includes the full consolidation of nine subsidiaries, namely Standard Chartered Holdings (International) B.V., Standard Chartered MB Holdings B.V., Standard Chartered UK Holdings Limited, Standard Chartered Grindlays PTY Limited, SCMB Overseas Limited, Standard Chartered Capital Management (Jersey) LLC, Cerulean Investments L.P., SC Ventures Innovation Investment L.P. and SC Ventures G.P. Limited.

Sovereign exposures

Exposures to central governments and central government departments, central banks and entities owned or guaranteed by the aforementioned. Sovereign exposures, as defined by the European Banking Authority, include only exposures to central governments.

Stage 1

Assets have not experienced a significant increase in credit risk since origination and impairment recognised on the basis of 12 months expected credit losses.

Stage 2

Assets have experienced a significant increase in credit risk since origination and impairment is recognised on the basis of lifetime expected credit losses.

Stage 3

Assets that are in default and considered credit-impaired (non-performing loans).

Standardised approach

In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment
Institutions (ECAI) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the
operational capital requirement by the application of a supervisory defined percentage charge to the gross income
of eight specified business lines.

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Structured note

An investment tool which pays a return linked to the value or level of a specified asset or index and sometimes offers
capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities
and foreign currency.

Subordinated liabilities

Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.

Sustainability Aspirations

A series of targets and metrics by which we aim to promote social and economic development, and deliver sustainable outcomes in the areas in which we can make the most material contribution to the delivery of the UN Sustainable Development Goals.

Sustainable Finance assets

Assets from clients whose activities are aligned with the Green and Sustainable Product Framework and/or from transactions for which the use of proceeds will be utilised directly to contribute towards eligible themes and activities set out within the Green and Sustainable Product Framework.

Sustainable Finance revenue

Revenue from clients whose activities are aligned with the Green and Sustainable Product Framework and/or from transactions for which proceeds will be utilised directly to contribute towards eligible themes and activities set out within the Green and Sustainable Product Framework and/or from approved 'labelled' transactions such as any transaction referred to as "green", "social", "sustainable", "SDG (sustainable development goal) aligned", "ESG", "transition", "COVID-19 facility" or "COVID-19 response" which have been approved by the Sustainable Finance Governance Committee.

Tier 1 capital

The sum of Common Equity Tier 1 capital and Additional Tier 1 capital.

Tier 1 capital ratio

Tier 1 capital as a percentage of risk-weighted assets.

Tier 2 capital

Tier 2 capital comprises qualifying subordinated liabilities and related share premium accounts.

TLAC or Total loss absorbing capacity

An international standard for TLAC issued by the FSB, which requires G-SIBs to have sufficient loss-absorbing and recapitalisation capacity available in resolution, to minimise impacts on financial stability, maintain the continuity of
critical functions and avoid exposing public funds to loss.

Transition risks

The risk of changes to market dynamics or sectoral economics due to governments' response to climate change.

UK bank levy

A levy that applies to certain UK banks and the UK operations of foreign banks. The levy is payable each year based on a percentage of the chargeable equities and liabilities on the Group's UK tax resident entities' balance sheets. Key exclusions from chargeable equities and liabilities include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liabilities subject to netting.

Unbiased

Not overly optimistic or pessimistic, represents information that is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to increase the probability that the financial information will be received favourably or unfavourably by users.

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Unlikely to pay

Indications of unlikeliness to pay shall include placing the credit obligation on non-accrued status; the recognition of a specific credit adjustment resulting from a significant perceived decline in credit quality subsequent to the Group taking on the exposure; selling the credit obligation at a material credit-related economic loss; the Group consenting to a distressed restructuring of the credit obligation where this is likely to result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or, where relevant fees; filing for the obligor's bankruptcy or a similar order in respect of an obligor's credit obligation to the Group; the obligor has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of a credit obligation to the Group.

VaR or Value at Risk

A quantitative measure of market risk estimating the potential loss that will not be exceeded in a set time period at a set statistical confidence level.

ViU or Value-in-Use

The present value of the future expected cash flows expected to be derived from an asset or CGU.

Write-downs

After an advance has been identified as impaired and is subject to an impairment provision, the stage may be reached whereby it is concluded that there is no realistic prospect of further recovery. Write-downs will occur when, and to the extent that, the whole or part of a debt is considered irrecoverable.

XVA

The term used to incorporate credit, debit and funding valuation adjustments to the fair value of derivative financial instruments. See 'CVA', 'DVA' and 'FVA'.

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CONTACT INFORMATION

Global headquarters

Standard Chartered Group

1 Basinghall Avenue

London, EC2V 5DD

United Kingdom

telephone: [phone]

facsimile: [phone]

Shareholder enquiries

ShareCare information

website: sc.com/shareholders

helpline: 0370 702 0138

ShareGift information

website: ShareGift.org

helpline: [phone]

Registrar information

UK

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol, BS99 6ZZ

Helpline: 0370 702 0138

Hong Kong

Computershare Hong Kong Investor Services Limited

17M Floor, Hopewell Centre

183 Queen's Road East

Wan Chai

Hong Kong

website: computershare.com/hk/investors

Chinese translation

Computershare Hong Kong Investor Services Limited

17M Floor, Hopewell Centre

183 Queen's Road East

Wan Chai

Hong Kong

Register for electronic communications

website: investorcentre.co.uk

For further information, please contact:

Gregg Powell, Head of Investor Relations

[phone]

LSE Stock code: STAN.LN

HKSE Stock code: 02888

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