Page 03

Group Chief Financial Officer's review

The Group delivered a strong performance in the third quarter of 2024

Summary of financial performance

	Q3'24 $million	Q3'23 $million	Change %	Constant currency change¹ %	Q2'24 $million	Change %	Constant currency change¹ %	YTD'24 $million	YTD'23 $million	Change %	Constant currency change¹ %
Underlying net interest income	2,606	2,388	9	9	2,560	2	1	7,585	7,165	6	7
Underlying non NII	2,298	2,015	14	15	2,246	2	1	7,277	6,189	18	19
Underlying operating income	4,904	4,403	11	12	4,806	2	1	14,862	13,354	11	13
Other operating expenses	(2,852)	(2,770)	(3)	(2)	(2,887)	1	3	(8,525)	(8,271)	(3)	(4)
UK bank levy	12	-	nm	nm	-	nm	nm	12	(3)	nm	nm
Underlying operating expenses	(2,840)	(2,770)	(3)	(2)	(2,887)	2	3	(8,513)	(8,274)	(3)	(4)
Underlying operating profit before impairment and taxation	2,064	1,633	26	28	1,919	8	8	6,349	5,080	25	26
Credit impairment	(178)	(294)	39	42	(73)	(144)	(133)	(427)	(466)	8	8
Other impairment	(92)	(26)	nm	nm	(83)	(11)	(6)	(235)	(89)	(164)	(150)
Profit from associates and joint ventures	13	3	nm	nm	65	(80)	(80)	77	97	(21)	(21)
Underlying profit before taxation	1,807	1,316	37	41	1,828	(1)	-	5,764	4,622	25	26
Restructuring	(91)	(7)	nm	nm	(95)	4	6	(241)	49	nm	nm
Goodwill & other impairment4	-	(697)	100	100	-	nm	nm	-	(697)	100	100
DVA	5	21	(76)	(76)	22	(77)	(77)	(21)	(18)	(17)	(17)
Other items3	1	-	nm	nm	(177)	101	101	(288)	-	nm	nm
Reported profit before taxation	1,722	633	172	180	1,578	9	10	5,214	3,956	32	34
Taxation	(575)	(494)	(16)	(18)	(604)	5	6	(1,698)	(1,432)	(19)	(22)
Profit for the period	1,147	139	nm	nm	974	18	20	3,516	2,524	39	40
Net interest margin (%)2	1.95	1.63	32		1.93	2		1.88	1.66	22
Underlying return on tangible equity (%)2	10.8	7.0	380		12.9	(210)		12.9	10.4	250
Underlying earnings per share (cents)	39.8	23.2	72		45.5	(13)		138.5	98.4	41

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

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

3.     Other items include $100 million charge relating to Korea equity linked securities (ELS) portfolio, loss of $174 million primarily relating to recycling of FX translation losses from reserves into P&L on the sale of Zimbabwe and $15 million loss on the Aviation business disposal

4   Goodwill and other impairment include nil (Q3'23: $697 million) impairment charge relating to the Group's investment in its associate China Bohai Bank (Bohai)

 

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Group Chief Financial Officer's review continued

Reported financial performance summary

	Q3'24 $million	Q3'23 $million	Change %	Constant currency change¹ %	Q2'24 $million	Change %	Constant currency change¹ %	YTD'24 $million	YTD'23 $million	Change %	Constant currency change¹ %
Net interest income	1,482	1,925	(23)	(23)	1,603	(8)	(8)	4,657	5,909	(21)	(20)
Non NII	3,468	2,598	33	33	3,058	13	12	10,084	7,741	30	32
Reported operating income	4,950	4,523	9	9	4,661	6	5	14,741	13,650	8	9
Reported operating expenses	(2,971)	(2,870)	(4)	(3)	(3,059)	3	5	(9,027)	(8,538)	(6)	(7)
Reported operating profit before impairment and taxation	1,979	1,653	20	21	1,602	24	24	5,714	5,112	12	13
Credit impairment	(178)	(292)	39	42	(75)	(137)	(127)	(418)	(453)	8	7
Goodwill & other impairment	(88)	(734)	88	88	(87)	(1)	1	(235)	(811)	71	71
Profit from associates and joint ventures	9	6	50	50	138	(93)	(93)	153	108	42	42
Reported profit before taxation	1,722	633	172	180	1,578	9	10	5,214	3,956	32	34
Taxation	(575)	(494)	(16)	(18)	(604)	5	6	(1,698)	(1,432)	(19)	(22)
Profit for the period	1,147	139	nm	nm	974	18	20	3,516	2,524	39	40
Reported return on tangible equity (%)2	10.0	(0.4)	1,040		10.4	(40)		11.3	7.8	350
Reported earnings per share (cents)	36.8	(1.3)	nm		36.7	-		120.2	74.9	60

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

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

All commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2023 on a constant currency basis, unless otherwise stated.

The Group delivered a strong performance in the third quarter of 2024 with underlying operating income of $4.9 billion, the best third quarter since 2015, and up 12 per cent. Underlying net interest income (NII) was up 9 per cent at constant currency as the Group benefitted from the roll-off of short-term hedges and improved mix from Treasury activities. Underlying non net interest income (Non NII) increased 15 per cent driven by a record quarter in Wealth Solutions and strong performance in Global Markets with double digit growth in both flow and episodic income. Operating expenses grew 2 per cent resulting in positive income-to-cost jaws of 9 per cent. The credit impairment charge of $178 million was equivalent to an annualised loan-loss rate of 21 basis points. This resulted in an underlying profit before tax of $1.8 billion, up 41 per cent.

The Group remains well capitalised and highly liquid with a diverse and stable deposit base. The liquidity coverage ratio of 143 per cent reflects disciplined asset and liability management. The common equity tier 1 (CET1) ratio of 14.2 per cent is above the top of the Group's target range post the 62 basis points full impact of the $1.5 billion share buyback announced in July 2024.

•  Underlying operating income of $4.9 billion was up 12 per cent driven by a record performance in Wealth Solutions, double-digit growth in Global Markets from product expansion and increased client demand, and the roll-off of short-term hedges within Treasury

•  Underlying NII increased 9 per cent, benefitting from the roll-off of short-term hedges of $123 million and improved mix from Treasury activities, partly offset by an accounting asymmetry resulting from Treasury management of FX positions and elevated deposit passthrough rates in Corporate & Investment Banking (CIB)

•  Underlying non NII increased 15 per cent. This was driven by a record performance in Wealth Solutions with broad-based growth across products and markets, and a strong performance in Global Markets with double-digit growth in both flow and episodic income. Excluding two notable items of $12 million relating to a hyperinflationary accounting adjustment in Ghana and revaluation of FX positions in Egypt, underlying non NII increased 14 per cent

•  Underlying operating expenses increased 2 per cent. This growth reflected the impact of inflation and the Group's continued investment into business growth initiatives including Wealth and Retail Banking (WRB) relationship managers and CIB capabilities partly offset by efficiency saves. The Group generated 9 per cent positive income-to-cost jaws in the quarter

 

•  Credit impairment was a charge of $178 million. The $177 million charge in WRB was higher than normalised levels primarily due to a $21 million overlay relating to Korea eCommerce platforms. CIB benefitted from further recoveries, partly offset by $34 million overlay for clients who have exposures to the Hong Kong commercial real estate sector. There was a $16 million charge in Ventures, mainly from Mox, albeit delinquency rates have improved

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 Group Chief Financial Officer's review continued

•  Other impairment charges of $92 million include a charge of $68 million related to the write-off of software assets with no impact on capital ratios

•  Profit from associates and joint ventures increased $10 million to $13 million, reflecting change in profits at China Bohai Bank (Bohai)

•  Restructuring, DVA and Other items charges totalled $85 million. Restructuring of $91 million reflects the impact of actions to transform the organisation to improve productivity, partly offset by gains on the remaining Principal Finance portfolio. Movements in Debit Valuation Adjustment (DVA) were a positive $5 million

•  Taxation was $0.6 billion on a reported basis with an underlying year-to-date effective tax rate of 30.8 per cent, broadly flat on the prior year reflecting deferred tax not recognised for UK losses, US tax adjustments and a change in the geographic mix of profits. The full year 2024 underlying effective tax rate (ETR) is expected to be around this level and the statutory tax rate is expected to be a few percentage points higher than the underlying ETR for this year, and trend downwards in future years

•  Underlying return on tangible equity (RoTE) increased by 380 basis points to 10.8 per cent reflecting the increase in profits

Operating income by product

	Q3'24 $million	Q3'23 $million	Change %	Constant currency change¹ %	Q2'24 $million	Change %	Constant currency change¹ %	YTD'24 $million	YTD'23 $million	Change %	Constant currency change¹ %
Transaction Services	1,585	1,667	(5)	(5)	1,605	(1)	(2)	4,805	4,859	(1)	-
Payments and Liquidity	1,112	1,196	(7)	(7)	1,139	(2)	(3)	3,412	3,438	(1)	(1)
Securities & Prime Services	156	138	13	15	153	2	2	450	410	10	11
Trade & Working Capital	317	333	(5)	(6)	313	1	-	943	1,011	(7)	(5)
Global Banking	475	447	6	7	488	(3)	(3)	1,435	1,305	10	12
Lending & Financial Solutions	407	393	4	4	422	(4)	(4)	1,243	1,142	9	10
Capital Markets & Advisory	68	54	26	29	66	3	2	192	163	18	19
Global Markets	840	716	17	16	796	6	6	2,677	2,515	6	8
Macro Trading	683	595	15	13	631	8	8	2,198	2,157	2	3
Credit Trading	174	122	43	43	165	5	7	506	359	41	45
Valuation & Other Adj	(17)	(1)	nm	nm	-	nm	nm	(27)	(1)	nm	nm
Wealth Solutions	694	526	32	32	618	12	12	1,928	1,532	26	28
Investment Products	507	364	39	40	444	14	13	1,375	1,059	30	32
Bancassurance	187	162	15	16	174	7	7	553	473	17	18
CCPL & Other Unsecured Lending	312	297	5	6	298	5	4	897	873	3	5
Deposits	946	953	(1)	(1)	908	4	3	2,762	2,637	5	5
Mortgages & Other Secured Lending	100	69	45	47	124	(19)	(21)	327	343	(5)	(2)
Treasury	(2)	(274)	99	101	(30)	93	130	11	(667)	102	102
Other	(46)	2	nm	nm	(1)	nm	nm	20	(43)	147	159
Total underlying operating income	4,904	4,403	11	12	4,806	2	1	14,862	13,354	11	13

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

The operating income by product commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2023 on a constant currency basis, unless otherwise stated.

Transaction Services income decreased 5 per cent as the impact of margin compression more than offset volume growth across Payments and Liquidity, and Trade & Working Capital. Securities & Prime Services income was up 15 per cent mainly driven by higher custody, funds and prime brokerage fees and higher margins.

Global Banking income increased 7 per cent as Lending & Financial Solutions grew 4 per cent mostly from strong pipeline execution which led to higher origination volumes. Capital Markets & Advisory income was up 29 per cent.

Global Markets income increased 16 per cent with double-digit growth in both flow and episodic income. Episodic growth was mainly driven by higher Rates income. Flow grew mostly from increased FX volumes and Credit Trading.

Wealth Solutions income was up 32 per cent with broad-based growth across all products supported by new and innovative product launches, increased investment in Affluent Relationship Managers and continued strong new to bank onboarding levels. Wealth net new sales of $5 billion in the quarter were up 13 per cent year-on-year.

CCPL & Other Unsecured Lending income was up 6 per cent with volume growth in both Personal Loans and Credit Cards.

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Group Chief Financial Officer's review continued

Deposits income decreased 1 per cent as the impact of higher Time Deposit volumes was more than offset by lower margins. Passthrough rates remained largely stable.

Mortgages & Other Secured Lending income was up 47 per cent or $31 million primarily from higher margins as the cost of funding reduced, particularly with lower HIBOR rates, albeit partly offset by lower mortgage volumes.

Treasury income increased by $272 million to a loss of $2 million benefitting from the roll-off of the short-term hedge and repricing of structural hedges, partly offset by a $2 million loss on revaluation of FX positions in Egypt.

Other products loss of $46 million includes higher funding costs of non-financial assets partly offset by $14 million relating to a hyperinflationary accounting adjustment in Ghana.

Profit before tax by client segment

	Q3'24 $million	Q3'23 $million	Change %	Constant currency change¹ %	Q2'24 $million	Change %	Constant currency change¹ %	YTD'24 $million	YTD'23 $million	Change %	Constant currency change¹ %
Corporate & Investment Banking	1,365	1,255	9	9	1,362	-	-	4,366	4,170	5	6
Wealth & Retail Banking	742	669	11	11	678	9	10	2,149	2,042	5	6
Ventures	(99)	(117)	15	15	(87)	(14)	(13)	(298)	(275)	(8)	(8)
Central & other items	(201)	(491)	59	65	(125)	(61)	(56)	(453)	(1,315)	66	66
Underlying profit before taxation	1,807	1,316	37	41	1,828	(1)	-	5,764	4,622	25	26

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

The client segment commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2023 on a constant currency basis, unless otherwise stated.

Corporate & Investment Banking (CIB) profit increased 9 per cent. Income grew 2 per cent with Global Markets up 16 per cent from double-digit growth in both flow and episodic income, and Global Banking up 7 per cent from higher origination volumes and pipeline execution. This was partly offset by Transaction Services which was down 5 per cent due to margin compression from higher passthrough rates. Expenses were 6 per cent higher, while credit impairment was a net release of $10 million. Other impairment of $57 million primarily related to the write-off of software assets.

Wealth & Retail Banking (WRB) profit increased 11 per cent. Income increased 11 per cent, with Wealth Solutions up 32 per cent from broad-based growth across products, partly offset by lower Deposits income due to lower margins. Expenses increased 4 per cent while credit impairment was $62 million higher, but broadly in-line with recent run-rates excluding a $21 million overlay relating to Korea eCommerce platforms and removal of a $13 million post model adjustment relating to Singapore credit cards.

Ventures loss decreased by $18 million to $99 million. Income increased by $8 million to $43 million with Digital Banks income of $39 million up 44 per cent. Expenses increased by $10 million whilst there was an impairment charge of $16 million primarily from Mox, albeit delinquency rates have improved.

Central & other items (C&O) recorded a loss of $201 million, which was 65 per cent lower than the prior year. Treasury income was up $281 million from the prior year largely driven by benefits from the roll-off of the short-term hedge and repricing of structural hedges, and a $2 million loss on revaluation of FX positions in Egypt. Other products income was down $52 million to a loss of $65 million driven by higher funding costs of non-financial assets coupled with non-repeat of FX gains made in the prior year, partly offset by  $14 million relating to a hyperinflationary accounting adjustment in Ghana. Expenses, which include UK Bank levy, central corporate costs and recharges, decreased by $71 million while there was a credit impairment release of $5 million mostly from sovereign-related portfolio movements. Associate income increased by $18 million reflecting change in profits at Bohai.

Adjusted net interest income and margin

	Q3'24 $million	Q3'23 $million	Change¹ %	Q2'24 $million	Change¹ %	YTD'24 $million	YTD'23 $million	Change¹ %
Adjusted net interest income2	2,606	2,380	10	2,562	2	7,597	7,151	6
Average interest-earning assets	532,459	579,713	(8)	533,869	-	539,984	577,351	(6)
Average interest-bearing liabilities	540,691	548,297	(1)	538,054	-	538,643	541,171	-
Gross yield (%)3	5.22	5.06	16	5.32	(10)	5.24	4.68	56
Rate paid (%)3	3.22	3.63	(41)	3.36	(14)	3.37	3.23	14
Net yield (%)3	2.00	1.43	57	1.96	4	1.87	1.45	42
Net interest margin (%)3,4	1.95	1.63	32	1.93	2	1.88	1.66	22

1 Variance is better/(worse) other than assets and liabilities which is increase/(decrease)                       

2 Adjusted net interest income is reported net interest income less funding costs for the trading book, financial guarantee fees and others on interest-earning assets

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

4 Adjusted net interest income divided by average interest-earning assets, annualised

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Group Chief Financial Officer's review continued

Adjusted net interest income was up 10 per cent driven by an increase in the net interest margin which averaged 195 basis points in the quarter, increasing 32 basis points year-on-year and 2 basis points compared to the prior quarter. The benefit from the roll-off of the short-term hedges and improved yield on structural hedges was partly offset by lower asset volumes and an accounting asymmetry resulting from Treasury management of FX positions.

•  Average interest-earning assets were down by $1.4 billion in the quarter primarily due to a reduction in underlying loans and advances to customers driven by a decline in mortgages. Gross yields decreased 10 basis points compared to the prior quarter due to the impact of lower interest rate on customer loan pricing and Treasury portfolio yields partly offset by the benefit from roll-off of the short-term hedges

•  Average interest-bearing liabilities were up by $2.6 billion on the prior quarter mostly from growth in WRB deposits. The rate paid on liabilities decreased 14 basis points compared with the average in the prior quarter reflecting an increase in the trading book funding cost adjustment partly offset by increase in Treasury accounting asymmetry

Credit risk summary

Income Statement (Underlying view)

	Q3'24 $million	Q3'23 $million	Change1 %	Q2'24 $million	Change1 %	YTD'24 $million	YTD'23 $million	Change1 %
Total credit impairment charge/(release)	178	294	(39)	73	144	427	466	(8)
Of which stage 1 and 22	126	101	25	12	nm	199	134	49
Of which stage 32	52	193	(73)	61	(15)	228	332	(31)

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

2 Refer to Credit Impairment charge table in Risk review section (page 27) for reconciliation from underlying to reported credit impairment

Balance sheet

	30.09.24 $million	30.06.24 $million	Change1 %	31.12.23 $million	Change1 %	30.09.23 $million	Change1 %
Gross loans and advances to customers2	292,394	280,893	4	292,145	-	286,531	2
Of which stage 1	275,490	264,249	4	273,692	1	266,590	3
Of which stage 2	10,369	10,005	4	11,225	(8)	12,431	(17)
Of which stage 3	6,535	6,639	(2)	7,228	(10)	7,510	(13)
Expected credit loss provisions	(5,137)	(4,997)	3	(5,170)	(1)	(5,522)	(7)
Of which stage 1	(496)	(480)	3	(430)	15	(458)	8
Of which stage 2	(390)	(362)	8	(420)	(7)	(440)	(11)
Of which stage 3	(4,251)	(4,155)	2	(4,320)	(2)	(4,624)	(8)
Net loans and advances to customers	287,257	275,896	4	286,975	-	281,009	2
Of which stage 1	274,994	263,769	4	273,262	1	266,132	3
Of which stage 2	9,979	9,643	3	10,805	(8)	11,991	(17)
Of which stage 3	2,284	2,484	(8)	2,908	(21)	2,886	(21)
Cover ratio of stage 3 before/after collateral (%)3	65 / 81	63 / 82	2 / (1)	60 / 76	5 / 5	62 / 79	3 / 2
Credit grade 12 accounts ($million)	943	964	(2)	2,155	(56)	1,132	(17)
Early alerts ($million)	5,100	5,044	1	5,512	(7)	5,403	(6)
Investment grade corporate exposures (%)3	74	74	-	73	1	74	-

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

2.     Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $8,955 million at 30 September 2024, $7,788 million at 30 June 2024, $13,996 million at 31 December 2023 and $10,267 million at 30 September 2023

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

 

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Group Chief Financial Officer's review continued

Asset quality remained resilient in the third quarter, with an improvement in a number of underlying credit metrics.

The Group continues to actively manage the credit portfolio while remaining alert to changes in the external environment, including increased geopolitical tensions, which has led to idiosyncratic stress in a select number of geographies and industry sectors.

The credit impairment charge of $178 million in the quarter was down $116 million year-on-year, representing an annualised loan loss rate of 21 basis points. The $177 million charge in WRB was higher than normalised levels primarily due to a $21 million overlay relating to Korea eCommerce platforms. There was a $16 million charge in Ventures, down $14 million year-on-year as delinquency rates have improved in Mox. CIB was a net release of $10 million benefitting from further recoveries, partly offset by $34 million overlay for clients who have exposures to the Hong Kong commercial real estate (CRE) sector and a $24 million overlay for economic uncertainty in Bangladesh. Also included is a China CRE sector charge of $6 million as additional stage 3 provisions were offset by $15 million in management overlay releases primarily as a result of repayments. The management overlay now totals $71 million, and the Group has provided $1.2 billion in total in relation to the China CRE sector.

Gross stage 3 loans and advances to customers of $6.5 billion were 2 per cent lower compared with 30 June 2024 as repayments, client upgrades, reduction in exposures and write-offs more than offset new inflows. Credit-impaired loans represent 2.2 per cent of gross loans and advances, broadly flat on the prior quarter.

The stage 3 cover ratio of 65 per cent increased 2 percentage points compared with the position at 30 June 2024 due to the decrease in gross stage 3 loans. The cover ratio post collateral of 81 per cent was broadly stable.

Credit grade 12 balances of $0.9 billion and Early alert accounts of $5.1 billion remained broadly stable quarter-on-quarter.

The proportion of investment grade corporate exposures was flat at 74 per cent quarter-on-quarter.

Restructuring, goodwill impairment and other items

	Q3'24				Q3'23				Q2'24
	Restructuring $million	Goodwill & other Impairment $million	DVA $million	Other items $million	Restructuring $million	Goodwill & other Impairment1 $million	DVA $million	Other items $million	Restructuring $million	Goodwill & other Impairment $million	DVA $million	Other items $million
Operating income	40	-	5	1	99	-	21	-	10	-	22	(177)
Operating expenses	(131)	-	-	-	(100)	-	-	-	(172)	-	-	-
Credit impairment	-	-	-	-	2	-	-	-	(2)	-	-	-
Other impairment	4	-	-	-	(11)	(697)	-	-	(4)	-	-	-
Profit from associates and joint ventures	(4)	-	-	-	3	-	-	-	73	-	-	-
Profit/(loss) before taxation	(91)	-	5	1	(7)	(697)	21	-	(95)	-	22	(177)

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

 

The Group's reported performance is adjusted for profits or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are significant or material in the context of the Group's normal business earnings for the period and items which management and investors would ordinarily identify separately when assessing underlying performance period-by period.

Restructuring charges of $91 million reflect the impact of actions to transform the organisation to improve productivity, primarily additional redundancy charges and technology related costs partly offset by profits on the remaining Principal Finance portfolio.

Movements in DVA were positive $5 million, driven by the widening of the Group's asset swap spreads.

 

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Group Chief Financial Officer's review continued

Balance sheet and liquidity

	30.09.24 $million	30.06.24 $million	Change¹ %	31.12.23 $million	Change¹ %	30.09.23 $million	Change %
Assets
Loans and advances to banks	47,512	45,231	5	44,977	6	46,111	3
Loans and advances to customers	287,257	275,896	4	286,975	-	281,009	2
Other assets	537,404	514,300	4	490,892	9	498,713	8
Total assets	872,173	835,427	4	822,844	6	825,833	6
Liabilities
Deposits by banks	32,172	28,087	15	28,030	15	29,744	8
Customer accounts	478,140	468,157	2	469,418	2	453,157	6
Other liabilities	309,125	287,856	7	275,043	12	294,576	5
Total liabilities	819,437	784,100	5	772,491	6	777,477	5
Equity	52,736	51,327	3	50,353	5	48,356	9
Total equity and liabilities	872,173	835,427	4	822,844	6	825,833	6
Advances-to-deposits ratio (%)²	52.7%	52.6%		53.3%		54.5%
Liquidity coverage ratio (%)	143%	148%		145%		156%

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

2 The Group excludes $20,534 million held with central banks (30.06.24: $18,419 million, 31.12.23: $20,710 million, 30.09.23: $21,241 million) that has been confirmed as repayable at the point of stress. Advances exclude reverse repurchase agreement and other similar secured lending of $8,955 million (30.06.24: $7,788 million, 31.12.23: $13,996 million, 30.09.23: $10,267 million) and include loans and advances to customers held at fair value through profit or loss of $6,093 million (30.06.24: $6,877 million, 31.12.23: $7,212 million, 30.09.23: $5,935 million). Deposits include customer accounts held at fair value through profit or loss of $22,344 million (30.06.24: $19,850 million, 31.12.23: $17,248 million, 30.09.23: $15,930 million)

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

•  Loans and advances (L&A) to customers increased by $11 billion or 4 per cent from 30 June 2024 to $287 billion. This was driven by a $3 billion increase from Treasury and securities-based lending and a $8 billion increase from currency translation. Excluding these items L&A were down a net $1 billion on an underlying basis, from an increase in Trade which was more than offset by a decline in mortgages. Year-to-date L&A were up 2 per cent on an underlying basis mostly from an increase in CIB partly offset by a decline in mortgages

•  Customer accounts of $478 billion increased by $10 billion or 2 per cent from 30 June 2024 and were up 1 per cent on an underlying basis excluding the impact of currency translation. This was primarily driven by an increase in WRB Time Deposits from affluent clients

•  Other assets increased by $23 billion or 4 per cent from 30 June 2024 with increases in financial assets held at fair value through profit or loss, primarily in relation to the trading book, derivatives and unsettled trade balances partly offset by a decrease in investment securities. Other liabilities increased 7 per cent with an increase in derivative liabilities, repurchase agreements, unsettled trade liabilities partly offset by a decrease in financial liabilities held at fair value through profit or loss

The advances-to-deposits ratio was broadly flat at 52.7 per cent since 30 June 2024. The point-in-time liquidity coverage ratio decreased 5 percentage points in the quarter to 143 per cent and remains well above the minimum regulatory requirement.

Risk-weighted assets

	30.09.24 $million	30.06.24 $million	Change¹ %	31.12.23 $million	Change¹ %	30.09.23 $million	Change¹ %
By risk type
Credit risk	188,844	185,004	2	191,423	(1)	188,294	0
Operational risk	29,479	29,479	-	27,861	6	27,861	6
Market risk	30,601	27,443	12	24,867	23	25,351	21
Total RWAs	248,924	241,926	3	244,151	2	241,506	3

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

Total risk-weighted assets (RWAs) of $248.9 billion increased $7.0 billion or 3 per cent since 30 June 2024.

•  Credit Risk RWA increased by $3.8 billion to $188.8 billion mostly driven by a $3.4 billion increase from currency translation

•  Operational Risk RWA were flat in quarter

•  Market Risk RWA increased $3.2 billion to $30.6 billion as RWA were deployed to help clients capture market opportunities

Page 10

 

 Group Chief Financial Officer's review continued

Capital base and ratios

	30.09.24 $million	30.06.24 $million	Change¹ %	31.12.23 $million	Change¹ %	30.09.23 $million	Change¹ %
CET1 capital	35,425	35,418	0.0	34,314	3.2	33,569	5.5
Additional Tier 1 capital (AT1)	6,507	6,484	0.4	5,492	18.5	5,492	18.5
Tier 1 capital	41,932	41,902	0.1	39,806	5.3	39,061	7.4
Tier 2 capital	11,726	11,667	0.5	11,935	(1.8)	12,051	(2.7)
Total capital	53,658	53,569	0.2	51,741	3.7	51,112	5.0
CET1 capital ratio(%)²	14.2	14.6	(0.4)	14.1	0.1	13.9	0.3
Total capital ratio(%)²	21.6	22.1	(0.5)	21.2	0.4	21.2	0.4
Leverage ratio (%)²	4.7	4.8	(0.1)	4.7	-	4.7	-

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

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

The Group's CET1 ratio of 14.2 per cent was 41 basis points lower than as at 30 June 2024 and remains 3.7 percentage points above the Group's latest regulatory minimum of 10.6 per cent. Underlying profit accretion was partly offset by shareholder distributions.

There was 48 basis points of CET1 accretion from underlying profits, and a further 19 basis points uplift primarily from fair value gains on other comprehensive income, FX and regulatory capital adjustments. This was partly offset by 21 basis points from an increase in RWAs.

The Group is part way through the $1.5 billion share buyback programme which it announced on 30 July 2024, and by 30 September 2024 had spent $603 million purchasing 61 million ordinary shares, reducing the share count by approximately 2 per cent. Even though the share buyback was still ongoing on 30 September 2024, the entire $1.5 billion is deducted from CET1 in the period, reducing the CET1 ratio by 62 basis points. Including the $1 billion buyback that was announced on 23 February 2024 and completed on 25 June 2024 , the Group has purchased 174 million shares during the year to 30 September, reducing the share count by approximately 7 per cent.

The Group is accruing a foreseeable dividend in respect of the final 2024 ordinary share dividend in the third quarter. This is not an indication of the Group's final 2024 ordinary share dividend, which will be proposed by the Board at the presentation of the 2024 full year results. The increase in the foreseeable dividend for ordinary dividend and AT1 coupons reduced the CET1 ratio by 25 basis points.

The Group's UK leverage ratio of 4.7 per cent decreased 11 basis points from 30 June 2024 and remains significantly above its minimum requirement of 3.8 per cent.

Guidance

We are upgrading our 2024 income guidance while all other 2024 points of guidance remain unchanged:

•  Operating income to increase towards 10 per cent in 2024 at constant currency, excluding the two notable items

We are also revising our 2025 and 2026 guidance as follows, while all other guidance remains unchanged:

•  Operating income to increase 5-7 per cent CAGR in 2023-2026 at constant currency; 2025 growth expected to be below the 5-7 per cent range at constant currency

•  Positive income-to-cost jaws in each year at constant currency, excluding the two notables

•  Basel 3.1 day-1 impact now expected to be close to neutral

•  Plan to return at least $8 billion to shareholders cumulative 2024-2026, increased from previous guidance for at least $5 billion

•  RoTE increasing steadily from 10 per cent, approaching 13 per cent in 2026 and to progress thereafter

 

 

Diego De Giorgi

Group Chief Financial Officer

30 October 2024