29 July 2022-
All figures are presented on an underlying basis and comparisons are made to 2021 on a reported currency basis, unless otherwise stated. A reconciliation of restructuring and other items excluded from underlying results is set out on pages 29-33.
Bill Winters, Group Chief Executive, said:
“We’ve posted a strong set of results for the first half of the year, with income up 10% on a normalised basis, supported by continued positive momentum in the second quarter, in which we grew income 11%. We remain disciplined on expenses, with significant savings delivered and maintained a strong capital position, with a CET1 ratio of 13.9%. We are also announcing
today a new $500m share buy-back to start imminently. We remain confident in the delivery of the financial targets we set out in February.”
Update on the five strategic actions
• CCIB: drive improved returns: Income RoRWA up 110bps to 6.0%; FI income now 44% of CCIB, up 3%pts
• CPBB: transform profitability: Cost-to-income ratio improved 2%pts from FY’21 to 72%; $98m gross expense savings delivered
in 1H’22; added over 350k new partnership clients
• Seize China opportunity: Record first half income for China onshore; strong network income growth in China-ASEAN corridor, up 36%, and China-South Asia, up 24% YoY
• Cost discipline to create operational leverage: $199m gross structural cost savings delivered in 1H’22
• Substantial shareholder distributions: CET1 ratio remains towards the top of our 13-14% target range; new $500m share buy-back to start imminently. $1.4bn total shareholder distributions announced so far this year Sustainability
• Sustainable Finance income up 43% with 11% asset growth YoY Selected information concerning financial performance (1H’22 unless otherwise stated)
• Return on tangible equity of 10.1%, up 20bps on 1H’21
• Income up 8% to $8.2bn, up 10% at constant currency (ccy) and excluding debit valuation adjustment (DVA) and normalising for the 2021 IFRS9 interest rate adjustment
– Net interest income up 12% at ccy
– Record half in Financial Markets, up $0.5bn or 18% at ccy and excluding DVA
– Continued positive momentum in Transaction Banking with income up 14% at ccy
– Wealth Management down $0.2bn or 16% at ccy
– 2Q’22 income up 6% YoY, or up 11% at ccy excluding DVA and normalising for the 2021 IFRS9 interest rate adjustment
– 2Q’22 Net interest margin (NIM) up 6bps QoQ to 1.35%, from rising interest rates
• Expenses increased 4% YoY to $5.3bn, or up 7% at ccy and up 6% at ccy excluding higher performance-related-pay accruals
– $199m gross expense savings more than offsetting increased investment spend in strategic initiatives and in Ventures
– Positive 2% income-to-cost jaws at ccy and excluding DVA, cost-to-income ratio down to 65%
• Credit impairment charge of $267m, up $314m YoY; 2Q’22 down $133m QoQ
– Includes $237m relating to China CRE stage 3 exposures and $70m for the foreign currency sovereign grading downgrade of Sri Lanka
– Management overlay down $129m in 1H’22; total now $216m, COVID-19 overlay $90m and China CRE overlay $126m
– High-risk assets up $0.4bn in 1H’22, driven by an increase in Early Alert accounts
• Underlying profit before tax up 7% at ccy to $2.8bn; statutory profit before tax up 10% at ccy to $2.8bn
• Tax charge of $684m: underlying effective tax rate of 24.6% up 0.5%pts due to a change in the geographic mix of profits
• The Group’s balance sheet remains liquid and well diversified
– Customer loans and advances down $2bn or 1% since 31.03.22, up $5bn or 2% excluding FX and RWA optimisation actions
– Advances-to-deposit ratio 59.6% (31.03.22: 60.0%); liquidity coverage ratio 142% (31.03.22: 140%)
• Risk-weighted assets (RWA) of $255bn down $16bn since 31.12.21
– Credit RWA down $14bn: $8bn of asset growth & mix, $6bn adverse regulatory changes, offset by $14bn efficiency actions,
$8bn favourable FX impact and $6bn positive credit migration
– Market risk RWA down $2bn to $23bn; Operational risk RWA broadly flat
• The Group remains strongly capitalised
– CET1 ratio 13.9% (31.12.21: 14.1%): Profits and lower RWAs offset by 100bps of regulatory changes, $750m share buy-back
programme and 50bps from FVOCI due to impact of rising yields on Treasury securities portfolio
– Interim ordinary dividend of $119m; equivalent to 4c per share
– $500m share buy-back starting imminently is expected to reduce the CET1 ratio by approximately 20bps
• Earnings per share increased 5.1 cents or 9% to 63.4 cents
