Page | |
Strategic report | |
About us | 2 |
Financial highlights | 3 |
Key financial metrics | 4 |
Our purpose and values | 5 |
Our core strengths | 5 |
Our strategy | 5 |
Stakeholder engagement | 8 |
Business performance and KPIs | 9 |
Economic background and outlook | 10 |
Financial summary | 10 |
Risk overview | 14 |
Risk environment | 15 |
Report of the Directors | |
Risk review | 17 |
Corporate Governance Report | 65 |
Directors' Report Disclosures table | 70 |
Statement of Directors’ Responsibilities in respect of the financial statements | 71 |
Financial statements | |
Independent auditors' report to the member of HSBC UK Bank plc | 72 |
Financial statements | 78 |
Notes on the financial statements | 87 |
Other information | |
Reconciliation of alternative performance measures | 126 |
Abbreviations | 127 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 1 |
2 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 3 |
Year ended | ||
31 Dec 2022 | 31 Dec 2021 | |
Reported results | ||
Reported revenue (£m) | 7,952 | 6,250 |
Reported profit before tax (£m)2 | 3,638 | 3,480 |
Reported profit after tax (£m) | 2,876 | 2,368 |
Profit attributable to the shareholders of the parent company (£m) | 2,871 | 2,363 |
Return on average tangible equity (%)2 | 16.3 | 13.5 |
Net interest margin (%) | 1.89 | 1.53 |
Expected credit losses/(releases) as % of average gross loans and advances to customers (%) | 0.24 | (0.51) |
Adjusted results | ||
Adjusted revenue (£m) | 7,944 | 6,239 |
Adjusted profit before tax (£m)2 | 4,036 | 3,764 |
Cost efficiency ratio (%)2 | 43.1 | 55.5 |
Adjusted return on average tangible equity (%)1,2 | 17.9 | 14.7 |
Balance sheet | ||
Total assets (£m) | 342,441 | 346,063 |
Net loans and advances to customers (£m) | 204,143 | 195,526 |
Customer accounts (£m) | 281,095 | 281,870 |
Average interest-earning assets (£m) | 327,840 | 303,151 |
Loans and advances to customers as % of customer accounts (%) | 72.6 | 69.4 |
Total shareholders' equity (£m) | 22,166 | 23,745 |
Tangible ordinary shareholders equity (£m) | 15,699 | 17,332 |
Capital, leverage and liquidity | ||
Common equity tier 1 capital ratio (%)2,3 | 13.5 | 15.3 |
Total capital ratio (%)3 | 19.3 | 21.6 |
Risk-weighted assets3 (£m) | 92,413 | 83,723 |
Leverage ratio3 (%) | 5.9 | 4.2 |
High-quality liquid assets (liquidity value) (£m)4 | 110,722 | 103,943 |
Liquidity coverage ratio (%)4 | 226 | 222 |
4 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 5 |
6 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 7 |
8 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 9 |
Year ended | ||
Audited | ||
31 Dec 2022 | 31 Dec 2021 | |
£m | £m | |
Net interest income | 6,203 | 4,650 |
Net fee income | 1,245 | 1,080 |
Net income from financial instruments held for trading or managed on a fair value basis | 384 | 318 |
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 36 | 15 |
Gains less losses from financial investments | 37 | 101 |
Other operating income | 47 | 86 |
Net operating income before change in expected credit losses and other credit impairment charges | 7,952 | 6,250 |
Change in expected credit losses and other credit impairment charges | (482) | 989 |
Net operating income | 7,470 | 7,239 |
Total operating expenses | (3,832) | (3,759) |
Operating profit | 3,638 | 3,480 |
Profit before tax | 3,638 | 3,480 |
Tax expense | (762) | (1,112) |
Profit for the year | 2,876 | 2,368 |
Profit attributable to shareholders of the parent company | 2,871 | 2,363 |
Profit attributable to non-controlling interests | 5 | 5 |
10 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Year ended | ||
At | ||
31 Dec 2022 | 31 Dec 2021 | |
£m | £m | |
Interest income | 7,592 | 5,072 |
Interest expense | (1,389) | (422) |
Net interest income | 6,203 | 4,650 |
Average interest-earning assets | 327,840 | 303,151 |
% | % | |
Gross interest yield1 | 2.32 | 1.67 |
Less: Gross interest payable1 | (0.55) | (0.18) |
Net interest spread2 | 1.77 | 1.49 |
Net interest margin3 | 1.89 | 1.53 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 11 |
At 31 Dec 2022 | WPB | CMB | GBM | Corporate Centre | Total |
£m | £m | £m | £m | £m | |
Net operating income/(expense) before change in expected credit losses and other credit impairment charges | 4,321 | 3,509 | 151 | (37) | 7,944 |
– external | 4,146 | 3,308 | 394 | 96 | 7,944 |
– inter-segment | 175 | 201 | (243) | (133) | — |
– of which: net interest income | 3,655 | 2,533 | (1) | 10 | 6,197 |
Change in expected credit losses and other credit impairment charges | (287) | (195) | — | — | (482) |
Net operating income/(expense) | 4,034 | 3,314 | 151 | (37) | 7,462 |
Total operating income/(expenses) | (2,267) | (1,132) | (34) | 7 | (3,426) |
Operating profit/(loss) | 1,767 | 2,182 | 117 | (30) | 4,036 |
Adjusted profit/(loss) before tax | 1,767 | 2,182 | 117 | (30) | 4,036 |
% | % | % | % | % | |
Adjusted cost efficiency ratio | 52.5 | 32.3 | 22.5 | 18.9 | 43.1 |
Balance sheet information | £m | £m | £m | £m | £m |
Loans and advances to customers (net) | 138,927 | 65,408 | — | (192) | 204,143 |
Customer accounts | 181,785 | 99,622 | — | (312) | 281,095 |
At 31 Dec 2021 | |||||
Net operating income/(expense) before change in expected credit losses and other credit impairment charges | 3,369 | 2,748 | 124 | (2) | 6,239 |
– external | 3,271 | 2,642 | 327 | (1) | 6,239 |
– inter-segment | 98 | 106 | (203) | (1) | — |
– of which: net interest income/(expense) | 2,774 | 1,858 | — | 10 | 4,642 |
Change in expected credit losses and other credit impairment charges | 439 | 550 | — | — | 989 |
Net operating income/(expense) | 3,808 | 3,298 | 124 | (2) | 7,228 |
Total operating expenses | (2,219) | (1,174) | (32) | (39) | (3,464) |
Operating profit/(loss) | 1,589 | 2,124 | 92 | (41) | 3,764 |
Adjusted profit/(loss) before tax | 1,589 | 2,124 | 92 | (41) | 3,764 |
% | % | % | % | % | |
Adjusted cost efficiency ratio (%) | 65.9 | 42.7 | 25.8 | (1,950.0) | 55.5 |
Balance sheet information | £m | £m | £m | £m | £m |
Loans and advances to customers (net) | 131,700 | 63,784 | — | 42 | 195,526 |
Customer accounts | 178,685 | 103,375 | — | (190) | 281,870 |
WPB | CMB | GBM | Corporate Centre | Total | |
At 31 Dec 2022 | £m | £m | £m | £m | £m |
Revenue | 4,331 | 3,507 | 151 | (37) | 7,952 |
Significant revenue items | (10) | 2 | — | — | (8) |
– customer remediation and related matters | (9) | 2 | — | — | (7) |
– restructuring and other related revenue | (1) | — | — | — | (1) |
Adjusted revenue/(expense) | 4,321 | 3,509 | 151 | (37) | 7,944 |
At 31 Dec 2021 | |||||
Revenue | 3,364 | 2,759 | 124 | 3 | 6,250 |
Significant revenue items | 5 | (11) | — | (5) | (11) |
– customer remediation and related matters | 5 | (13) | — | — | (8) |
– restructuring and other related revenue | — | 2 | — | (5) | (3) |
Adjusted revenue/(expense) | 3,369 | 2,748 | 124 | (2) | 6,239 |
WPB | CMB | GBM | Corporate Centre | Total | |
At 31 Dec 2022 | £m | £m | £m | £m | £m |
Operating expenses | (2,309) | (1,170) | (35) | (318) | (3,832) |
Significant cost items | 42 | 38 | 1 | 325 | 406 |
– restructuring and other related costs1 | 70 | 39 | 1 | 319 | 429 |
– customer remediation and related matters | (28) | (1) | — | 6 | (23) |
Adjusted operating expenses | (2,267) | (1,132) | (34) | 7 | (3,426) |
At 31 Dec 2021 | |||||
Operating expenses | (2,311) | (1,181) | (32) | (235) | (3,759) |
Significant cost items | 92 | 7 | — | 196 | 295 |
– restructuring and other related costs1 | 63 | 6 | — | 190 | 259 |
– customer remediation and related matters | 29 | 1 | — | 6 | 36 |
Adjusted operating (expenses)/income | (2,219) | (1,174) | (32) | (39) | (3,464) |
12 | HSBC UK Bank plc Annual Report and Accounts 2022 |
WPB | CMB | GBM | Corporate Centre | Total | |
At 31 Dec 2022 | £m | £m | £m | £m | £m |
Profit/(loss) before tax | 1,735 | 2,142 | 116 | (355) | 3,638 |
Net impact on reported profit and loss | 32 | 40 | 1 | 325 | 398 |
– significant revenue items | (10) | 2 | — | — | (8) |
– significant cost items | 42 | 38 | 1 | 325 | 406 |
Adjusted profit/(loss) before tax | 1,767 | 2,182 | 117 | (30) | 4,036 |
At 31 Dec 2021 | £m | £m | £m | £m | £m |
Profit/(loss) before tax | 1,492 | 2,128 | 92 | (232) | 3,480 |
Net impact on reported profit and loss | 97 | (4) | — | 191 | 284 |
– significant revenue items | 5 | (11) | — | (5) | (11) |
– significant cost items | 92 | 7 | — | 196 | 295 |
Adjusted profit before tax | 1,589 | 2,124 | 92 | (41) | 3,764 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 13 |
31 Dec | 31 Dec | |
2022 | 2021 | |
£m | £m | |
Total assets | 342,441 | 346,063 |
– cash and balances at central banks | 94,407 | 112,478 |
– financial assets mandatory measured at fair value through profit and loss | 108 | 79 |
– loans and advances to banks | 6,357 | 1,914 |
– loans and advances to customers | 204,143 | 195,526 |
– reverse repurchase agreements – non-trading | 7,406 | 7,988 |
– financial investments | 16,092 | 14,377 |
– other assets | 13,382 | 13,637 |
Total liabilities | 320,215 | 322,258 |
– deposits by banks | 10,721 | 11,180 |
– customer accounts | 281,095 | 281,870 |
– repurchase agreements – non-trading | 9,333 | 10,438 |
– derivative liabilities | 304 | 292 |
– debt securities in issue | 1,299 | 900 |
– other liabilities | 17,463 | 17,578 |
Total equity | 22,226 | 23,805 |
– total shareholders’ equity1 | 22,166 | 23,745 |
– non-controlling interests | 60 | 60 |
14 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Risk | Description | |
Externally driven | ||
Geopolitical and macroeconomic risk | p | Our operations and portfolios are subject to risks associated with political instability, civil unrest and military conflict, which could lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets. Heightened geopolitical tensions, alongside other factors, have also disrupted supply chains globally. Inflation and rising interest rates in the UK have contributed to the current economic slowdown that will affect our customers and our business. |
Credit risk | ● | We regularly undertake detailed reviews of our portfolios and proactively manage credit facilities to customers and sectors likely to come under stress as a result of current macroeconomic and geopolitical events, including UK recessionary pressures and second order impacts from the Russia-Ukraine war. We remain focused on assessing and managing the impacts of the cost of living crisis and higher interest rates on our customers, including those that will need to refinance their mortgage onto increased rate loans. Sector deep dives and stress tests are regularly conducted with particular focus on the Automotive, Construction and Contracting, Commercial Real Estate, Hospitality, Hotels, Oil and Gas and Retail industry sectors. We have increased the frequency and depth of our monitoring activities with stress tests and other sectoral reviews performed to identify portfolios or customers who are likely to experience financial difficulty. |
Evolving regulatory environment risk | p | The regulatory risk environment continues to be complex. There has been increased regulatory focus on the protection of consumers, particularly those that are vulnerable; sanctions; operational resilience; cyber threats; crypto-asset related risks; wider anti-money laundering controls; and diversity and inclusion. These, alongside other regulatory priorities, may result in change requirements across HSBC UK in the short to medium term. We continue to monitor regulatory and wider industry developments closely and engage with regulators, as appropriate. |
Cyber threat and unauthorised access to systems | u | HSBC UK faces a risk of service disruption from external and internal malicious activity. In response to the recent geopolitical events, including the Russia-Ukraine war, we have further strengthened our monitoring approach. HSBC UK operates a continuous improvement programme to protect our technology operations and to counter a hostile and fast evolving cyber threat environment. |
Ibor transition | q | We remain exposed to regulatory compliance, legal and resilience risks as contracts transition away from demising Ibor benchmarks to new reference rates. As a result, we continue to consider the fairness of client outcomes, our compliance with regulatory expectations and the operation of our systems and processes. We have transitioned all but a small number of contracts in demised Ibors and are well progressed in transitioning contracts in remaining demising Ibors, specifically US dollar Libor. HSBC UK has significantly fewer US dollar Libor facilities to transition, versus the number transitioned for GBP Libor and the nature of our good progress means we consider the risk to have decreased versus 2021. |
Environmental, social and governance risk | p | We are subject to ESG risks relating to climate change; greenwashing; nature; and human rights. This risk has increased owing to the pace and volume of regulatory developments globally and stakeholders placing more emphasis on financial institutions’ actions and investment decisions in respect of ESG matters. Failure to meet these evolving expectations may result in financial and non-financial risks for HSBC UK, including adverse reputational consequences. |
Digital currencies and disintermediation risk | u | With the increasing attention of the public, governments, regulatory bodies and central banks on digital assets, including cryptocurrencies, the banking landscape has the potential to move significantly to a more direct linkage between currency providers and payment participants, to the possible detriment of intermediaries, such as HSBC UK. We continue to monitor digital asset consultations, pilots and issuances, the state of the market and the impact on participants and evolution in use of digital assets to understand how changes may impact our customers and business. We also closely observe and assess the potential for consequential financial crime and the resulting impact on payment transparency and architecture. |
HSBC UK Bank plc Annual Report and Accounts 2022 | 15 |
Risk | Description | |
Internally driven | ||
People risk | p | HSBC UK is exposed to risks associated with employee retention, talent availability and compliance with employment laws and regulations. Heightened demand for talent in the UK labour market, coupled with the cost of living crisis have led to increased attrition and employee attraction challenges, and continuing pressure on our people. There is additional focus on actively embedding hybrid working to maintain employee engagement. |
IT systems infrastructure and operational resilience | p | We continue to monitor and improve IT systems and network resilience to minimise service disruption and improve HSBC UK customer experience, through for example, our Operational Resilience programme. The significant volume of change and the complexity of our IT environment increases the risk of service interruption which we work to mitigate through change management controls. We are seeing increased demand on customer support centres and our business operations as a result of the current economic environment and there is additional focus on operational resilience. To support the business strategy, we have continued to strengthen our end-to-end management, build and deployment controls and system monitoring capabilities. |
Model risk | p | Model risk has heightened with increased regulatory requirements driving material changes to models across the banking industry in the UK. Currently there is a particular focus on capital models, however this focus is expected to be extended to all models based on the Consultation Paper (CP 6/22) published by the PRA in June 2022.The macroeconomic environment and new technologies such as machine learning continue to drive changes to the model risk landscape. A key area of focus is ensuring our standards, processes and controls are adequate to identify, measure and manage the resulting model risks. |
Financial crime and fraud risk | u | We continue to support our customers against a backdrop of complex geopolitical, socioeconomic, and technological challenges, including the Russia-Ukraine war. We are monitoring the impacts of the Russia-Ukraine war on HSBC UK, and using our sanctions compliance capabilities to respond to evolving sanctions regulations, noting the challenges that arise in implementing the unprecedented volume and diverse set of sanctions and trade restrictions. Fraud, particularly first-party payment fraud, continues to be a key area of focus for HSBC UK. We are investing in new fraud detection technologies, in order to limit losses and protect customers to within agreed tolerance levels. |
Conduct and customer detriment | u | HSBC UK has fully integrated the Global Purpose-Led Conduct Approach into our Risk Management Framework; our business activities; and our governance, ensuring we consider and act on the impact our actions and decisions have on our customers and society. This integration to a higher standard of identification and reporting has enabled further simplification to processes, ensuring our approach to conduct is more meaningful to colleagues. Throughout 2022, HSBC UK has been working towards meeting new Consumer Duty regulation requirements, and a new Code of Conduct rule, ensuring we deliver good customer outcomes and act consistently to support customers. With the expected rise in vulnerable customers and those in financial difficulty due to the cost of living crisis, the standards that we have sustained and enhanced throughout 2022 have contributed to HSBC UK being well positioned to support these customers in 2023 and mitigate foreseeable new potential conduct risks. |
Data risk | p | We use data to serve our customers and run our internal operations, often in real-time within digital experiences and processes. If this data is not accurate and timely, our ability to serve customers, operate with resilience, or meet regulatory requirements could be impacted. We need to further invest in controls to ensure data is kept confidential, and that we comply with the growing number of laws and increasing expectations from regulators concerning data privacy controls and the cross- border movement of data. |
Third-party risk | u | We procure services and goods from a range of third parties. It is critical that we have appropriate risk management policies and processes over the selection and governance of third parties. This includes third parties’ supply networks, particularly for key activities that could affect our operational resilience. Any deficiency in the management of risks associated with our third parties could affect our ability to support our customers and meet regulatory expectations. |
Execution risk | p | Failure to effectively prioritise, manage and/or deliver transformation across the organisation impacts our ability to achieve our strategic objectives. Given the increased scale, complexity and pace of strategic change at HSBC UK, we must monitor, manage and oversee change execution risk to ensure our change portfolios and initiatives continue to deliver the right outcomes for our customers, people, investors and communities. |
● | New risk introduced in 2022 |
p | Risk has heightened during 2022 |
u | Risk remains at the same level as 2021 |
q | Risk has decreased during 2022 |
16 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Page | |
How we manage our risks | 17 |
Risk management | 18 |
What are our principal risks and uncertainties | 19 |
Top and emerging risks | 19 |
Externally driven | 19 |
Internally driven | 23 |
Our material banking risks | 25 |
Credit risk | 26 |
Treasury risk | 55 |
Market risk | 61 |
Climate risk | 62 |
Resilience risk | 62 |
Regulatory compliance risk | 63 |
Financial crime risk | 64 |
Model risk | 64 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 17 |
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HSBC UK Bank plc Annual Report and Accounts 2022 | 19 |
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HSBC UK Bank plc Annual Report and Accounts 2022 | 21 |
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HSBC UK Bank plc Annual Report and Accounts 2022 | 23 |
24 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Risks | Arising from | Measurement, monitoring and management of risk |
Credit risk (see page 26) | ||
The risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. | Credit risk arises principally from direct lending, trade finance and leasing business, but also from certain other products such as guarantees and derivatives. | Credit risk is: •measured as the amount that could be lost if a customer or counterparty fails to make repayments; •monitored using various internal risk management measures and within limits approved by individuals within a framework of delegated authorities; and •managed through a robust risk control framework that outlines clear and consistent policies, principles and guidance for risk managers. |
Treasury risk (see page 55) | ||
The risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, including the risk of adverse impact on earnings or capital due to structural foreign exchange exposures and changes in market interest rates, and including the financial risks arising from historic and current provision of pensions and other post- employment benefits to staff and their dependants. | Treasury risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment. | Treasury risk is: •measured through appetites set as target and ratios; •monitored and projected through appetites and using stress and scenario testing; and •managed through control resources in conjunction with risk profiles and cashflows. |
Market risk (see page 61) | ||
The risk that movements in market factors, including but not limited to interest rates, credit spreads and foreign exchange rates will reduce our income or the value of our portfolios. | Exposure to market risk is separated into two portfolios: •trading portfolios; and •non-trading portfolios. | Market risk is: •measured using sensitivities, value at risk and stress testing, giving a detailed picture of potential gains and losses for a range of market movements and scenarios, as well as tail risks over specified time horizons; •monitored using VaR sensitivities, stress testing and other measures, including the sensitivity of net interest income and the sensitivity of structural foreign exchange; and •managed using risk limits approved by the Risk Management Meeting. |
Climate risk (see page 62) | ||
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a greener economy. | Climate risk can materialise through: •physical risk, which arises from the increased frequency and severity of weather events; •transition risk, which arises from the process of moving to a low-carbon economy; and •greenwashing risk, which arises from the act of knowingly or unknowingly misleading stakeholders regarding our strategy relating to climate, the climate impact/benefit of a product or service, or the climate commitments or performance of our customers. | Climate risk is: •measured using a variety of risk appetite metrics and Key Management Indicators, which assess the impact of climate risk across the risk taxonomy; •monitored using stress testing; and •managed through adherence to risk appetite thresholds and via specific policies. |
Resilience risk (see page 62) | ||
Resilience risk is the risk that we are unable to provide critical services to our customers, affiliates, and counterparties as a result of sustained and significant operational disruption. | Resilience risk arises from failures or inadequacies in processes, people, systems or external events. These may be driven by rapid technological innovation, changing behaviours of our consumers, cyber threats and attacks, cross border dependencies, and third party relationships. | Resilience risk is: •measured through a range of metrics with defined maximum acceptable impact tolerances and against our agreed risk appetite; •monitored through oversight of enterprise processes, risks, controls and strategic change programmes; and •managed by continuous monitoring and thematic review. |
HSBC UK Bank plc Annual Report and Accounts 2022 | 25 |
Risks | Arising from | Measurement, monitoring and management of risk |
Regulatory compliance risk (see page 63) | ||
Regulatory compliance risk is the risk associated with breaching our duty to clients and other counterparties, inappropriate market conduct and breaching related financial services regulatory standards. | Regulatory compliance risk arises from the failure to observe the letter and spirit of relevant laws, codes, rules, regulations and standards of good practice. This could result in poor market or customer outcomes leading to fines, penalties and reputational damage to our business. | Regulatory compliance risk is: •measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement and assessment of our regulatory compliance teams; •monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and •managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required. |
Financial crime risk (see page 64) | ||
Financial crime risk is the risk of knowingly or unknowingly helping parties to commit or to further potentially illegal activity through HSBC UK, including money laundering, fraud, bribery and corruption, tax evasion, sanctions breaches, and terrorist and proliferation financing. | Financial crime risk arises from day-to-day banking operations involving customers, third parties and employees. | Financial crime risk is: •measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement of, and assessment by, our compliance teams; •monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and •managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required. |
Model risk (see page 64) | ||
Model risk is the potential for adverse consequences from business decisions informed by models, which can be exacerbated by errors in methodology, design or the way they are used. | Model risk arises in both financial and non-financial contexts whenever business decision making includes reliance on models. | Model risk is: •measured by reference to model performance tracking and the output of detailed technical reviews, with key metrics including model review statuses and findings; •monitored against model risk appetite statements, insight from the independent review function, feedback from internal and external audits, and regulatory reviews; •managed by creating and communicating appropriate policies, procedures and guidance, training employees in their application, and supervising their adoption to ensure operational effectiveness. |
26 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Debt securities and other bills | Wholesale lending | Retail lending | |||
External credit rating | Internal credit rating | 12-month Basel probability of default % | Internal credit rating | 12-month probability- weighted PD % | |
Quality classification1,2 | |||||
Strong | A- and above | CRR1 to CRR2 | 0.000–0.169 | Band 1 and 2 | 0.000–0.500 |
Good | BBB+ to BBB- | CRR3 | 0.170–0.740 | Band 3 | 0.501–1.500 |
Satisfactory | BB+ to B and unrated | CRR4 to CRR5 | 0.741–4.914 | Band 4 and 5 | 1.501–20.000 |
Sub-standard | B- to C | CRR6 to CRR8 | 4.915–99.999 | Band 6 | 20.001–99.999 |
Credit-impaired | Default | CRR9 to CRR10 | 100.000 | Band 7 | 100.000 |
Quality classification definitions •‘Strong’ exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default. •‘Good’ exposures demonstrate a good capacity to meet financial commitments, with low default risk. •‘Satisfactory’ exposures require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default risk. •‘Sub-standard’ exposures require varying degrees of special attention and default risk is of greater concern. •‘Credit-impaired’ exposures have been assessed as described on Note 1.2(g) on the financial statements. |
HSBC UK Bank plc Annual Report and Accounts 2022 | 27 |
28 | HSBC UK Bank plc Annual Report and Accounts 2022 |
The group | At 31 Dec 2022 | At 31 Dec 2021 | ||
Gross carrying/ nominal amount | Allowance for ECL1 | Gross carrying/ nominal amount | Allowance for ECL1 | |
£m | £m | £m | £m | |
Loans and advances to customers at amortised cost | 206,055 | (1,912) | 197,381 | (1,855) |
– personal | 138,626 | (872) | 131,318 | (767) |
– corporate and commercial | 64,955 | (1,035) | 63,927 | (1,085) |
– non-bank financial institutions | 2,474 | (5) | 2,136 | (3) |
Loans and advances to banks at amortised cost | 6,359 | (2) | 1,914 | — |
Other financial assets measured at amortised cost | 109,137 | (5) | 122,133 | (1) |
– cash and balances at central banks | 94,407 | — | 112,478 | — |
– items in the course of collection from other banks | 353 | — | 299 | — |
– reverse repurchase agreements – non-trading | 7,406 | — | 7,988 | — |
– financial investments | 5,160 | — | — | — |
– prepayments, accrued income and other assets2 | 1,811 | (5) | 1,368 | (1) |
Total gross carrying amount on-balance sheet | 321,551 | (1,919) | 321,428 | (1,856) |
Loans and other credit related commitments | 67,628 | (91) | 67,394 | (73) |
– personal | 42,059 | (9) | 39,889 | (9) |
– corporate and commercial | 24,669 | (82) | 26,843 | (64) |
– non-bank financial institutions | 900 | — | 662 | — |
Financial guarantees | 1,148 | (6) | 1,102 | (3) |
– personal | 342 | — | 317 | — |
– corporate and commercial | 518 | (6) | 490 | (2) |
– non-bank financial institutions | 288 | — | 295 | (1) |
Total nominal amount off-balance sheet3 | 68,776 | (97) | 68,496 | (76) |
390,327 | (2,016) | 389,924 | (1,932) | |
Fair value | Memorandum allowance for ECL4 | Fair value | Memorandum allowance for ECL4 | |
£m | £m | £m | £m | |
Debt instruments measured at 'FVOCI' | 10,932 | (1) | 14,377 | (2) |
HSBC UK Bank plc Annual Report and Accounts 2022 | 29 |
At 31 Dec 2022 | At 31 Dec 2021 | |||
Gross carrying/ nominal amount | Allowance for ECL1 | Gross carrying/ nominal amount | Allowance for ECL1 | |
The bank | £m | £m | £m | £m |
Loans and advances to customers at amortised cost | 201,389 | (1,723) | 192,880 | (1,672) |
– personal | 135,110 | (742) | 128,069 | (667) |
– corporate and commercial | 55,681 | (976) | 55,892 | (1,002) |
– non-bank financial institutions | 10,598 | (5) | 8,919 | (3) |
Loans and advances to banks at amortised cost | 9,306 | (2) | 4,405 | — |
Other financial assets measured at amortised cost | 108,967 | (5) | 121,966 | (1) |
– cash and balances at central banks | 94,407 | — | 112,477 | — |
– items in the course of collection from other banks | 154 | — | 132 | — |
– reverse repurchase agreements – non-trading | 7,406 | — | 7,988 | — |
– financial investments | 5,160 | — | — | — |
– prepayments, accrued income and other assets2 | 1,840 | (5) | 1,369 | (1) |
Total gross carrying amount on-balance sheet | 319,662 | (1,730) | 319,251 | (1,673) |
Loans and other credit related commitments | 54,324 | (88) | 53,687 | (71) |
– personal | 31,527 | (8) | 29,223 | (7) |
– corporate and commercial | 21,916 | (80) | 23,887 | (64) |
– non-bank financial institutions | 881 | — | 577 | — |
Financial guarantees | 1,148 | (6) | 1,102 | (3) |
– personal | 342 | — | 317 | — |
– corporate and commercial | 518 | (6) | 490 | (2) |
– non-bank financial institutions | 288 | — | 295 | (1) |
Total nominal amount off-balance sheet3 | 55,472 | (94) | 54,789 | (74) |
375,134 | (1,824) | 374,040 | (1,747) | |
Fair value | Memorandum allowance for ECL4 | Fair value | Memorandum allowance for ECL4 | |
£m | £m | £m | £m | |
Debt instruments measured at 'FVOCI' | 10,932 | (1) | 14,377 | (2) |
30 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Gross carrying/nominal amount1 | Allowance for ECL | ECL coverage % | |||||||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | % | |
Loans and advances to customers at amortised cost | 154,818 | 46,693 | 4,521 | 23 | 206,055 | (248) | (941) | (722) | (1) | (1,912) | 0.2 | 2.0 | 16.0 | 4.3 | 0.9 |
– personal | 106,745 | 31,041 | 840 | — | 138,626 | (112) | (571) | (189) | — | (872) | 0.1 | 1.8 | 22.5 | — | 0.6 |
– corporate and commercial | 45,739 | 15,520 | 3,673 | 23 | 64,955 | (134) | (368) | (532) | (1) | (1,035) | 0.3 | 2.4 | 14.5 | 4.3 | 1.6 |
– non-bank financial institutions | 2,334 | 132 | 8 | — | 2,474 | (2) | (2) | (1) | — | (5) | 0.1 | 1.5 | 12.5 | — | 0.2 |
Loans and advances to banks at amortised cost | 6,354 | 1 | 4 | — | 6,359 | — | — | (2) | — | (2) | — | — | 50.0 | — | — |
Other financial assets measured at amortised cost | 108,987 | 126 | 24 | — | 109,137 | — | (1) | (4) | — | (5) | — | 0.8 | 16.7 | — | — |
Loan and other credit-related commitments | 62,581 | 4,806 | 241 | — | 67,628 | (29) | (37) | (25) | — | (91) | — | 0.8 | 10.4 | — | 0.1 |
– personal | 41,614 | 358 | 87 | — | 42,059 | (9) | — | — | — | (9) | — | — | — | — | — |
– corporate and commercial | 20,120 | 4,395 | 154 | — | 24,669 | (20) | (37) | (25) | — | (82) | 0.1 | 0.8 | 16.2 | — | 0.3 |
– financial | 847 | 53 | — | — | 900 | — | — | — | — | — | — | — | — | — | — |
Financial guarantee and similar contracts | 983 | 147 | 18 | — | 1,148 | — | — | (6) | — | (6) | — | — | 33.3 | — | 0.5 |
– personal | 335 | 7 | — | — | 342 | — | — | — | — | — | — | — | — | — | — |
– corporate and commercial | 407 | 93 | 18 | — | 518 | — | — | (6) | — | (6) | — | — | 33.3 | — | 1.2 |
– financial | 241 | 47 | — | — | 288 | — | — | — | — | — | — | — | — | — | — |
At 31 Dec 2022 | 333,723 | 51,773 | 4,808 | 23 | 390,327 | (277) | (979) | (759) | (1) | (2,016) | 0.1 | 1.9 | 15.8 | 4.3 | 0.5 |
Gross carrying amount | Allowance for ECL | ECL coverage % | ||||||||||
Stage 2 | of which: | of which: | of which: | Stage 2 | of which: | of which: | of which: | Stage 2 | of which: | of which: | of which: | |
Up-to- date1 | 1 to 29 DPD2 | 30 and > DPD2 | Up-to- date1 | 1 to 29 DPD2 | 30 and > DPD2 | Up-to- date1 | 1 to 29 DPD2 | 30 and > DPD2 | ||||
£m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | |
Loans and advances to customers at amortised cost: | 46,693 | 46,050 | 386 | 257 | (941) | (819) | (70) | (52) | 2.0 | 1.8 | 18.1 | 20.2 |
– personal | 31,041 | 30,689 | 236 | 116 | (571) | (465) | (61) | (45) | 1.8 | 1.5 | 25.8 | 38.8 |
– corporate and commercial | 15,520 | 15,230 | 150 | 140 | (368) | (352) | (9) | (7) | 2.4 | 2.3 | 6.0 | 5.0 |
– non-bank financial | 132 | 131 | — | 1 | (2) | (2) | — | — | 1.5 | 1.5 | — | — |
Loans and advances to banks at amortised cost | 1 | 1 | — | — | — | — | — | — | — | — | — | — |
Other financial assets measured at amortised cost | 126 | 126 | — | — | (1) | (1) | — | — | 0.8 | 0.8 | — | — |
HSBC UK Bank plc Annual Report and Accounts 2022 | 31 |
Gross carrying/nominal amount1 | Allowance for ECL | ECL coverage % | |||||||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | % | |
Loans and advances to customers at amortised cost | 174,917 | 18,436 | 4,008 | 20 | 197,381 | (315) | (692) | (843) | (5) | (1,855) | 0.2 | 3.8 | 21.0 | 25.0 | 0.9 |
– personal | 126,904 | 3,361 | 1,053 | — | 131,318 | (122) | (353) | (292) | — | (767) | 0.1 | 10.5 | 27.7 | — | 0.6 |
– corporate and commercial | 45,957 | 15,000 | 2,950 | 20 | 63,927 | (191) | (338) | (551) | (5) | (1,085) | 0.4 | 2.3 | 18.7 | 25.0 | 1.7 |
– non-bank financial institutions | 2,056 | 75 | 5 | — | 2,136 | (2) | (1) | — | — | (3) | 0.1 | 1.3 | — | — | 0.1 |
Loans and advances to banks at amortised cost | 1,914 | — | — | — | 1,914 | — | — | — | — | — | — | — | — | — | — |
Other financial assets measured at amortised cost | 122,085 | 32 | 16 | — | 122,133 | (1) | — | — | — | (1) | — | — | — | — | — |
Loan and other credit-related commitments | 63,642 | 3,492 | 260 | — | 67,394 | (32) | (26) | (15) | — | (73) | 0.1 | 0.7 | 5.8 | — | 0.1 |
– personal | 39,527 | 287 | 75 | — | 39,889 | (8) | (1) | — | — | (9) | — | 0.3 | — | — | — |
– corporate and commercial | 23,524 | 3,134 | 185 | — | 26,843 | (24) | (25) | (15) | — | (64) | 0.1 | 0.8 | 8.1 | — | 0.2 |
– financial | 591 | 71 | — | — | 662 | — | — | — | — | — | — | — | — | — | — |
Financial guarantee and similar contracts | 963 | 123 | 16 | — | 1,102 | (1) | — | (2) | — | (3) | 0.1 | — | 12.5 | — | 0.3 |
– personal | 308 | 9 | — | — | 317 | — | — | — | — | — | — | — | — | — | — |
– corporate and commercial | 393 | 81 | 16 | — | 490 | — | — | (2) | — | (2) | — | — | 12.5 | — | 0.4 |
– financial | 262 | 33 | — | — | 295 | (1) | — | — | — | (1) | 0.4 | — | — | — | 0.3 |
At 31 Dec 2021 | 363,521 | 22,083 | 4,300 | 20 | 389,924 | (349) | (718) | (860) | (5) | (1,932) | 0.1 | 3.3 | 20.0 | 25.0 | 0.5 |
Gross carrying amount | Allowance for ECL | ECL coverage % | ||||||||||
Stage 2 | of which: | of which: | of which: | Stage 2 | of which: | of which: | of which: | Stage 2 | of which: | of which: | of which: | |
Up-to- date1 | 1 to 29 DPD2 | 30 and > DPD2 | Up-to- date1 | 1 to 29 DPD2 | 30 and > DPD2 | Up-to- date1 | 1 to 29 DPD2 | 30 and > DPD2 | ||||
£m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | |
Loans and advances to customers at amortised cost: | 18,436 | 17,815 | 394 | 227 | (692) | (616) | (42) | (34) | 3.8 | 3.5 | 10.7 | 15.0 |
– personal | 3,361 | 3,045 | 210 | 106 | (353) | (286) | (36) | (31) | 10.5 | 9.4 | 17.1 | 29.2 |
– corporate and commercial | 15,000 | 14,695 | 184 | 121 | (338) | (329) | (6) | (3) | 2.3 | 2.2 | 3.3 | 2.5 |
– non-bank financial institutions | 75 | 75 | — | — | (1) | (1) | — | — | 1.3 | 1.3 | — | — |
Loans and advances to banks at amortised cost | — | — | — | — | — | — | — | — | — | — | — | — |
Other financial assets measured at amortised cost | 32 | 32 | — | — | — | — | — | — | — | — | — | — |
32 | HSBC UK Bank plc Annual Report and Accounts 2022 |
‘Maximum exposure to credit risk’ table The following table presents our maximum exposure before taking account of any collateral held or other credit enhancements (unless such enhancements meet accounting offsetting requirements). The table excludes financial instruments whose carrying amount best represents the net exposure to credit risk; and it excludes equity securities as they are not subject to credit risk. For the financial assets recognised on the balance sheet, the maximum exposure to credit risk equals their carrying amount and is net of the allowance for ECL; for financial guarantees and similar contracts granted, it is the maximum amount that we would have to pay if the guarantees were called upon. For loan commitments and other credit- related commitments, it is generally the full amount of the committed facilities. The offset in the table relates to amounts where there is a legally enforceable right of offset in the event of counterparty default and where, as a result, there is a net exposure for credit risk purposes. However, as there is no intention to settle these balances on a net basis under normal circumstances, they do not qualify for net presentation for accounting purposes. No offset has been applied to off-balance sheet collateral. In the case of derivatives the offset column also includes collateral received in cash and other financial assets. |
At 31 Dec 2022 | At 31 Dec 2021 | |||||
Maximum exposure | Offset | Net | Maximum exposure | Offset | Net | |
The group | £m | £m | £m | £m | £m | £m |
Loans and advances to customers held at amortised cost | 204,143 | (2,786) | 201,357 | 195,526 | (2,457) | 193,069 |
– personal | 137,754 | — | 137,754 | 130,551 | — | 130,551 |
– corporate and commercial | 63,920 | (2,752) | 61,168 | 62,842 | (2,395) | 60,447 |
– non-bank financial institutions | 2,469 | (34) | 2,435 | 2,133 | (62) | 2,071 |
Loans and advances to banks at amortised cost | 6,357 | — | 6,357 | 1,914 | — | 1,914 |
Other financial assets held at amortised cost | 109,256 | — | 109,256 | 122,258 | — | 122,258 |
– cash and balances at central banks | 94,407 | — | 94,407 | 112,478 | — | 112,478 |
– items in the course of collection from other banks | 353 | — | 353 | 299 | — | 299 |
– reverse repurchase agreements – non-trading | 7,406 | — | 7,406 | 7,988 | — | 7,988 |
– financial investments | 5,160 | — | 5,160 | — | — | — |
– other assets | 1,930 | — | 1,930 | 1,493 | — | 1,493 |
Derivatives | 546 | (522) | 24 | 64 | (49) | 15 |
Total on-balance sheet exposure to credit risk | 320,302 | (3,308) | 316,994 | 319,762 | (2,506) | 317,256 |
Total off-balance sheet | 74,057 | — | 74,057 | 73,654 | — | 73,654 |
– financial guarantees and similar contracts | 3,665 | — | 3,665 | 3,286 | — | 3,286 |
– loan and other credit-related commitments | 70,392 | — | 70,392 | 70,368 | — | 70,368 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 33 |
Average 2023 Q1– 2027 Q4 | Average 2022 Q1– 2026 Q4 | |
UK% | UK% | |
GDP growth rate | 1.1 | 2.5 |
Unemployment | 4.3 | 4.3 |
Inflation Rate | 3.1 | 1.2 |
House price growth | 0.4 | 3.5 |
Probability | 60 | 60 |
34 | HSBC UK Bank plc Annual Report and Accounts 2022 |
UK% | |
GDP growth rate | 4.4 (4Q24) |
Unemployment | 3.5 (4Q23) |
House price growth | 4.2 (1Q23) |
Inflation rate | 0.7 (1Q24) |
Probability | 5 |
Worst outcome 2021–2025 | |
UK% | |
GDP growth rate | (3.5) (3Q23) |
Unemployment | 5.8 (2Q24) |
House price growth | (10.1) (2Q24) |
Inflation rate (min) | (0.4) (4Q24) |
Inflation rate (max) | 10.8 (1Q23) |
Probability | 25 |
UK% | |
GDP growth rate | (6.9) (3Q23) |
Unemployment | 8.7 (2Q24) |
House price growth | (22.9) (2Q24) |
Inflation rate (min) | (2.3) (2Q24) |
Inflation rate (max) | 13.5 (2Q23) |
Probability | 10 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 35 |
Retail | Wholesale | Total | |
£m | £m | £m | |
Low-risk counterparties (banks, sovereigns and government entities) | — | — | — |
Corporate lending adjustments | — | 114 | 114 |
Retail lending adjustments | 130 | — | 130 |
Total | 130 | 114 | 244 |
36 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Retail | Wholesale | Total | |
£m | £m | £m | |
Low-risk counterparties (banks, sovereigns and government entities) | — | 3 | 3 |
Corporate lending adjustments | — | 314 | 314 |
Retail lending adjustments | 142 | — | 142 |
Total | 142 | 317 | 459 |
2022 | 2021 | |
£m | £m | |
ECL of financial instruments subject to significant measurement uncertainty at 31 Dec1 | ||
Reported ECL | 559 | 584 |
Consensus scenarios | ||
Central scenario | 458 | 455 |
Upside scenario | 354 | 371 |
Downside scenario | 606 | 598 |
Downside 2 scenario | 1,604 | 1,295 |
2022 | 2021 | |
£m | £m | |
ECL of loans and advances to customers at 31 Dec | ||
Reported ECL | 860 | 738 |
Consensus scenarios | ||
Central scenario | 799 | 636 |
Upside scenario | 715 | 562 |
Downside scenario | 848 | 769 |
Downside 2 scenario | 1,443 | 1,514 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 37 |
Non-credit impaired | Credit impaired | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | ||||||
Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
At 1 Jan 2022 | 240,386 | (348) | 22,039 | (718) | 4,283 | (860) | 20 | (5) | 266,728 | (1,931) |
Transfers of financial instruments: | (34,718) | (175) | 32,900 | 245 | 1,818 | (70) | — | — | — | — |
– transfers from Stage 1 to Stage 2 | (57,652) | 177 | 57,652 | (177) | — | — | — | — | — | — |
– transfers from Stage 2 to Stage 1 | 23,349 | (337) | (23,349) | 337 | — | — | — | — | — | — |
– transfers to Stage 3 | (638) | 3 | (2,125) | 153 | 2,763 | (156) | — | — | — | — |
– transfers from Stage 3 | 223 | (18) | 722 | (68) | (945) | 86 | — | — | — | — |
Net remeasurement of ECL arising from transfer of stage | — | 214 | — | (264) | — | (3) | — | — | — | (53) |
Changes due to modifications not derecognised | — | — | — | — | — | — | — | — | — | — |
New financial assets originated or purchased | 55,066 | (154) | — | — | — | — | — | — | 55,066 | (154) |
Changes to Risk parameters – further lending/repayment | (10,027) | 76 | 333 | 13 | (46) | 105 | 3 | — | (9,737) | 194 |
Changes to risk parameters – credit quality | — | 70 | — | (214) | — | (449) | — | 4 | — | (589) |
Changes to model used for ECL calculation | — | 4 | — | (138) | — | 12 | — | — | — | (122) |
Asset derecognised (including final repayments) | (30,601) | 36 | (3,700) | 98 | (781) | 20 | — | — | (35,082) | 154 |
Assets written off | — | — | — | — | (490) | 490 | — | — | (490) | 490 |
Credit related modifications that resulted in derecognition | — | — | — | — | — | — | — | — | — | — |
Others2 | 3,850 | — | — | — | — | — | — | — | 3,850 | — |
At 31 Dec 2022 | 223,956 | (277) | 51,572 | (978) | 4,784 | (755) | 23 | (1) | 280,335 | (2,011) |
ECL release/(charge) for the period | 246 | (505) | (315) | 4 | (570) | |||||
Recoveries | 71 | |||||||||
Others | 22 | |||||||||
Total change in ECL for the period | (477) | |||||||||
38 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Non-credit impaired | Credit impaired | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | ||||||
Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
At 1 Jan 2021 | 226,574 | (559) | 35,528 | (1,728) | 3,850 | (1,091) | 38 | (23) | 265,990 | (3,401) |
Transfers of financial instruments: | 7,393 | (717) | (8,936) | 855 | 1,543 | (138) | — | — | — | — |
– transfers from Stage 1 to Stage 2 | (13,961) | 92 | 13,961 | (92) | — | — | — | — | — | — |
– transfers from Stage 2 to Stage 1 | 21,731 | (787) | (21,731) | 787 | — | — | — | — | — | — |
– transfers to Stage 3 | (591) | 5 | (1,541) | 218 | 2,132 | (223) | — | — | — | — |
– transfers from Stage 3 | 214 | (27) | 375 | (58) | (589) | 85 | — | — | — | — |
Net remeasurement of ECL arising from transfer of stage | — | 461 | — | (83) | — | (1) | — | — | — | 377 |
Changes due to modifications not derecognised | — | — | — | — | (1) | — | — | — | (1) | — |
New financial assets originated or purchased | 46,099 | (114) | — | — | — | — | — | — | 46,099 | (114) |
Changes to Risk parameters – further lending/ repayment | (12,643) | 132 | (1,305) | 182 | (119) | 182 | (18) | 4 | (14,085) | 500 |
Changes to risk parameters – credit quality | — | 432 | — | (66) | — | (406) | — | 14 | — | (26) |
Changes to model used for ECL calculation | — | (13) | — | (40) | — | — | — | — | — | (53) |
Asset derecognised (including final repayments) | (27,037) | 30 | (3,248) | 162 | (417) | 21 | — | — | (30,702) | 213 |
Assets written off | — | — | — | — | (573) | 573 | — | — | (573) | 573 |
Credit related modifications that resulted in derecognition | — | — | — | — | — | — | — | — | — | — |
Others | — | — | — | — | — | — | — | — | — | — |
At 31 Dec 2021 | 240,386 | (348) | 22,039 | (718) | 4,283 | (860) | 20 | (5) | 266,728 | (1,931) |
ECL release/(charge) for the period | 928 | 155 | (204) | 18 | 897 | |||||
Recoveries | 100 | |||||||||
Others | (24) | |||||||||
Total change in ECL for the period | 973 | |||||||||
HSBC UK Bank plc Annual Report and Accounts 2022 | 39 |
Gross carrying/notional amount | Allowance for ECL | Net | ||||||
Strong | Good | Satis- factory | Sub- standard | Credit impaired | Total | |||
£m | £m | £m | £m | £m | £m | £m | £m | |
In-scope for IFRS 9 | ||||||||
Loans and advances to customers held at amortised cost | 129,503 | 32,452 | 34,283 | 5,273 | 4,544 | 206,055 | (1,912) | 204,143 |
– personal | 120,776 | 8,640 | 7,397 | 973 | 840 | 138,626 | (872) | 137,754 |
– corporate and commercial | 7,696 | 23,612 | 25,679 | 4,272 | 3,696 | 64,955 | (1,035) | 63,920 |
– non-bank financial institutions | 1,031 | 200 | 1,207 | 28 | 8 | 2,474 | (5) | 2,469 |
Loans and advances to banks held at amortised cost | 6,355 | — | — | — | 4 | 6,359 | (2) | 6,357 |
Cash and balances at central banks | 94,407 | — | — | — | — | 94,407 | — | 94,407 |
Items in the course of collection from other banks | 353 | — | — | — | — | 353 | — | 353 |
Reverse repurchase agreements – non-trading | 7,406 | — | — | — | — | 7,406 | — | 7,406 |
Financial investments | 5,160 | — | — | — | — | 5,160 | — | 5,160 |
Other assets | 1,457 | 126 | 201 | 3 | 24 | 1,811 | (5) | 1,806 |
– endorsements and acceptances | — | 32 | 15 | 3 | 1 | 51 | (2) | 49 |
– accrued income and other | 1,457 | 94 | 186 | — | 23 | 1,760 | (3) | 1,757 |
Debt instruments measured at FVOCI1 | 12,384 | — | — | — | — | 12,384 | (1) | 12,383 |
Out-of-scope for IFRS 9 | ||||||||
Derivatives | 508 | 29 | 7 | 1 | 1 | 546 | — | 546 |
Total gross carrying amount on balance sheet | 257,533 | 32,607 | 34,491 | 5,277 | 4,573 | 334,481 | (1,920) | 332,561 |
Percentage of total credit quality | 77.0% | 9.7% | 10.3% | 1.6% | 1.4% | 100.0% | — | — |
Loan and other credit related commitments | 42,289 | 14,141 | 10,407 | 550 | 241 | 67,628 | (91) | 67,537 |
Financial guarantees | 642 | 186 | 264 | 38 | 18 | 1,148 | (6) | 1,142 |
In-scope: Irrecoverable loan commitments and financial guarantees | 42,931 | 14,327 | 10,671 | 588 | 259 | 68,776 | (97) | 68,679 |
Loan and other credit related commitments | 740 | 1,072 | 923 | 100 | 20 | 2,855 | — | 2,855 |
Performance and other guarantees | 385 | 889 | 1,137 | 87 | 32 | 2,530 | (7) | 2,523 |
Out-of-scope: Revocable loan commitments and Non-financial guarantees | 1,125 | 1,961 | 2,060 | 187 | 52 | 5,385 | (7) | 5,378 |
Total nominal amount off balance sheet | 44,056 | 16,288 | 12,731 | 775 | 311 | 74,161 | (104) | 74,057 |
At 31 Dec 2022 | 301,589 | 48,895 | 47,222 | 6,052 | 4,884 | 408,642 | (2,024) | 406,618 |
Debt instruments measured at FVOCI1 | 14,273 | — | — | — | — | 14,273 | (2) | 14,271 |
Total gross carrying amount on balance sheet | 262,468 | 26,096 | 36,678 | 6,479 | 4,044 | 335,765 | (1,858) | 333,907 |
Out-of-scope: Revocable loan commitments and Non-financial guarantees | 936 | 1,875 | 2,196 | 189 | 43 | 5,239 | (5) | 5,234 |
Total nominal amount off balance sheet | 44,249 | 14,558 | 13,416 | 1,193 | 319 | 73,735 | (81) | 73,654 |
At 31 Dec 2021 | 306,717 | 40,654 | 50,094 | 7,672 | 4,363 | 409,500 | (1,939) | 407,561 |
40 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Gross carrying/notional amount | Allowance for ECL | Net | ||||||
Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total | |||
£m | £m | £m | £m | £m | £m | £m | £m | |
Loans and advances to customers at amortised cost | 129,503 | 32,452 | 34,283 | 5,273 | 4,544 | 206,055 | (1,912) | 204,143 |
– Stage 1 | 105,529 | 24,826 | 23,794 | 669 | — | 154,818 | (248) | 154,570 |
– Stage 2 | 23,974 | 7,626 | 10,489 | 4,604 | — | 46,693 | (941) | 45,752 |
– Stage 3 | — | — | — | — | 4,521 | 4,521 | (722) | 3,799 |
– POCI | — | — | — | — | 23 | 23 | (1) | 22 |
Loans and advances to banks at amortised cost | 6,355 | — | — | — | 4 | 6,359 | (2) | 6,357 |
– Stage 1 | 6,354 | — | — | — | — | 6,354 | — | 6,354 |
– Stage 2 | 1 | — | — | — | — | 1 | — | 1 |
– Stage 3 | — | — | — | — | 4 | 4 | (2) | 2 |
– POCI | — | — | — | — | — | — | — | — |
Other financial assets measured at amortised cost | 108,783 | 126 | 201 | 3 | 24 | 109,137 | (5) | 109,132 |
– Stage 1 | 108,737 | 105 | 145 | — | — | 108,987 | — | 108,987 |
– Stage 2 | 46 | 21 | 56 | 3 | — | 126 | (1) | 125 |
– Stage 3 | — | — | — | — | 24 | 24 | (4) | 20 |
– POCI | — | — | — | — | — | — | — | — |
Loan and other credit-related commitments | 42,289 | 14,141 | 10,407 | 550 | 241 | 67,628 | (91) | 67,537 |
– Stage 1 | 41,874 | 12,551 | 8,030 | 126 | — | 62,581 | (29) | 62,552 |
– Stage 2 | 415 | 1,590 | 2,377 | 424 | — | 4,806 | (37) | 4,769 |
– Stage 3 | — | — | — | — | 241 | 241 | (25) | 216 |
– POCI | — | — | — | — | — | — | — | — |
Financial guarantees | 642 | 186 | 264 | 38 | 18 | 1,148 | (6) | 1,142 |
– Stage 1 | 632 | 182 | 166 | 3 | — | 983 | — | 983 |
– Stage 2 | 10 | 4 | 98 | 35 | — | 147 | — | 147 |
– Stage 3 | — | — | — | — | 18 | 18 | (6) | 12 |
– POCI | — | — | — | — | — | — | — | — |
At 31 Dec 2022 | 287,572 | 46,905 | 45,155 | 5,864 | 4,831 | 390,327 | (2,016) | 388,311 |
Debt instruments at FVOCI1 | 12,384 | — | — | — | — | 12,384 | (1) | 12,383 |
– Stage 1 | 12,384 | — | — | — | — | 12,384 | (1) | 12,383 |
– Stage 2 | — | — | — | — | — | — | — | — |
– Stage 3 | — | — | — | — | — | — | — | — |
– POCI | — | — | — | — | — | — | — | — |
At 31 Dec 2022 | 12,384 | — | — | — | — | 12,384 | (1) | 12,383 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 41 |
Gross carrying/notional amount | Allowance for ECL | Net | ||||||
Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total | |||
£m | £m | £m | £m | £m | £m | £m | £m | |
Loans and advances to customers at amortised cost | 124,378 | 25,978 | 36,519 | 6,478 | 4,028 | 197,381 | (1,855) | 195,526 |
– stage 1 | 124,221 | 24,837 | 25,096 | 763 | — | 174,917 | (315) | 174,602 |
– stage 2 | 157 | 1,141 | 11,423 | 5,715 | — | 18,436 | (692) | 17,744 |
– stage 3 | — | — | — | — | 4,008 | 4,008 | (843) | 3,165 |
– POCI | — | — | — | — | 20 | 20 | (5) | 15 |
Loans and advances to banks at amortised cost | 1,914 | — | — | — | — | 1,914 | — | 1,914 |
– stage 1 | 1,914 | — | — | — | — | 1,914 | — | 1,914 |
– stage 2 | — | — | — | — | — | — | — | — |
– stage 3 | — | — | — | — | — | — | — | — |
– POCI | — | — | — | — | — | — | — | — |
Other financial assets measured at amortised cost | 121,850 | 110 | 156 | 1 | 16 | 122,133 | (1) | 122,132 |
– stage 1 | 121,850 | 109 | 126 | — | — | 122,085 | (1) | 122,084 |
– stage 2 | — | 1 | 30 | 1 | — | 32 | — | 32 |
– stage 3 | — | — | — | — | 16 | 16 | — | 16 |
– POCI | — | — | — | — | — | — | — | — |
Loan and other credit-related commitments | 42,690 | 12,513 | 10,983 | 948 | 260 | 67,394 | (73) | 67,321 |
– stage 1 | 42,688 | 12,344 | 8,516 | 94 | — | 63,642 | (32) | 63,610 |
– stage 2 | 2 | 169 | 2,467 | 854 | — | 3,492 | (26) | 3,466 |
– stage 3 | — | — | — | — | 260 | 260 | (15) | 245 |
– POCI | — | — | — | — | — | — | — | — |
Financial guarantees | 623 | 170 | 237 | 56 | 16 | 1,102 | (3) | 1,099 |
– stage 1 | 623 | 169 | 155 | 16 | — | 963 | (1) | 962 |
– stage 2 | — | 1 | 82 | 40 | — | 123 | — | 123 |
– stage 3 | — | — | — | — | 16 | 16 | (2) | 14 |
– POCI | — | — | — | — | — | — | — | — |
At 31 Dec 2021 | 291,455 | 38,771 | 47,895 | 7,483 | 4,320 | 389,924 | (1,932) | 387,992 |
Debt instruments at FVOCI1 | 14,273 | — | — | — | — | 14,273 | (2) | 14,271 |
– stage 1 | 14,273 | — | — | — | — | 14,273 | (2) | 14,271 |
– stage 2 | — | — | — | — | — | — | — | — |
– stage 3 | — | — | — | — | — | — | — | — |
– POCI | — | — | — | — | — | — | — | — |
At 31 Dec 2021 | 14,273 | — | — | — | — | 14,273 | (2) | 14,271 |
42 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Performing – Forborne | Non-Performing – Forborne | Total Forborne | ||||
Stage 1 | Stage 2 | POCI | Stage 3 | POCI | Total | |
£m | £m | £m | £m | £m | £m | |
Gross carrying amount | ||||||
Personal | — | 159 | — | 376 | — | 535 |
– first lien residential mortgages | — | 23 | — | 235 | — | 258 |
– credit cards | — | 63 | — | 45 | — | 108 |
– other personal lending which is unsecured | — | 73 | — | 96 | — | 169 |
Wholesale | — | 587 | — | 1,032 | 23 | 1,642 |
– corporate and commercial | — | 587 | — | 1,031 | 23 | 1,641 |
– non-bank financial institutions | — | — | — | 1 | — | 1 |
At 31 Dec 2022 | — | 746 | — | 1,408 | 23 | 2,177 |
Allowance for ECL | ||||||
Personal | — | (31) | — | (97) | — | (128) |
– first lien residential mortgages | — | (1) | — | (30) | — | (31) |
– credit cards | — | (13) | — | (28) | — | (41) |
– other personal lending which is unsecured | — | (17) | — | (39) | — | (56) |
Wholesale | — | (21) | — | (115) | (1) | (137) |
– corporate and commercial | — | (21) | — | (115) | (1) | (137) |
At 31 Dec 2022 | — | (52) | — | (212) | (1) | (265) |
Gross carrying amount | ||||||
Personal | — | — | — | 510 | — | 510 |
– first lien residential mortgages | — | — | — | 340 | — | 340 |
– credit cards | — | — | — | 105 | — | 105 |
– other personal lending which is unsecured | — | — | — | 65 | — | 65 |
Wholesale | 196 | 79 | — | 1,158 | 20 | 1,453 |
– corporate and commercial | 196 | 79 | — | 1,158 | 20 | 1,453 |
– non-bank financial institutions | — | — | — | — | — | — |
At 31 Dec 20211 | 196 | 79 | — | 1,668 | 20 | 1,963 |
Allowance for ECL | ||||||
Personal | — | — | — | (92) | — | (92) |
– first lien residential mortgages | — | — | — | (47) | — | (47) |
– credit cards | — | — | — | (27) | — | (27) |
– other personal lending which is unsecured | — | — | — | (18) | — | (18) |
Wholesale | (3) | (2) | — | (122) | (5) | (132) |
– corporate and commercial | (3) | (2) | — | (122) | (5) | (132) |
At 31 Dec 20211 | (3) | (2) | — | (214) | (5) | (224) |
HSBC UK Bank plc Annual Report and Accounts 2022 | 43 |
Gross carrying amount | Allowance for ECL | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
Corporate and commercial | 45,739 | 15,520 | 3,673 | 23 | 64,955 | (134) | (368) | (532) | (1) | (1,035) |
– agriculture, forestry and fishing | 3,018 | 889 | 152 | — | 4,059 | (5) | (26) | (26) | — | (57) |
– mining and quarrying | 507 | 140 | 34 | — | 681 | (1) | (1) | (7) | — | (9) |
– manufacturing | 6,070 | 1,444 | 420 | — | 7,934 | (11) | (24) | (88) | — | (123) |
– electricity, gas, steam and air-conditioning supply | 942 | 56 | 1 | — | 999 | (1) | (1) | — | — | (2) |
– water supply, sewerage, waste management and remediation | 737 | 88 | 8 | — | 833 | (1) | (1) | (2) | — | (4) |
– construction | 2,256 | 898 | 234 | — | 3,388 | (10) | (24) | (37) | — | (71) |
– wholesale and retail trade, repair of motor vehicles and motorcycles | 5,915 | 5,137 | 837 | — | 11,889 | (22) | (121) | (113) | — | (256) |
– transportation and storage | 1,522 | 358 | 80 | — | 1,960 | (4) | (7) | (6) | — | (17) |
– accommodation and food | 3,840 | 2,359 | 341 | — | 6,540 | (12) | (56) | (25) | — | (93) |
– publishing, audiovisual and broadcasting | 1,870 | 435 | 125 | 23 | 2,453 | (10) | (18) | (9) | (1) | (38) |
– real estate | 8,265 | 2,009 | 551 | — | 10,825 | (22) | (29) | (109) | — | (160) |
– professional, scientific and technical activities | 3,349 | 378 | 132 | — | 3,859 | (11) | (21) | (18) | — | (50) |
– administrative and support services | 3,880 | 651 | 260 | — | 4,791 | (8) | (17) | (34) | — | (59) |
– public administration and defence, compulsory social security | — | — | — | — | — | — | — | — | — | — |
– education | 670 | 98 | 69 | — | 837 | (3) | (3) | (17) | — | (23) |
– health and care | 1,275 | 273 | 122 | — | 1,670 | (4) | (10) | (6) | — | (20) |
– arts, entertainment and recreation | 700 | 108 | 92 | — | 900 | (3) | (4) | (27) | — | (34) |
– other services | 919 | 199 | 215 | — | 1,333 | (6) | (5) | (8) | — | (19) |
– activities of households | 1 | — | — | — | 1 | — | — | — | — | — |
– government | 3 | — | — | — | 3 | — | — | — | — | — |
Non-bank financial institutions | 2,334 | 132 | 8 | — | 2,474 | (2) | (2) | (1) | — | (5) |
Loans and advances to banks | 6,354 | 1 | 4 | — | 6,359 | — | — | (2) | — | (2) |
At 31 Dec 2022 | 54,427 | 15,653 | 3,685 | 23 | 73,788 | (136) | (370) | (535) | (1) | (1,042) |
Nominal amount | Allowance for ECL | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
Corporate and commercial | 20,527 | 4,488 | 172 | — | 25,187 | (20) | (37) | (31) | — | (88) |
Financial | 1,088 | 100 | — | — | 1,188 | — | — | — | — | — |
At 31 Dec 2022 | 21,615 | 4,588 | 172 | — | 26,375 | (20) | (37) | (31) | — | (88) |
44 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Gross carrying amount | Allowance for ECL | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
Corporate and commercial | 45,957 | 15,000 | 2,950 | 20 | 63,927 | (191) | (338) | (551) | (5) | (1,085) |
– agriculture, forestry and fishing | 3,476 | 459 | 149 | — | 4,084 | (5) | (14) | (11) | — | (30) |
– mining and quarrying | 402 | 193 | 71 | — | 666 | (1) | (1) | (8) | — | (10) |
– manufacturing | 5,586 | 1,275 | 209 | — | 7,070 | (13) | (27) | (42) | — | (82) |
– electricity, gas, steam and air-conditioning supply | 480 | 19 | 1 | — | 500 | (3) | — | — | — | (3) |
– water supply, sewerage, waste management and remediation | 687 | 42 | 25 | — | 754 | (2) | (1) | (7) | — | (10) |
– construction | 2,401 | 887 | 137 | — | 3,425 | (8) | (16) | (29) | — | (53) |
– wholesale and retail trade, repair of motor vehicles and motorcycles | 8,956 | 1,720 | 355 | — | 11,031 | (17) | (25) | (99) | — | (141) |
– transportation and storage | 1,376 | 471 | 82 | — | 1,929 | (4) | (12) | (10) | — | (26) |
– accommodation and food | 898 | 6,326 | 655 | — | 7,879 | (35) | (118) | (24) | — | (177) |
– publishing, audiovisual and broadcasting | 2,039 | 325 | 100 | 20 | 2,484 | (21) | (19) | (47) | (5) | (92) |
– real estate | 8,701 | 1,302 | 534 | — | 10,537 | (43) | (15) | (148) | — | (206) |
– professional, scientific and technical activities | 3,435 | 311 | 143 | — | 3,889 | (9) | (14) | (18) | — | (41) |
– administrative and support services | 3,624 | 757 | 190 | — | 4,571 | (15) | (23) | (39) | — | (77) |
– public administration and defence, compulsory social security | 1 | — | — | — | 1 | — | — | — | — | — |
– education | 696 | 123 | 44 | — | 863 | (2) | (5) | (13) | — | (20) |
– health and care | 1,277 | 397 | 111 | — | 1,785 | (5) | (11) | (20) | — | (36) |
– arts, entertainment and recreation | 557 | 216 | 100 | — | 873 | (4) | (26) | (25) | — | (55) |
– other services | 1,140 | 177 | 44 | — | 1,361 | (4) | (11) | (11) | — | (26) |
– activities of households | 1 | — | — | — | 1 | — | — | — | — | — |
– assets backed securities | 224 | — | — | — | 224 | — | — | — | — | — |
Non-bank financial institutions | 2,056 | 75 | 5 | — | 2,136 | (2) | (1) | — | — | (3) |
Loans and advances to banks | 1,914 | — | — | — | 1,914 | — | — | — | — | — |
At 31 Dec 2021 | 49,927 | 15,075 | 2,955 | 20 | 67,977 | (193) | (339) | (551) | (5) | (1,088) |
Nominal amount | Allowance for ECL | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
Corporate and commercial | 23,917 | 3,215 | 201 | — | 27,333 | (24) | (25) | (17) | — | (66) |
Financial | 853 | 104 | — | — | 957 | (1) | — | — | — | (1) |
At 31 Dec 2021 | 24,770 | 3,319 | 201 | — | 28,290 | (25) | (25) | (17) | — | (67) |
HSBC UK Bank plc Annual Report and Accounts 2022 | 45 |
Non-credit impaired | Credit impaired | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | ||||||
Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
At 1 Jan 2022 | 73,650 | (218) | 18,378 | (364) | 3,156 | (568) | 20 | (5) | 95,204 | (1,155) |
Transfers of financial instruments | (6,143) | (113) | 4,472 | 155 | 1,671 | (42) | — | — | — | — |
– transfers from stage 1 to stage 2 | (20,060) | 58 | 20,060 | (58) | — | — | — | — | — | — |
– transfers from stage 2 to stage 1 | 14,289 | (160) | (14,289) | 160 | — | — | — | — | — | — |
– transfers to stage 3 | (562) | 3 | (1,711) | 66 | 2,273 | (69) | — | — | — | — |
– transfers from stage 3 | 190 | (14) | 412 | (13) | (602) | 27 | — | — | — | — |
Net remeasurement of ECL arising from transfer of stage | — | 72 | — | (127) | — | (2) | — | — | — | (57) |
Changes due to modifications not derecognised | — | — | — | — | — | — | — | — | — | — |
New financial assets originated or purchased | 14,489 | (43) | — | — | — | — | — | — | 14,489 | (43) |
Changes to risk parameters – further lending/repayments | (665) | 27 | (332) | 15 | (159) | 96 | 3 | — | (1,153) | 138 |
Change in risk parameters – credit quality | — | 105 | — | (50) | — | (312) | — | 4 | — | (253) |
Changes to models used for ECL calculation | — | 5 | — | (53) | — | — | — | — | — | (48) |
Asset derecognised (including final repayments) | (9,919) | 9 | (2,352) | 17 | (565) | 16 | — | — | (12,836) | 42 |
Assets written off | — | — | — | — | (246) | 246 | — | — | (246) | 246 |
At 31 Dec 2022 | 75,262 | (156) | 20,166 | (407) | 3,857 | (566) | 23 | (1) | 99,308 | (1,130) |
ECL release/(charge) for the period | 175 | (198) | (202) | 4 | (221) | |||||
Recoveries | 7 | |||||||||
Others | 22 | |||||||||
Total change in ECL for the period | (192) | |||||||||
46 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Non-credit impaired | Credit impaired | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | ||||||
Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
At 1 Jan 2021 | 70,942 | (380) | 28,352 | (834) | 2,581 | (699) | 37 | (23) | 101,912 | (1,936) |
Transfers of financial instruments | 5,352 | (191) | (6,246) | 238 | 894 | (47) | — | — | — | — |
– transfers from stage 1 to stage 2 | (9,402) | 52 | 9,402 | (52) | — | — | — | — | — | — |
– transfers from stage 2 to stage 1 | 14,957 | (236) | (14,957) | 236 | — | — | — | — | — | — |
– transfers to stage 3 | (320) | 3 | (891) | 61 | 1,211 | (64) | — | — | — | — |
– transfers from stage 3 | 117 | (10) | 200 | (7) | (317) | 17 | — | — | — | — |
Net remeasurement of ECL arising from transfer of stage | — | 105 | — | (25) | — | (1) | — | — | — | 79 |
Changes due to modifications not derecognised | — | — | — | — | (1) | — | — | — | (1) | — |
New financial assets originated or purchased | 13,368 | (59) | — | — | — | — | — | — | 13,368 | (59) |
Changes to risk parameters – further lending/repayments | (7,196) | 58 | (2,064) | 110 | 91 | 166 | (17) | 4 | (9,186) | 338 |
Change in risk parameters – credit quality | — | 253 | — | 181 | — | (230) | — | 14 | — | 218 |
Changes to models used for ECL calculation | — | (13) | — | (40) | — | — | — | — | — | (53) |
Asset derecognised (including final repayments) | (8,816) | 9 | (1,664) | 6 | (181) | 15 | — | — | (10,661) | 30 |
Assets written off | — | — | — | — | (228) | 228 | — | — | (228) | 228 |
Other | — | — | — | — | — | — | — | — | — | — |
At 31 Dec 2021 | 73,650 | (218) | 18,378 | (364) | 3,156 | (568) | 20 | (5) | 95,204 | (1,155) |
ECL release/(charge) for the period | 355 | 232 | (52) | 18 | 553 | |||||
Recoveries | 12 | |||||||||
Others | (23) | |||||||||
Total change in ECL for the period | 542 | |||||||||
2022 | 2021 | |
£m | £m | |
Gross loans and advances | ||
Stage 1 | 9,471 | 9,551 |
Stage 2 | 2,293 | 1,855 |
Stage 3 | 583 | 575 |
POCI | — | — |
At 31 Dec | 12,347 | 11,981 |
– of which: forborne loans1 | 178 | 229 |
Allowance for ECL | (179) | (201) |
2022 | 2021 | |
£m | £m | |
< 1 year | 6,903 | 6,831 |
1-2 years | 2,920 | 2,718 |
2-5 years | 1,979 | 1,978 |
> 5 years | 545 | 454 |
At 31 Dec | 12,347 | 11,981 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 47 |
48 | HSBC UK Bank plc Annual Report and Accounts 2022 |
2022 | 2021 | |||
Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | |
£m | % | £m | % | |
Stage 1 | ||||
Not collateralised | 4,151 | 0.4 | 4,739 | 0.5 |
Fully collateralised | 7,769 | 0.1 | 8,813 | 0.2 |
LTV ratio: | ||||
– less than 50% | 2,305 | 0.2 | 2,923 | 0.2 |
– 51% to 75% | 4,753 | 0.1 | 4,282 | 0.2 |
– 76% to 90% | 375 | 0.2 | 1,175 | 0.2 |
– 91% to 100% | 336 | 0.2 | 433 | 0.1 |
Partially collateralised (A): | 1,588 | 0.1 | 1,412 | 0.1 |
– collateral value on A | 920 | 644 | ||
Total | 13,508 | 0.2 | 14,964 | 0.3 |
Stage 2 | ||||
Not collateralised | 1,855 | 1.5 | 1,314 | 0.9 |
Fully collateralised | 1,624 | 1.0 | 714 | 1.2 |
LTV ratio: | ||||
– less than 50% | 515 | 1.0 | 390 | 1.0 |
– 51% to 75% | 981 | 0.9 | 283 | 1.4 |
– 76% to 90% | 115 | 1.5 | 32 | 0.7 |
– 91% to 100% | 13 | 0.4 | 9 | 3.9 |
Partially collateralised (B): | 139 | 1.0 | 270 | 0.4 |
– collateral value on B | 112 | 165 | ||
Total | 3,618 | 1.2 | 2,298 | 1.0 |
Stage 3 | ||||
Not collateralised | 245 | 35.2 | 301 | 41.9 |
Fully collateralised | 287 | 5.6 | 240 | 3.6 |
LTV ratio: | ||||
– less than 50% | 44 | 4.5 | 26 | 2.5 |
– 51% to 75% | 220 | 0.5 | 170 | 2.6 |
– 76% to 90% | 9 | 20.7 | 8 | 4.0 |
– 91% to 100% | 14 | 78.2 | 36 | 9.0 |
Partially collateralised (C): | 64 | 29.6 | 72 | 32.8 |
– collateral value on C | 34 | 40 | ||
Total | 596 | 20.3 | 613 | 25.8 |
POCI | ||||
Not collateralised | — | — | — | — |
Fully collateralised | — | — | — | — |
LTV ratio: | ||||
– less than 50% | — | — | — | — |
– 51% to 75% | — | — | — | — |
– 76% to 90% | — | — | — | — |
– 91% to 100% | — | — | — | — |
Partially collateralised (D): | — | — | — | — |
– collateral value on D | — | — | ||
Total | — | — | — | — |
At 31 Dec | 17,722 | 1.1 | 17,875 | 1.2 |
2022 | 2021 | |||
Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | |
£m | % | £m | % | |
Rated CRR/PD1 to 7 | ||||
Not collateralised | 5,995 | 0.7 | 6,047 | 0.5 |
Fully collateralised | 9,386 | 0.3 | 9,509 | 0.2 |
Partially collateralised (A): | 1,727 | 0.2 | 1,679 | 0.2 |
– collateral value on A | 1,032 | 805 | ||
Total | 17,108 | 0.4 | 17,235 | 0.3 |
Rated CRR/PD 8 | ||||
Not collateralised | 11 | 3.8 | 5 | 45.1 |
Fully collateralised | 7 | 8.3 | 18 | 24.0 |
LTV ratio: | ||||
– less than 50% | 3 | 6.9 | 10 | 24.5 |
– 51% to 75% | 2 | 20.2 | 6 | 22.7 |
– 76% to 90% | — | — | — | — |
– 91% to 100% | 2 | 3.6 | 2 | 13.0 |
Partially collateralised (B): | — | — | 4 | 12.1 |
– collateral value on B | — | 3 | ||
Total | 18 | 6.2 | 27 | 26.3 |
Rated CRR/PD9 to 10 | ||||
Not collateralised | 245 | 35.2 | 301 | 41.9 |
Fully collateralised | 287 | 5.6 | 240 | 3.6 |
LTV ratio: | ||||
– less than 50% | 44 | 4.5 | 26 | 2.5 |
– 51% to 75% | 220 | 0.5 | 170 | 2.6 |
– 76% to 90% | 9 | 20.7 | 8 | 4.0 |
– 91% to 100% | 14 | 78.2 | 36 | 9.0 |
Partially collateralised (C): | 64 | 29.6 | 72 | 32.8 |
– collateral value on C | 34 | 40 | ||
Total | 596 | 20.3 | 613 | 25.8 |
At 31 Dec | 17,722 | 1.1 | 17,875 | 1.2 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 49 |
2022 | 2021 | |||
Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | |
£m | % | £m | % | |
Stage 1 | ||||
Not collateralised | 41,567 | 0.3 | 42,837 | 0.3 |
Fully collateralised | 11,291 | 0.1 | 10,840 | 0.2 |
LTV ratio: | ||||
– less than 50% | 4,108 | 0.1 | 3,163 | 0.2 |
– 51% to 75% | 4,157 | 0.1 | 4,844 | 0.2 |
– 76% to 90% | 1,334 | 0.1 | 1,442 | 0.1 |
– 91% to 100% | 1,692 | 0.1 | 1,391 | 0.1 |
Partially collateralised (A): | 5,210 | 0.1 | 6,317 | 0.1 |
– collateral value on A | 2,803 | 3,515 | ||
Total | 58,068 | 0.2 | 59,994 | 0.3 |
Stage 2 | ||||
Not collateralised | 9,798 | 2.8 | 9,350 | 2.6 |
Fully collateralised | 5,079 | 1.3 | 5,473 | 1.4 |
LTV ratio: | ||||
– less than 50% | 2,160 | 1.1 | 2,109 | 1.5 |
– 51% to 75% | 2,121 | 1.4 | 2,857 | 1.2 |
– 76% to 90% | 478 | 1.9 | 343 | 2.1 |
– 91% to 100% | 320 | 1.3 | 164 | 1.6 |
Partially collateralised (B): | 1,876 | 1.2 | 1,344 | 1.8 |
– collateral value on B | 981 | 690 | ||
Total | 16,753 | 2.2 | 16,167 | 2.1 |
Stage 3 | ||||
Not collateralised | 2,466 | 14.1 | 1,533 | 20.0 |
Fully collateralised | 571 | 4.3 | 819 | 3.0 |
LTV ratio: | ||||
– less than 50% | 143 | 3.5 | 142 | 4.2 |
– 51% to 75% | 276 | 6.0 | 562 | 1.1 |
– 76% to 90% | 83 | 0.9 | 69 | 11.5 |
– 91% to 100% | 69 | 3.7 | 46 | 9.2 |
Partially collateralised (C): | 245 | 25.7 | 200 | 39.0 |
– collateral value on C | 128 | 115 | ||
Total | 3,282 | 13.3 | 2,552 | 16.0 |
POCI | ||||
Not collateralised | 23 | 2.8 | 20 | 22.7 |
Fully collateralised | — | — | — | — |
LTV ratio: | ||||
– less than 50% | — | — | — | — |
– 51% to 75% | — | — | — | — |
– 76% to 90% | — | — | — | — |
– 91% to 100% | — | — | — | — |
Partially Collateralised (D): | — | — | — | — |
– collateral value on D | — | — | ||
Total | 23 | 2.8 | 20 | 22.7 |
At 31 Dec | 78,126 | 1.2 | 78,733 | 1.2 |
2022 | 2021 | |||
Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | |
£m | % | £m | % | |
Rated CRR/PD 8 | ||||
Not collateralised | 189 | 6.2 | 807 | 4.4 |
Fully collateralised | 57 | 7.9 | 84 | 13.2 |
LTV ratio: | ||||
– less than 50% | 16 | 4.4 | 28 | 12.7 |
– 51% to 75% | 21 | 6.7 | 29 | 22.5 |
– 76% to 90% | 18 | 12.4 | 17 | 5.6 |
– 91% to 100% | 2 | 6.8 | 10 | 2.4 |
Partially collateralised (A): | 20 | 5.8 | 102 | 8.0 |
– collateral value on A | 3 | 29 | ||
Total | 266 | 6.5 | 993 | 5.5 |
Rated CRR/PD 9 to 10 | ||||
Not collateralised | 2,489 | 14.0 | 1,553 | 20.0 |
Fully collateralised | 571 | 4.3 | 819 | 3.0 |
LTV ratio: | ||||
– less than 50% | 143 | 3.5 | 142 | 4.2 |
– 51% to 75% | 276 | 6.0 | 562 | 1.1 |
– 76% to 90% | 83 | 0.9 | 69 | 11.5 |
– 91% to 100% | 69 | 3.7 | 46 | 9.2 |
Partially collateralised (B): | 245 | 25.7 | 200 | 39.0 |
– collateral value on B | 128 | 115 | ||
Total | 3,305 | 13.2 | 2,572 | 16.1 |
At 31 Dec | 3,571 | 12.7 | 3,565 | 13.1 |
50 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Gross carrying amount | Allowance for ECL | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
By portfolio | ||||||||
First lien residential mortgages | 96,757 | 28,200 | 546 | 125,503 | (10) | (113) | (62) | (185) |
– of which: interest only (including offset) | 14,979 | 3,637 | 90 | 18,706 | (2) | (37) | (10) | (49) |
Other personal lending | 9,988 | 2,841 | 294 | 13,123 | (102) | (458) | (127) | (687) |
– other | 5,892 | 1,591 | 198 | 7,681 | (56) | (187) | (73) | (316) |
– credit cards | 4,096 | 1,250 | 96 | 5,442 | (46) | (271) | (54) | (371) |
At 31 Dec 2022 | 106,745 | 31,041 | 840 | 138,626 | (112) | (571) | (189) | (872) |
Nominal amount | Allowance for ECL | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
At 31 Dec 2022 | 41,949 | 365 | 87 | 42,401 | (9) | — | — | (9) |
Gross carrying amount | Allowance for ECL | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
By portfolio | ||||||||
First lien residential mortgages | 115,464 | 1,927 | 686 | 118,077 | (20) | (42) | (101) | (163) |
– of which: interest only (including offset) | 17,371 | 1,189 | 71 | 18,631 | (3) | (16) | (18) | (37) |
Other personal lending | 11,440 | 1,434 | 367 | 13,241 | (102) | (311) | (191) | (604) |
– other | 6,199 | 778 | 245 | 7,222 | (52) | (118) | (115) | (285) |
– credit cards | 5,241 | 656 | 122 | 6,019 | (50) | (193) | (76) | (319) |
At 31 Dec 2021 | 126,904 | 3,361 | 1,053 | 131,318 | (122) | (353) | (292) | (767) |
Nominal amount | Allowance for ECL | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
At 31 Dec 2021 | 39,835 | 296 | 75 | 40,206 | (8) | (1) | — | (9) |
HSBC UK Bank plc Annual Report and Accounts 2022 | 51 |
£m | |
Expired interest-only mortgage loans1 | 111 |
Interest-only mortgage loans by maturity | |
– 2023 | 182 |
– 2024 | 178 |
– 2025 | 249 |
– 2026 | 318 |
– 2027–2031 | 2,450 |
– post 2031 | 8,507 |
At 31 Dec 2022 | 11,995 |
52 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Non-credit impaired | Credit impaired | |||||||||
Stage 1 | Stage 2 | Stage 3 | POCI | Total | ||||||
Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | Gross carrying/ nominal amount | Allowance for ECL | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
At 1 Jan 2022 | 166,739 | (130) | 3,657 | (354) | 1,128 | (292) | — | — | 171,524 | (776) |
Transfers of financial instruments | (28,575) | (62) | 28,428 | 90 | 147 | (28) | — | — | — | — |
– transfers from stage 1 to stage 2 | (37,592) | 119 | 37,592 | (119) | — | — | — | — | — | — |
– transfers from stage 2 to stage 1 | 9,060 | (177) | (9,060) | 177 | — | — | — | — | — | — |
– transfers to stage 3 | (76) | — | (414) | 87 | 490 | (87) | — | — | — | — |
– transfers from stage 3 | 33 | (4) | 310 | (55) | (343) | 59 | — | — | — | — |
Net remeasurement of ECL arising from transfer of stage | — | 142 | — | (137) | — | (1) | — | — | — | 4 |
New financial assets originated or purchased | 40,577 | (111) | — | — | — | — | — | — | 40,577 | (111) |
Changes to risk parameters – further lending/ repayments | (9,365) | 49 | 669 | (2) | 112 | 9 | — | — | (8,584) | 56 |
Change in risk parameters – credit quality | — | (35) | — | (164) | — | (137) | — | — | — | (336) |
Changes to models used for ECL calculation | — | (1) | — | (85) | — | 12 | — | — | — | (74) |
Asset derecognised (including final repayments) | (20,682) | 27 | (1,348) | 81 | (216) | 4 | — | — | (22,246) | 112 |
Assets written off | — | — | — | — | (244) | 244 | — | — | (244) | 244 |
At 31 Dec 2022 | 148,694 | (121) | 31,406 | (571) | 927 | (189) | — | — | 181,027 | (881) |
ECL release/(charge) for the period | 71 | (307) | (113) | — | (349) | |||||
Recoveries | 64 | |||||||||
Others | — | |||||||||
Total change in ECL for the period | (285) | |||||||||
At 1 Jan 2021 | 155,635 | (176) | 7,173 | (894) | 1,270 | (395) | — | — | 164,078 | (1,465) |
Transfers of financial instruments | 2,041 | (527) | (2,690) | 617 | 649 | (90) | — | — | — | — |
– transfers from stage 1 to stage 2 | (4,559) | 40 | 4,559 | (40) | — | — | — | — | — | — |
– transfers from stage 2 to stage 1 | 6,774 | (551) | (6,774) | 551 | — | — | — | — | — | — |
– transfers to stage 3 | (271) | 2 | (650) | 157 | 921 | (159) | — | — | — | — |
– transfers from stage 3 | 97 | (18) | 175 | (51) | (272) | 69 | — | — | — | — |
Net remeasurement of ECL arising from transfer of stage | — | 356 | — | (58) | — | — | — | — | — | 298 |
New financial assets originated or purchased | 32,731 | (55) | — | — | — | — | — | — | 32,731 | (55) |
Changes to risk parameters – further lending/ repayments | (5,447) | 72 | 758 | 72 | (210) | 18 | — | — | (4,899) | 162 |
Change in risk parameters – credit quality | — | 179 | — | (247) | — | (176) | — | — | — | (244) |
Changes to models used for ECL calculation | — | — | — | — | — | — | — | — | — | — |
Asset derecognised (including final repayments) | (18,221) | 21 | (1,584) | 156 | (236) | 6 | — | — | (20,041) | 183 |
Assets written off | — | — | — | — | (345) | 345 | — | — | (345) | 345 |
At 31 Dec 2021 | 166,739 | (130) | 3,657 | (354) | 1,128 | (292) | — | — | 171,524 | (776) |
ECL release/(charge) for the period | 573 | (77) | (152) | — | 344 | |||||
Recoveries | 88 | |||||||||
Others | (1) | |||||||||
Total change in ECL for the period | 431 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 53 |
2022 | 2021 | |||
Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | |
£m | % | £m | % | |
Stage 1 | ||||
Fully collateralised | 108,895 | — | 121,888 | — |
LTV ratio: | ||||
– less than 50% | 57,630 | — | 58,971 | — |
– 51% to 60% | 18,852 | — | 20,559 | — |
– 61% to 70% | 16,506 | — | 18,722 | — |
– 71% to 80% | 10,468 | — | 17,460 | — |
– 81% to 90% | 4,853 | — | 5,723 | — |
– 91% to 100% | 586 | — | 453 | — |
Partially collateralised (A): | 263 | — | 253 | — |
LTV ratio: | ||||
– 101% to 110% | 58 | — | 75 | — |
– 111% to 120% | 50 | — | 43 | — |
– greater than 120% | 155 | — | 135 | — |
– collateral value on A | 191 | 169 | ||
Total | 109,158 | — | 122,141 | — |
Stage 2 | ||||
Fully collateralised | 28,245 | 0.4 | 1,978 | 2.1 |
LTV ratio: | ||||
– less than 50% | 8,471 | 0.6 | 1,346 | 1.6 |
– 51% to 60% | 5,224 | 0.4 | 288 | 2.5 |
– 61% to 70% | 7,008 | 0.3 | 192 | 3.2 |
– 71% to 80% | 4,856 | 0.3 | 125 | 4.8 |
– 81% to 90% | 2,384 | 0.2 | 23 | 5.6 |
– 91% to 100% | 302 | 0.2 | 4 | 1.9 |
Partially collateralised (B): | 40 | 0.3 | 2 | 9.0 |
LTV ratio: | ||||
– 101% to 110% | 8 | 1.3 | 1 | 0.4 |
– 111% to 120% | 8 | — | — | — |
– greater than 120% | 24 | 0.1 | 1 | 11.1 |
– collateral value on B | 31 | 1 | ||
Total | 28,285 | 0.4 | 1,980 | 2.1 |
Stage 3 | ||||
Fully collateralised | 551 | 11.0 | 695 | 14.3 |
LTV ratio: | ||||
– less than 50% | 362 | 9.2 | 463 | 13.0 |
– 51% to 60% | 91 | 9.7 | 92 | 14.0 |
– 61% to 70% | 40 | 15.9 | 58 | 16.2 |
– 71% to 80% | 27 | 19.7 | 50 | 19.1 |
– 81% to 90% | 9 | 24.5 | 15 | 26.9 |
– 91% to 100% | 22 | 22.5 | 17 | 18.6 |
Partially collateralised (C): | 10 | 6.2 | 5 | 26.3 |
LTV ratio: | ||||
– 101% to 110% | 9 | 3.6 | 3 | 20.7 |
– 111% to 120% | — | — | — | — |
– greater than 120% | 1 | 11.9 | 2 | 33.4 |
– collateral value on C | 3 | 4 | ||
Total | 561 | 10.9 | 700 | 14.4 |
At 31 Dec | 138,004 | 0.1 | 124,821 | 0.1 |
54 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 55 |
56 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Risk types | Non-Trading risk | |||
•Interest rates •Credit spreads | ||||
Risk measure | Value at risk | Sensitivity | Stress testing | |||
HSBC UK Bank plc Annual Report and Accounts 2022 | 57 |
Credit spread | Interest Rates | Portfolio Diversifi- cation1 | Total2 | |
£m | £m | £m | £m | |
Balance at 31 Dec 2022 | 1.4 | 42.1 | (1.0) | 42.5 |
Average | 1.4 | 38.2 | (0.9) | 38.7 |
Maximum | 2.1 | 83.4 | 84.3 | |
Minimum | 0.9 | 24.5 | 24.3 | |
Balance at 31 Dec 2021 | 1.9 | 24.5 | (2.1) | 24.3 |
Average | 1.8 | 26.7 | (1.2) | 27.3 |
Maximum | 2.6 | 34.1 | 35.6 | |
Minimum | 1.5 | 16.6 | 16.6 |
58 | HSBC UK Bank plc Annual Report and Accounts 2022 |
At 31 Dec | ||
2022 | 2021 | |
Available capital (£m) | ||
Common equity tier 1 capital | 12,519 | 12,813 |
Tier 1 capital | 14,771 | 15,067 |
Total regulatory capital | 17,847 | 18,067 |
Risk-weighted assets (£m) | ||
Credit risk | 80,740 | 72,817 |
Counterparty credit risk | 204 | 129 |
Market risk | 101 | 170 |
Operational risk | 11,368 | 10,607 |
Total risk-weighted assets | 92,413 | 83,723 |
Capital ratios (%) | ||
Common equity tier 1 | 13.5 | 15.3 |
Total tier 1 | 16.0 | 18.0 |
Total capital | 19.3 | 21.6 |
Leverage ratio | ||
Total leverage ratio exposure measure (£m) | 251,500 | 358,221 |
Leverage ratio (%) | 5.9 | 4.2 |
At | |||
31 Dec | 31 Dec | ||
2022 | 2021 | ||
Ref* | £m | £m | |
CET1 capital: instruments and reserves | |||
1 | Capital instruments and the related share premium accounts | 9,015 | 9,015 |
– ordinary shares | 9,015 | 9,015 | |
2 | Retained earnings | 12,078 | 11,463 |
3 | Accumulated other comprehensive income (and other reserves) | (2,556) | (544) |
5a | Independently reviewed interim net profits net of any foreseeable charge or dividend | 896 | 1,125 |
6 | CET1 capital before regulatory adjustments | 19,433 | 21,059 |
28 | Total regulatory adjustments to common equity tier 1 | (6,914) | (8,246) |
29 | CET1 capital | 12,519 | 12,813 |
36 | Additional tier 1 capital before regulatory adjustments | 2,252 | 2,254 |
44 | Additional tier 1 capital | 2,252 | 2,254 |
45 | Tier 1 Capital (T1 = CET1 + AT1) | 14,771 | 15,067 |
51 | Tier 2 capital before regulatory adjustments | 3,076 | 3,000 |
58 | Tier 2 capital | 3,076 | 3,000 |
59 | Total capital | 17,847 | 18,067 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 59 |
Credit risk, counterparty credit risk and operational risk | Market risk | Total RWAs | ||||
WPB | CMB | GBM | Corporate Centre | |||
£m | £m | £m | £m | £m | £m | |
RWAs at 1 Jan 2022 | 24,705 | 56,918 | 367 | 1,563 | 170 | 83,723 |
Asset size | 609 | 3,831 | 140 | 703 | (69) | 5,214 |
Asset quality | (432) | (2,402) | — | 90 | — | (2,744) |
Methodology and policy | 8,071 | (1,280) | 1 | (572) | — | 6,220 |
– internal updates | (34) | (920) | 1 | (82) | — | (1,035) |
– external updates – regulatory | 8,105 | (360) | — | (490) | — | 7,255 |
Total RWA movement | 8,248 | 149 | 141 | 221 | (69) | 8,690 |
RWAs at 31 Dec 2022 | 32,953 | 57,067 | 508 | 1,784 | 101 | 92,413 |
Average for | ||
2022 | 2021 | |
LCR (%) | 226 | 222 |
HQLA (£m) | 110,722 | 103,943 |
Net outflows (£m) | 48,946 | 46,807 |
NSFR (%) | 164 | 176 |
60 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Liquidity pool | Cash | Level 1 | Level 2 | |
£m | £m | £m | £m | |
Cash and balance at central bank | 97,199 | 97,199 | — | — |
Central and local government bonds | 11,417 | — | 10,850 | 567 |
Regional government PSE | 218 | — | 218 | — |
International organisation and MDBs | 957 | — | 957 | — |
Covered bonds | 930 | — | 261 | 669 |
Other | 1 | — | — | 1 |
Average Total for 2022 | 110,722 | 97,199 | 12,286 | 1,237 |
Average Total for 2021 | 103,943 | 93,783 | 9,523 | 637 |
£ | $ | € | Other | Total | |
£m | £m | £m | £m | £m | |
Average Liquidity Pool for 2022 | 103,757 | 4,453 | 1,341 | 1,171 | 110,722 |
Average Liquidity Pool for 2021 | 97,012 | 4,732 | 1,341 | 858 | 103,943 |
2022 | 2021 | 2022 | 2021 | |||
£m | £m | £m | £m | |||
Sources | Uses | |||||
Customer accounts | 281,095 | 281,870 | Loans and advances to customers | 204,143 | 195,526 | |
Deposits by banks | 10,721 | 11,180 | Loans and advances to banks | 6,357 | 1,914 | |
Repurchase agreements – non-trading | 9,333 | 10,438 | Reverse repurchase agreements – non-trading | 7,406 | 7,988 | |
Debt securities in issue | 1,299 | 900 | Cash collateral, margin and settlement accounts | 231 | 294 | |
Cash collateral, margin and settlement accounts | 315 | 2 | ||||
Subordinated liabilities | 12,349 | 12,487 | Financial investments | 16,092 | 14,377 | |
Total equity | 22,226 | 23,805 | Cash and balances with Central banks | 94,407 | 112,478 | |
Other balance sheet liabilities | 5,103 | 5,381 | Other balance sheet assets | 13,805 | 13,486 | |
At 31 Dec | 342,441 | 346,063 | At 31 Dec | 342,441 | 346,063 |
Risk types | Trading risk |
•Foreign exchange •Interest rates | |
Risk measure | VaR | Sensitivity | Stress testing |
HSBC UK Bank plc Annual Report and Accounts 2022 | 61 |
62 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 63 |
64 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 65 |
66 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 67 |
68 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 69 |
Page | |
Stakeholder Engagement | Stakeholder engagement and Section 172 on page 8 |
Employee Engagement | Stakeholder engagement and Section 172 on page 8 |
Employee Health and Safety | Strategic report 'Supporting our employees' on page 6 |
Diversity & Inclusion | Strategic report 'Supporting our employees' on page 6 and Corporate Governance Report on page 65 |
Results and Dividends | Financial summary on pages 10 to 14 and Note 6 of the Financial statements on page 102 |
Segmental Analysis | Strategic report on pages 11 to 13 and Note 1.1(f) of the Financial statements on page 87 |
Future Developments | Strategic report 'Our strategy' on pages 5 to 7 |
Share Capital | Note 23 of the Financial statements on page 119 |
Risk Factors | Report of the Directors on pages 17 to 71 |
Directors' Emoluments | Note 3 of the Financial statements on page 99 |
Opportunities and Threats | Strategic report on pages 5 to 7 and Risk report on pages 17 to 64 |
Directors | Corporate Governance Report on page 65 |
Subsidiaries and Joint Ventures | Note 29 of the Financial statements on pages 124 to 125 |
Director Indemnities | Corporate Governance Report on page 65 |
Post Balance Sheet Events | Note 28 of the Financial statements page 124 |
70 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 71 |
72 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Key audit matter | Matters discussed with the Audit Committee |
Determining expected credit losses ('ECL') involves management judgement and is subject to a high degree of estimation uncertainty. Management makes various assumptions when estimating ECL. The significant assumptions that we focused on in our audit included those with greater levels of management judgement and for which variations had the most significant impact on ECL. These included: •Assumptions made in determining forward looking economic scenarios and their probability weightings (specifically the central and downside scenarios given these have the most material impact on ECL); and •Estimating expected cash flows and collateral valuations to assess the ECL of credit impaired wholesale exposures. Models are also important to the determination of ECL and during the year the retail probability of default (‘PD’) models were redeveloped. The level of estimation uncertainty and judgement has remained high during 2022 as a result of the uncertain macroeconomic and geopolitical environment, high levels of inflation and a rising interest rate environment. This leads to uncertainty around judgements made in determining the severity and probability weighting of macroeconomic variable forecasts across the different economic scenarios used in ECL models, and in the estimation of expected cash flows and collateral valuations on credit impaired stage 3 exposures. | We held discussions with the Audit Committee covering governance and controls over ECL. We discussed a number of areas including: •The severity of macroeconomic scenarios, and their related probability weightings; •The valuation of credit impaired exposures, with focus on assumptions made in the recoverability of significant wholesale exposures; •The redevelopment of retail probability of default models; and •The disclosures made in relation to ECL. |
How our audit addressed the key audit matter | |
We assessed the design and effectiveness of controls and governance over the estimation of ECLs. We observed management’s review and challenge governance forums for (1) the determination of macroeconomic scenarios and their probability weightings, and (2) the assessment of ECL for Retail and Wholesale portfolios, including the assessment of ECL calculated on the largest credit-impaired stage 3 exposures. We also tested controls over: •The input of critical data elements into source systems and the flow and transformation of critical data elements from source systems to impairment models and management judgemental adjustments; •Credit reviews that determine credit risk ratings (CRRs) for wholesale customers; •Independent model validation and monitoring; •The calculation and approval of management judgemental adjustments to modelled outcomes; •The identification of credit-impairment triggers; and •The calculation and approval of significant individual impairments relating to the largest wholesale credit-impaired exposures. We involved our economic experts in assessing the significant assumptions made in determining the severity and probability weighting of macroeconomic forecasts, with particular focus on the downside and consensus central scenarios. These assessments considered the sensitivity of ECLs to variations in the severity and probability weighting of macroeconomic variables for different economic scenarios. We involved our modelling specialists in assessing the appropriateness of the significant assumptions and methodologies used for models. We independently reperformed the calculations for a sample of those models and management judgemental adjustments. We further considered whether the judgements made in selecting the significant assumptions would give rise to indicators of possible management bias. We involved our valuation specialists to assist in testing the valuation of collateral for a sample of wholesale credit-impaired exposures. In addition, we performed substantive testing over: •The compliance of ECL methodologies and assumptions with the requirements of IFRS 9; •The assumptions and methodology underpinning the redeveloped retail PD models and independently replicated these models; •The appropriateness and application of the quantitative and qualitative criteria used to assess significant increases in credit risk; •A sample of critical data elements used in the year end ECL calculation; •A sample of CRRs applied to wholesale exposures; and •A sample of calculations made in estimating expected cash flows for certain credit-impaired wholesale exposures. We evaluated and tested the credit risk disclosures made in the financial statements. | |
Relevant references in the Annual Report and Accounts 2022 | |
Note 1: Basis of preparation and significant accounting policies 1.2(g) Impairment of amortised cost and FVOCI financial assets, page 90. Summary of credit risk, page 29. Measurement uncertainty and sensitivity analysis of ECL estimates, page 33. | |
HSBC UK Bank plc Annual Report and Accounts 2022 | 73 |
Key audit matter | Matters discussed with the Audit Committee |
The defined benefit pension scheme is in a net surplus position as at 31 December 2022 consistent with the prior year. Defined benefit obligation (‘DBO’) The valuation of the DBO is dependent on a number of actuarial assumptions. We consider the discount rate, inflation rate and mortality rates to be the most significant assumptions used in determining the DBO. Management uses an actuarial expert to determine the valuation of the DBO using a number of market-based inputs and other financial and demographic assumptions. Changes in these assumptions can have a material impact on the valuation due to the long duration of the pension liabilities and as such the valuation is considered to be highly judgemental. Pension Assets The pension scheme asset consists of various classes of pension assets, some of which are more complex to value and therefore higher risk. These include, infrastructure loan notes, directly held property and some more complex pooled investment vehicles (‘PIVs’). Valuation experts are used to determine the value of certain classes of complex pension assets including the valuation of infrastructure loan notes and directly held property. The valuation of complex pooled investment vehicles is obtained from the investment managers. The estimation of fair value for more complex pension assets is subjective and relies on valuation models as well as unobservable inputs. Therefore, significant judgement is required to estimate fair values. | We discussed the results of the work performed by our team (including actuarial experts). This included how the key assumptions compared to our independently compiled expected ranges and the assessment of the modelling methodology adopted by management's actuarial expert. We discussed with the Audit Committee the changes in methodology including the rounding convention for financial assumptions and updates to the mortality assumptions to factor in the impact of Covid-19. For the complex scheme assets, our discussions included: •The results of audit work which included our assessment of the valuation methodology adopted by management's experts when valuing, infrastructure loan notes and the property portfolios; and •The results of the additional audit procedures which we performed to corroborate the reasonableness of the valuations independently obtained from the PIV investment managers. |
How our audit addressed the key audit matter | |
We tested controls over: •The determination of the actuarial assumptions used in calculating the valuation of the DBO and the approval of those assumptions by management; and •The valuation of plan assets. Our substantive testing over the defined benefit obligation included the following: •Evaluated the objectivity and competence of management’s actuarial expert involved in the valuation of the DBO; •Engaged our actuarial experts to assess the reasonableness of the judgements made by management and management’s actuarial expert in determining the key financial and demographic assumptions used in the calculation of the DBO; •Assessed the reasonableness of the assumptions using independently compiled expected ranges based on market observable indices and our market experience; and •Evaluated the appropriateness of the pension disclosures within the financial statements, including the disclosure regarding the sensitivity of assumptions by comparing them to the output of our audit work. Our substantive testing over pension assets included the following: •Obtained independent confirmations to support the investment valuations from the investment managers for material investment balances; •Engaged our valuation experts to independently review a sample of more complex investments including directly held property and infrastructure loan notes; and •In respect of more complex pooled investment vehicles, we performed one or more of the following additional procedures: –For fair values based on net asset valuation statements from fund managers, we inspected these statements; –Agreed valuation statements from fund managers to audited fund financial statements where they were available; –Reviewed the investment managers’ controls reports in respect of valuation controls; –Reviewed transaction prices close to the year end for the fund where they were available. | |
Relevant references in the Annual Report and Accounts 2022 | |
Note 1: Basis of preparation and significant accounting policies 1.2(h) Employee compensation and benefits, page 93. Note 3: Employee compensation and benefit, page 95. | |
74 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Financial statements - group | Financial statements - parent company | |
Overall materiality | £202m (2021: £106m) | £200m (2021: £97m) |
How we determined it | 5% of adjusted profit before tax | 5% of adjusted profit before tax |
Rationale for benchmark applied | Adjusted profit before tax is the primary measure used by shareholders in assessing the performance of the group and the parent company and removes the impact of significant items that distort year-on-year comparisons. In determining overall materiality, we have made adjustments, including for the impact of certain customer redress and restructuring programmes as they are large items unrelated to the underlying performance of the group and parent company. The benchmark used in 2021 was a 4-year average of adjusted profit reflecting the significant impact that Covid-19 had on profitability. | |
HSBC UK Bank plc Annual Report and Accounts 2022 | 75 |
76 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 77 |
Page | ||
Consolidated income statement | 79 | |
Consolidated statement of comprehensive income | 80 | |
Consolidated balance sheet | 81 | |
Consolidated statement of cash flows | 82 | |
Consolidated statement of changes in equity | 83 | |
HSBC UK Bank plc balance sheet | 84 | |
HSBC UK Bank plc statement of cash flows | 85 | |
HSBC UK Bank plc statement of changes in equity | 86 | |
Page | ||
1 | Basis of preparation and significant accounting policies | 87 |
2 | Net fee income | 95 |
3 | Employee compensation and benefits | 95 |
4 | Auditors’ remuneration | 100 |
5 | Tax | 100 |
6 | Dividends | 102 |
7 | Fair values of financial instruments carried at fair value | 102 |
8 | Fair values of financial instruments not carried at fair value | 103 |
9 | Derivatives | 104 |
10 | Financial investments | 106 |
11 | Assets pledged, collateral received and assets transferred | 107 |
12 | Interests in joint ventures | 108 |
13 | Investments in subsidiaries | 108 |
14 | Structured entities | 108 |
15 | Goodwill and intangible assets | 109 |
16 | Prepayments, accrued income and other assets | 110 |
17 | Debt securities in issue | 110 |
18 | Accruals, deferred income and other liabilities | 110 |
19 | Provisions | 111 |
20 | Subordinated liabilities | 112 |
21 | Maturity analysis of assets, liabilities and off-balance sheet commitments | 113 |
22 | Offsetting of financial assets and financial liabilities | 118 |
23 | Called up share capital and other equity instruments | 119 |
24 | Contingent liabilities, contractual commitments, guarantees and contingent assets | 120 |
25 | Finance lease receivables | 121 |
26 | Legal proceedings and regulatory matters | 121 |
27 | Related party transactions | 121 |
28 | Events after the balance sheet date | 124 |
29 | HSBC UK Bank plc’s subsidiaries and joint ventures | 124 |
78 | HSBC UK Bank plc Annual Report and Accounts 2022 |
2022 | 2021 | ||
Notes | £m | £m | |
Net interest income | |||
– interest income1,2,3 | |||
– interest expense | ( | ( | |
Net fee income | 2 | ||
– fee income | |||
– fee expense | ( | ( | |
Net income from financial instruments held for trading or managed on a fair value basis | |||
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | |||
Gains less losses from financial investments | |||
Other operating income | |||
Net operating income before change in expected credit losses and other credit impairment charges | |||
Change in expected credit losses and other credit impairment charges | ( | ||
Net operating income | |||
Employee compensation and benefits4 | 3 | ( | ( |
General and administrative expenses4 | ( | ( | |
Depreciation and impairment of property, plant and equipment and right-of-use assets | ( | ( | |
Amortisation and impairment of intangible assets | ( | ( | |
Total operating expenses | ( | ( | |
Operating profit | |||
Profit before tax | |||
Tax expense | 5 | ( | ( |
Profit for the year | |||
Attributable to: | |||
– ordinary shareholders of the parent company | |||
– non-controlling interests | |||
Profit for the year | |||
HSBC UK Bank plc Annual Report and Accounts 2022 | 79 |
2022 | 2021 | |
£m | £m | |
Profit for the year | ||
Other comprehensive income/(expense) | ||
Items that will be reclassified subsequently to profit or loss when specific conditions are met: | ||
Debt instruments at fair value through other comprehensive income | ( | ( |
– fair value losses | ( | ( |
– fair value gains transferred to the income statement on disposal | ( | ( |
– expected credit recoveries recognised in the income statement | ( | ( |
– income taxes | ||
Cash flow hedges | ( | ( |
– fair value losses | ( | ( |
– fair value (gains)/losses reclassified to the income statement | ( | |
– income taxes | ||
Exchange differences | ( | ( |
– other exchange differences | ( | ( |
Items that will not be reclassified subsequently to profit or loss: | ||
Remeasurement of defined benefit asset/liability | ( | ( |
– before income taxes | ( | ( |
– income taxes1 | ( | |
Other comprehensive income/(expense) for the year, net of tax | ( | ( |
Total comprehensive income for the year | ||
Attributable to: | ||
– ordinary shareholders of the parent company | ||
– non-controlling interests | ||
Total comprehensive income for the year | ||
80 | HSBC UK Bank plc Annual Report and Accounts 2022 |
2022 | 2021 | ||
Notes | £m | £m | |
Assets | |||
Cash and balances at central banks | |||
Items in the course of collection from other banks | |||
Financial assets mandatorily measured at fair value through profit or loss | 7 | ||
Derivatives | 9 | ||
Loans and advances to banks | |||
Loans and advances to customers | |||
Reverse repurchase agreements – non-trading | |||
Financial investments | 10 | ||
Prepayments, accrued income and other assets | 16 | ||
Interests in joint ventures | 12 | ||
Goodwill and intangible assets | 15 | ||
Total assets | |||
Liabilities and equity | |||
Liabilities | |||
Deposits by banks | |||
Customer accounts | |||
Repurchase agreements – non-trading | |||
Items in the course of transmission to other banks | |||
Derivatives | 9 | ||
Debt securities in issue | 17 | ||
Accruals, deferred income and other liabilities | 18 | ||
Current tax liabilities | |||
Provisions | 19 | ||
Deferred tax liabilities | 5 | ||
Subordinated liabilities | 20 | ||
Total liabilities | |||
Equity | |||
Called up share capital | 23 | ||
Share premium account | 23 | ||
Other equity instruments | 23 | ||
Other reserves | |||
Retained earnings | |||
Total shareholders’ equity | |||
Non-controlling interests | |||
Total equity | |||
Total liabilities and equity | |||
HSBC UK Bank plc Annual Report and Accounts 2022 | 81 |
2022 | 2021 | |
£m | £m | |
Profit before tax | ||
Adjustments for non-cash items: | ||
Depreciation, amortisation and impairment | ||
Net gain from investing activities | ( | ( |
Change in expected credit losses gross of recoveries and other credit impairment charges | ( | |
Provisions including pensions | ( | |
Share-based payment expense | ||
Other non-cash items included in profit before tax | ( | ( |
Elimination of exchange differences1 | ( | |
Changes in operating assets and liabilities | ||
Change in net trading securities and derivatives | ( | ( |
Change in loans and advances to banks and customers | ( | ( |
Change in reverse repurchase agreements – non-trading | ( | |
Change in financial assets mandatorily measured at fair value | ( | ( |
Change in other assets | ( | |
Change in deposits by banks and customer accounts | ( | |
Change in repurchase agreements – non-trading | ( | |
Change in debt securities in issue | ||
Change in other liabilities | ( | |
Contributions paid to defined benefit plans | ( | ( |
Tax paid | ( | |
Net cash from operating activities | ( | |
Purchase of financial investments | ( | ( |
Proceeds from the sale and maturity of financial investments | ||
Net cash flows from the purchase and sale of property, plant and equipment | ( | ( |
Net investment in intangible assets | ( | ( |
Net cash from investing activities | ( | |
Subordinated loan capital issued2 | ||
Subordinated loan capital repaid2 | ( | |
Dividends paid to shareholders of the parent company and non-controlling interests | ( | ( |
Net cash from financing activities | ( | |
Net increase in cash and cash equivalents | ( | |
Cash and cash equivalents at 1 Jan | ||
Exchange differences in respect of cash and cash equivalents | ( | |
Cash and cash equivalents at 31 Dec3 | ||
Cash and cash equivalents comprise: | ||
– cash and balances at central banks | ||
– items in the course of collection from other banks | ||
– loans and advances to banks of one month or less | ||
– reverse repurchase agreements with banks of one month or less | ||
– treasury bills, other bills and certificates of deposit less than three months | ||
– cash collateral and net settlement accounts | ||
– less: items in the course of transmission to other banks | ( | ( |
Cash and cash equivalents at 31 Dec3 | ||
82 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Other reserves | |||||||||
Called up share capital and share premium | Other equity instru- ments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Group re- organisa- tion reserve2 | Total share- holders’ equity | Non- controlling interests | Total equity | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | |
At 1 Jan 2022 | ( | ||||||||
Profit for the year | — | — | — | — | — | ||||
Other comprehensive income (net of tax) | — | — | ( | ( | ( | — | ( | — | ( |
– debt instruments at fair value through other comprehensive income | — | — | — | ( | — | — | ( | — | ( |
– cash flow hedges | — | — | — | — | ( | — | ( | — | ( |
– remeasurement of defined benefit asset/ liability | — | — | ( | — | — | — | ( | — | ( |
– exchange differences | — | — | — | ( | — | — | ( | — | ( |
Total comprehensive income for the year | — | — | ( | ( | — | ||||
Dividends to shareholders | — | — | ( | — | — | — | ( | ( | ( |
Other movements1 | — | — | — | — | — | — | |||
At 31 Dec 2022 | ( | ( | |||||||
At 1 Jan 2021 | |||||||||
Profit for the year | — | — | — | — | — | ||||
Other comprehensive income (net of tax) | — | — | ( | ( | ( | — | ( | — | ( |
– debt instruments at fair value through other comprehensive income | — | — | — | ( | — | — | ( | — | ( |
– cash flow hedges | — | — | — | — | ( | — | ( | — | ( |
– remeasurement of defined benefit asset/ liability | — | — | ( | — | — | — | ( | — | ( |
– exchange differences | — | — | — | ( | — | — | ( | — | ( |
Total comprehensive income for the year | — | — | ( | ( | — | ||||
Dividends to shareholders | — | — | ( | — | — | — | ( | ( | ( |
Other movements1 | — | — | — | — | — | — | |||
At 31 Dec 2021 | ( | ||||||||
HSBC UK Bank plc Annual Report and Accounts 2022 | 83 |
2022 | 2021 | ||
Notes | £m | £m | |
Assets | |||
Cash and balances at central banks | 94,407 | 112,477 | |
Items in the course of collection from other banks | 154 | 132 | |
Financial assets mandatorily measured at fair value through profit or loss | 7 | 108 | 79 |
Derivatives | 9 | 546 | 64 |
Loans and advances to banks | 9,304 | 4,405 | |
Loans and advances to customers | 199,666 | 191,208 | |
Reverse repurchase agreements – non-trading | 7,406 | 7,988 | |
Financial investments | 10 | 16,092 | 14,377 |
Investments in subsidiaries | 13 | 1,010 | 1,014 |
Prepayments, accrued income and other assets | 16 | 8,527 | 8,861 |
Interests in joint ventures | 12 | 5 | 5 |
Goodwill and intangible assets | 15 | 1,185 | 1,128 |
Total assets | 338,410 | 341,738 | |
Liabilities and equity | |||
Liabilities | |||
Deposits by banks | 11,619 | 12,095 | |
Customer accounts | 279,575 | 280,023 | |
Repurchase agreements – non-trading | 9,333 | 10,438 | |
Items in the course of transmission to other banks | 304 | 148 | |
Derivatives | 9 | 304 | 292 |
Debt securities in issue | 17 | 1,091 | 675 |
Accruals, deferred income and other liabilities | 18 | 3,330 | 1,514 |
Current tax liabilities | 135 | 760 | |
Provisions | 19 | 386 | 442 |
Deferred tax liabilities | 5 | 690 | 2,001 |
Subordinated liabilities | 20 | 12,349 | 12,487 |
Total liabilities | 319,116 | 320,875 | |
Equity | |||
Called up share capital | 23 | — | — |
Share premium account | 23 | 9,015 | 9,015 |
Other equity instruments | 23 | 2,196 | 2,196 |
Other reserves | 3,678 | 5,214 | |
Retained earnings | 4,405 | 4,438 | |
Total equity | 19,294 | 20,863 | |
Total liabilities and equity | 338,410 | 341,738 | |
84 | HSBC UK Bank plc Annual Report and Accounts 2022 |
2022 | 2021 | |
£m | £m | |
Profit before tax | 3,599 | 3,265 |
Adjustments for non-cash items: | ||
Depreciation, amortisation and impairment | 473 | 397 |
Net gain from investing activities | (37) | (101) |
Change in expected credit losses gross of recoveries and other credit impairment charges | 457 | (801) |
Provisions including pensions | (93) | 114 |
Share-based payment expense | 16 | 15 |
Other non-cash items included in profit before tax | (204) | (30) |
Elimination of exchange differences1 | 1,032 | (33) |
Changes in operating assets and liabilities | ||
Change in net trading securities and derivatives | (2,174) | (97) |
Change in loans and advances to banks and customers | (9,130) | (4,163) |
Change in reverse repurchase agreements – non-trading | 894 | (5,503) |
Change in financial assets mandatorily measured at fair value | (29) | (53) |
Change in other assets | (2,188) | 693 |
Change in deposits by banks and customer accounts | (924) | 33,604 |
Change in repurchase agreements – non-trading | (1,104) | 4,288 |
Change in debt securities in issue | 416 | 34 |
Change in other liabilities | 1,013 | (1,202) |
Contributions paid to defined benefit plans | (21) | (195) |
Tax paid | (1,460) | 58 |
Net cash from operating activities | (9,464) | 30,290 |
Purchase of financial investments | (10,386) | (12,468) |
Proceeds from the sale and maturity of financial investments | 8,571 | 17,000 |
Net cash flows from the purchase and sale of property, plant and equipment | (64) | (44) |
Net investment in intangible assets | (375) | (343) |
Net cash from investing activities | (2,254) | 4,145 |
Subordinated loan capital issued2 | — | 4,978 |
Subordinated loan capital repaid2 | — | (2,000) |
Dividends paid to shareholders of the parent company and non-controlling interests | (1,929) | (747) |
Net cash from financing activities | (1,929) | 2,231 |
Net increase in cash and cash equivalents | (13,647) | 36,666 |
Cash and cash equivalents at 1 Jan | 114,114 | 77,454 |
Exchange differences in respect of cash and cash equivalents | 49 | (6) |
Cash and cash equivalents at 31 Dec3 | 100,516 | 114,114 |
Cash and cash equivalents comprise: | ||
– cash and balances at central banks | 94,407 | 112,477 |
– items in the course of collection from other banks | 154 | 132 |
– loans and advances to banks of one month or less | 5,677 | 1,002 |
– reverse repurchase agreements with banks of one month or less | 312 | — |
– treasury bills, other bills and certificates of deposit less than three months | 268 | 475 |
– cash collateral and net settlement accounts | 2 | 176 |
– less: items in the course of transmission to other banks | (304) | (148) |
Cash and cash equivalents at 31 Dec3 | 100,516 | 114,114 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 85 |
Other reserves | |||||||
Called up share capital and share premium | Other equity instruments | Retained earnings | Financial assets at FVOCI reserve | Cash flow hedging reserve | Group re- organisation2 reserve | Total share- holders’ equity | |
£m | £m | £m | £m | £m | £m | £m | |
At 1 Jan 2022 | 9,015 | 2,196 | 4,438 | 56 | (90) | 5,248 | 20,863 |
Profit for the year | — | — | 2,882 | — | — | — | 2,882 |
Other comprehensive expense (net of tax) | — | — | (1,023) | (302) | (1,234) | — | (2,559) |
– debt instruments at fair value through other comprehensive income | — | — | — | (300) | — | — | (300) |
– cash flow hedges | — | — | — | — | (1,234) | — | (1,234) |
– remeasurement of defined benefit asset/liability | — | — | (1,023) | — | — | — | (1,023) |
– exchange differences | — | — | — | (2) | — | — | (2) |
Total comprehensive income for the year | — | — | 1,859 | (302) | (1,234) | — | 323 |
Dividends to shareholders | — | — | (1,929) | — | — | — | (1,929) |
Other movements1 | — | — | 37 | — | — | — | 37 |
At 31 Dec 2022 | 9,015 | 2,196 | 4,405 | (246) | (1,324) | 5,248 | 19,294 |
At 1 Jan 2021 | 9,015 | 2,196 | 3,473 | 146 | 1 | 5,248 | 20,079 |
Profit for the year | — | — | 2,201 | — | — | — | 2,201 |
Other comprehensive income (net of tax) | — | — | (510) | (90) | (91) | — | (691) |
– debt instruments at fair value through other comprehensive income | — | — | — | (89) | — | — | (89) |
– cash flow hedges | — | — | — | — | (91) | — | (91) |
– remeasurement of defined benefit asset/liability | — | — | (510) | — | — | — | (510) |
– exchange differences | — | — | — | (1) | — | — | (1) |
Total comprehensive income for the year | — | — | 1,691 | (90) | (91) | — | 1,510 |
Dividends to shareholders | — | — | (747) | — | — | — | (747) |
Other movements1 | — | — | 21 | — | — | — | 21 |
At 31 Dec 2021 | 9,015 | 2,196 | 4,438 | 56 | (90) | 5,248 | 20,863 |
86 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 87 |
The review of goodwill for impairment reflects management’s best estimate of the future cash flows of the CGUs and the rates used to discount these cash flows, both of which are subject to uncertain factors as follows: | |
Judgements | Estimates |
•The accuracy of forecast cash flows is subject to a high degree of uncertainty in volatile market conditions. Where such circumstances are determined to exist, management re-tests goodwill for impairment more frequently than once a year when indicators of impairment exist. This ensures that the assumptions on which the cash flow forecasts are based continue to reflect current market conditions and management’s best estimate of future business prospects. | •The future cash flows of the CGUs are sensitive to the cash flows projected for the periods for which detailed forecasts are available and to assumptions regarding the long-term pattern of sustainable cash flows thereafter. Forecasts are compared with actual performance and verifiable economic data, but they reflect management’s view of future business prospects at the time of the assessment. •The rates used to discount future expected cash flows can have a significant effect on their valuation, and are based on the costs of equity assigned to individual CGUs. The cost of equity percentage is generally derived from a capital asset pricing model and the market implied cost of equity, which incorporates inputs reflecting a number of financial and economic variables, including the risk-free interest rate and a premium for the risk of the business being evaluated. These variables are subject to fluctuations in external market rates and economic conditions beyond management’s control. •Key assumptions used in estimating goodwill impairment are described in Note 15. |
88 | HSBC UK Bank plc Annual Report and Accounts 2022 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 89 |
90 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Origination CRR | Significance trigger – PD that increases by |
0.1-1.2 | 15 bps |
2.1-3.3 | 30 bps |
Origination CRR | Additional significance criteria – Number of CRR grade notches deterioration required to identify as significant credit deterioration (stage 2) (> or equal to) |
0.1 | 5 notches |
1.1-4.2 | 4 notches |
4.3-5.1 | 3 notches |
5.2-7.1 | 2 notches |
7.2-8.2 | 1 notch |
8.3 | 0 notch |
HSBC UK Bank plc Annual Report and Accounts 2022 | 91 |
Model | Regulatory capital | IFRS 9 |
PD | Through the cycle (represents long-run average PD throughout a full economic cycle). The definition of default includes a backstop of 90+ days past due, although this has been modified to 180+ days past due for some portfolios, particularly UK and US mortgages. | Point in time (based on current conditions, adjusted to take into account estimates of future conditions that will impact PD). Default backstop of 90+ days past due for all portfolios. |
EAD | Cannot be lower than current balance. | Amortisation captured for term products. |
LGD | Downturn LGD (consistent losses expected to be suffered during a severe but plausible economic downturn). Regulatory floors may apply to mitigate risk of underestimating downturn LGD due to lack of historical data. Discounted using cost of capital. All collection costs included. | Expected LGD (based on estimate of loss given default including the expected impact of future economic conditions such as changes in value of collateral). No floors. Discounted using the original effective interest rate of the loan. Only costs associated with obtaining/selling collateral included. |
Other | Discounted back from point of default to balance sheet date. |
92 | HSBC UK Bank plc Annual Report and Accounts 2022 |
The calculation of the group’s ECL under IFRS 9 requires the group to make a number of judgements, assumptions and estimates. The most significant are set out below: | |
Judgements | Estimates |
•Defining what is considered to be a significant increase in credit risk. •Determining the lifetime and point of initial recognition of overdrafts and credit cards. •Selecting and calibrating the PD, LGD and EAD models, which support the calculations, including making reasonable and supportable judgements about how models react to current and future economic conditions. •Selecting model inputs and economic forecasts, including determining whether sufficient and appropriately weighted economic forecasts are incorporated to calculate unbiased expected loss. •Making management judgemental adjustments to account for late breaking events, model and data limitations and deficiencies, and expert credit judgements. | •The section ‘Measurement uncertainty and sensitivity analysis of ECL estimates’, marked as audited on pages 33 to 37, sets out the assumptions used in determining ECL, and provides an indication of the sensitivity of the result to the application of different weightings being applied to different economic assumptions. |
The most significant critical accounting estimates relate to the determination of key assumptions applied in calculating the defined benefit pension obligation. | |
Judgements | Estimates |
•A range of assumptions could be applied, and different assumptions could significantly alter the defined benefit obligation and the amounts recognised in profit or loss or OCI. •The calculation of the defined benefit pension obligation includes assumptions with regard to the discount rate, inflation rate, pension payments and deferred pensions, pay and mortality. Management determines these assumptions in consultation with the plan’s actuaries. •Key assumptions used in calculating the defined benefit pension obligation and the sensitivity of the calculation to different assumptions are described in Note 3. | |
HSBC UK Bank plc Annual Report and Accounts 2022 | 93 |
The recognition and measurement of provisions requires the group to make a number of judgements, assumptions and estimates. The most significant are set out below: | |
Judgements | Estimates |
•Determining whether a present obligation exists. Professional advice is taken on the assessment of litigation and similar obligations. •Provisions for legal proceedings and regulatory matters typically require a higher degree of judgement than other types of provisions. When matters are at an early stage, accounting judgements can be difficult because of the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the probability and amount of any outflows that may arise. As matters progress, management and legal advisers evaluate on an ongoing basis whether provisions should be recognised, revising previous estimates as appropriate. At more advanced stages, it is typically easier to make estimates around a better defined set of possible outcomes. | •Provisions for legal proceedings and regulatory matters remain very sensitive to the assumptions used in the estimate. There could be a wider range of possible outcomes for any pending legal proceedings, investigations or inquiries. As a result it is often not practicable to quantify a range of possible outcomes for individual matters. It is also not practicable to meaningfully quantify ranges of potential outcomes in aggregate for these types of provisions because of the diverse nature and circumstances of such matters and the wide range of uncertainties involved. |
94 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Year ended | ||
31 Dec | 31 Dec | |
2022 | 2021 | |
Net fee income by product | £m | £m |
Account services | 257 | 276 |
Funds under management | 114 | 126 |
Cards | 580 | 410 |
Credit facilities | 130 | 140 |
Imports/exports | 30 | 33 |
Insurance agency commission | 25 | 59 |
Receivables finance | 96 | 90 |
Other | 261 | 195 |
Fee income | 1,493 | 1,329 |
Less: fee expense | (248) | (249) |
Net fee income | 1,245 | 1,080 |
Net fee income by global business | ||
Wealth and Personal Banking | 590 | 514 |
Commercial Banking | 879 | 755 |
Global Banking and Markets | (222) | (188) |
Corporate Centre | (2) | (1) |
2022 | 20211 | |
£m | £m | |
Wages and salaries | 971 | 903 |
Social security costs | 106 | 97 |
Post-employment benefits | 2 | 22 |
Year ended 31 Dec | 1,079 | 1,022 |
20222 | 20211,2 | |
Wealth and Personal Banking | 15,923 | 16,458 |
Commercial Banking | 4,491 | 4,932 |
Global Banking and Markets | 54 | 51 |
Corporate Centre | 33 | 6 |
Year ended 31 Dec | 20,501 | 21,447 |
2022 | 2021 | |
£m | £m | |
Restricted share awards | 8 | 7 |
Savings-related and other share award option plans | 9 | 10 |
Year ended 31 Dec | 17 | 17 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 95 |
Award | Policy |
Deferred share awards (including annual incentive awards, LTI awards delivered in shares) and GPSP | An assessment of performance over the relevant period ending on 31 December is used to determine the amount of the award to be granted. •Deferred awards generally require employees to remain in employment over the vesting period and are generally not subject to performance conditions after the grant date. •Deferred share awards generally vest over a period of three, five or seven years. •Vested shares may be subject to a retention requirement post-vesting. •Awards are subject to malus and clawback provisions. |
International Employee Share Purchase Plan (‘ShareMatch’) | The plan was first introduced in Hong Kong in 2013 and now includes employees based in 31 jurisdictions. •Shares are purchased in the market each quarter up to a maximum value of £750, or the equivalent in local currency. •Matching awards are added at a ratio of one free share for every three purchased. •Matching awards vest subject to continued employment and the retention of the purchased shares for a maximum period of two years and nine months. |
2022 | 2021 | |
Number | Number | |
(000s) | (000s) | |
Restricted share awards outstanding at 1 Jan | 2,457 | 1,525 |
Additions during the year | 1,976 | 2,101 |
Released in the year | (1,404) | (1,137) |
Forfeited in the year | (48) | (32) |
Restricted share awards outstanding at 31 Dec | 2,981 | 2,457 |
Weighted average fair value of awards granted (£) | 4.03 | 4.11 |
Plans | Policy |
Savings-related share option plans (‘Sharesave’) | •Eligible employees can save up to £500 per month with the option to use the savings to acquire shares. •These are generally exercisable within six months following either the third or fifth anniversary of the commencement of a three-year or five-year contract, respectively. •The exercise price is set at a 20% (2021: 20%) discount to the market value immediately preceding the date of invitation. |
Savings-related share option plans | ||
Number | WAEP1 | |
(000s) | £ | |
Outstanding at 1 Jan 2022 | 64,073 | 2.85 |
Granted during the year | 4,523 | 4.30 |
Exercised during the year | (1,517) | 3.56 |
Expired during the year | (1,360) | 4.95 |
Forfeited during the year | (5,369) | 2.94 |
Outstanding at 31 Dec 2022 | 60,350 | 2.88 |
– of which exercisable | 1,761 | 4.35 |
Weighted average remaining contractual life (years) | 2.23 | |
Outstanding at 1 Jan 2021 | 59,815 | 2.96 |
Granted during the year | 16,434 | 5.28 |
Exercised during the year | (1,693) | 3.69 |
Expired during the year | (488) | 4.13 |
Forfeited during the year | (9,995) | 3.60 |
Outstanding at 31 Dec 2021 | 64,073 | 2.85 |
– of which exercisable | 2,702 | 3.98 |
Weighted average remaining contractual life (years) | 2.97 |
96 | HSBC UK Bank plc Annual Report and Accounts 2022 |
2022 | 2021 | |
£m | £m | |
Defined benefit pension plans | (95) | (44) |
Defined contribution pension plans | 97 | 66 |
Pension plans | 2 | 22 |
Year ended 31 Dec | 2 | 22 |
Fair value of plan assets | Present value of defined benefit obligations | Net defined benefit assets/(liabilities) | |||
£m | £m | £m | |||
At 1 Jan 2022 | 30,578 | (23,833) | 6,745 | ||
Service cost | — | (25) | (25) | ||
– current service cost | — | (10) | (10) | ||
– past service cost | — | (15) | (15) | ||
Net interest income/(cost) on the net defined benefit asset/(liability) | 571 | (443) | 128 | ||
Remeasurement effects recognised in other comprehensive income | (9,343) | 7,740 | (1,603) | ||
– return on plan assets (excluding interest income) | (9,343) | — | (9,343) | ||
– actuarial losses financial assumptions | — | 8,561 | 8,561 | ||
– actuarial gain demographic assumptions | — | (100) | (100) | ||
– actuarial gain experience adjustments | — | (721) | (721) | ||
Transfers to/from the scheme | 36 | (27) | 9 | ||
Benefits paid | (992) | 992 | — | ||
Other movements1 | 3 | — | 3 | ||
At 31 Dec 2022 | 20,853 | (15,596) | 5,257 | ||
HSBC UK Bank plc Annual Report and Accounts 2022 | 97 |
Fair value of plan assets | Present value of defined benefit obligations | Net defined benefit assets/(liabilities) | |
£m | £m | £m | |
At 1 Jan 2021 | 31,130 | (24,173) | 6,957 |
Service cost | — | (40) | (40) |
– current service cost | — | (10) | (10) |
– past service cost | — | (30) | (30) |
Net interest income/(cost) on the net defined benefit asset/(liability) | 446 | (344) | 102 |
Remeasurement effects recognised in other comprehensive income | (274) | (197) | (471) |
– return on plan assets (excluding interest income) | (274) | — | (274) |
– actuarial losses financial assumptions | — | 444 | 444 |
– actuarial gain demographic assumptions | — | (325) | (325) |
– actuarial gain experience adjustments | — | (316) | (316) |
Transfers to/from the scheme | 113 | (93) | 20 |
Benefits paid | (1,014) | 1,014 | — |
Other movements1 | 177 | — | 177 |
At 31 Dec 2021 | 30,578 | (23,833) | 6,745 |
2023 | 2024 | 2025 | 2026 | 2027 | 2028–2032 | |
£m | £m | £m | £m | £m | £m | |
The plan1 | 1,024 | 1,058 | 1,093 | 1,128 | 1,165 | 6,423 |
At 31 Dec 2022 | At 31 Dec 2021 | |||||
Value | Quoted market price in active market | No quoted market price in active market | Value | Quoted market price in active market | No quoted market price in active market | |
£m | £m | £m | £m | £m | £m | |
The plan | ||||||
Fair value of plan assets | 20,853 | 11,550 | 9,303 | 30,578 | 26,799 | 3,779 |
– equities1 | 93 | — | 93 | 146 | 4 | 142 |
– bonds fixed income2 | 4,386 | 4,002 | 384 | 13,399 | 12,894 | 505 |
– bonds index linked | 7,869 | 7,869 | — | 13,418 | 13,418 | — |
– derivatives | 998 | — | 998 | 1,377 | — | 1,377 |
– property | 700 | — | 700 | 808 | — | 808 |
– other3 | 6,807 | (321) | 7,128 | 1,430 | 483 | 947 |
Discount rate | Inflation rate (RPI) | Inflation rate (CPI) | Rate of increase for pensions | Rate of pay increase | |
% | % | % | % | % | |
UK | |||||
At 31 Dec 2022 | 4.93 | 3.39 | 2.84 | 3.27 | 3.34 |
At 31 Dec 2021 | 1.90 | 3.45 | 3.20 | 3.30 | 3.45 |
98 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Mortality table | Life expectancy at age 60 for a male member currently: | Life expectancy at age 60 for a female member currently: | ||||
Aged 60 | Aged 40 | Aged 60 | Aged 40 | |||
UK | ||||||
At 31 Dec 2022 | SAPS S31 | 27.1 | 28.6 | 28.4 | 29.9 | |
At 31 Dec 2021 | SAPS S31 | 27.3 | 28.8 | 28.5 | 30.1 | |
Impact on HSBC Bank (UK) Pension Scheme Obligation1 | ||||
Financial impact of increase | Financial impact of decrease | |||
2022 | 2021 | 2022 | 2021 | |
£m | £m | £m | £m | |
Discount rate – increase/decrease of 0.25% | (483) | (988) | 509 | 1,053 |
Inflation rate (RPI/CPI) – increase/decrease of 0.25% | 387 | 895 | (371) | (724) |
Pension payments and deferred pensions – increase/decrease of 0.25% | 457 | 936 | (431) | (870) |
Pay – increase/decrease of 0.25% | 8 | 15 | (8) | (15) |
Change in mortality – increase of 1 year | 390 | 1,025 | (405) | N/A |
2022 | 2021 | |
£000 | £000 | |
Fees paid to non-executive Directors | 1,406 | 1,568 |
Salaries and other emoluments1 | 2,418 | 2,735 |
Annual incentives2 | 1,160 | 716 |
Long-term incentives3 | 781 | 477 |
Year ended 31 Dec | 5,765 | 5,496 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 99 |
2022 | 2021 | |
£000 | £000 | |
Salaries and other emoluments | 1,771 | 1,753 |
Annual incentives1 | 890 | 596 |
Long-term incentives2 | 602 | 407 |
Year ended 31 Dec | 3,263 | 2,756 |
2022 | 2021 | |
£m | £m | |
Audit fees payable to PwC | 5.4 | 5.4 |
Other audit fees payable | 2.8 | 2.7 |
Year ended 31 Dec | 8.2 | 8.1 |
2022 | 2021 | |
£m | £m | |
Audit fees for HSBC UK Bank plc‘s statutory audit1 | 4.3 | 4.4 |
Fees for other services provided to the group | 3.9 | 3.7 |
– audit of the group‘s subsidiaries2 | 1.1 | 1.0 |
– audit-related assurance services3 | 1.9 | 2.0 |
– other assurance services4 | 0.9 | 0.7 |
Year ended 31 Dec | 8.2 | 8.1 |
2022 | 2021 | |
£m | £m | |
Current tax | 876 | 836 |
– for this year | 880 | 852 |
– adjustments in respect of prior years | (4) | (16) |
Deferred tax | (114) | 276 |
– origination and reversal of temporary differences | 52 | 54 |
– effect of changes in tax rates | (172) | 203 |
– adjustments in respect of prior years | 6 | 19 |
Year ended 31 Dec1 | 762 | 1,112 |
100 | HSBC UK Bank plc Annual Report and Accounts 2022 |
2022 | 2021 | |||
£m | % | £m | % | |
Profit before tax | 3,638 | 3,480 | ||
Tax expense | ||||
Taxation at UK corporation tax rate of 19.00% (2021: 19.00%) | 691 | 19.0 | 661 | 19.0 |
Items increasing the tax charge in 2022: | ||||
– UK banking surcharge | 278 | 7.6 | 266 | 7.6 |
– UK bank levy | 9 | 0.2 | 9 | 0.3 |
– non-deductible costs in respect of regulatory and legal matters | — | — | 4 | 0.1 |
– adjustments in respect of prior period liabilities | 2 | 0.1 | 3 | 0.1 |
– other permanent disallowables | 4 | 0.1 | 1 | 0.1 |
Items reducing tax charge in 2022: | ||||
– change in tax rates | (172) | (4.7) | 203 | 5.8 |
– deductions for AT1 coupon payments | (39) | (1.1) | (32) | (0.9) |
– non-deductible UK customer redress | (11) | (0.3) | (3) | (0.1) |
Year ended 31 Dec | 762 | 20.9 | 1,112 | 32.0 |
Loan impairment provisions | Cash flow hedges | FVOCI reserves | Defined benefit pension | Fixed and intangible assets | Other | Total | |
£m | £m | £m | £m | £m | £m | £m | |
The group | |||||||
At 1 Jan 2022 | 122 | 45 | (26) | (2,226) | 102 | 14 | (1,969) |
Income statement | (30) | — | — | 174 | (18) | (12) | 114 |
Other comprehensive income | — | 470 | 118 | 580 | — | 20 | 1,188 |
Foreign exchange and other adjustments | — | 1 | — | — | — | — | 1 |
At 31 Dec 2022 | 92 | 516 | 92 | (1,472) | 84 | 22 | (666) |
Assets | 92 | 516 | 92 | — | 84 | 22 | 806 |
Liabilities | — | — | — | (1,472) | — | — | (1,472) |
At 1 Jan 2021 | 123 | 1 | (52) | (1,879) | 118 | 12 | (1,677) |
Income statement | 1 | — | — | (272) | (16) | 11 | (276) |
Other comprehensive income | — | 44 | 23 | (76) | (7) | (16) | |
Foreign exchange and other adjustments | (2) | — | 3 | 1 | — | (2) | — |
At 31 Dec 2021 | 122 | 45 | (26) | (2,226) | 102 | 14 | (1,969) |
Assets | 122 | 45 | — | — | 102 | 14 | 283 |
Liabilities | — | — | (26) | (2,226) | — | — | (2,252) |
Loan impairment provisions | Cash flow hedges | FVOCI reserves | Defined benefit pension | Fixed and intangible assets | Other | Total | |
£m | £m | £m | £m | £m | £m | £m | |
The bank | |||||||
At 1 Jan 2022 | 115 | 45 | (29) | (2,226) | 80 | 14 | (2,001) |
Income statement | (30) | — | — | 174 | (12) | (9) | 123 |
Other comprehensive income | — | 470 | 118 | 580 | — | 20 | 1,188 |
Foreign exchange and other adjustments | — | 1 | — | — | — | (1) | — |
At 31 Dec 2022 | 85 | 516 | 89 | (1,472) | 68 | 24 | (690) |
Assets | 85 | 516 | 89 | — | 68 | 24 | 782 |
Liabilities | — | — | — | (1,472) | — | — | (1,472) |
At 1 Jan 2021 | 114 | 1 | (52) | (1,879) | 95 | 11 | (1,710) |
Income statement | 1 | — | — | (272) | (15) | 10 | (276) |
Other comprehensive income | — | 44 | 23 | (76) | — | (7) | (16) |
Foreign exchange and other adjustments | — | — | — | 1 | — | — | 1 |
At 31 Dec 2021 | 115 | 45 | (29) | (2,226) | 80 | 14 | (2,001) |
Assets | 115 | 45 | — | — | 80 | 14 | 254 |
Liabilities | — | — | (29) | (2,226) | — | — | (2,255) |
HSBC UK Bank plc Annual Report and Accounts 2022 | 101 |
2022 | 2021 | |||
£ per share | £m | £ per share | £m | |
Dividends paid on ordinary shares | ||||
Interim dividend in respect of the previous year | 9,820 | 491 | — | — |
Interim dividend in respect of the current year | 25,919 | 1,296 | 12,659 | 633 |
Total | 35,739 | 1,787 | 12,659 | 633 |
2022 | 2021 | ||
First call date | £m | £m | |
Undated Subordinated Additional Tier 1 instruments | |||
– £1,096m | Dec 2019 | 70 | 57 |
– £1,100m | Dec 2024 | 72 | 57 |
Total | 142 | 114 | |
2022 | 2021 | |||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
The group and bank | £m | £m | £m | £m | £m | £m | £m | £m |
Recurring fair value measurements at 31 Dec | ||||||||
Assets | ||||||||
Financial assets mandatorily measured at fair value through profit or loss | 72 | — | 36 | 108 | 65 | 14 | — | 79 |
Derivatives | 14 | 532 | — | 546 | 1 | 63 | — | 64 |
Financial investments | 10,757 | 175 | — | 10,932 | 13,979 | 398 | — | 14,377 |
Liabilities | ||||||||
Derivatives | — | 304 | — | 304 | 1 | 291 | — | 292 |
102 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Fair value | |||||
Carrying amount | Quoted market price Level 1 | Observable inputs Level 2 | Significant unobservable inputs Level 3 | Total | |
£m | £m | £m | £m | £m | |
The group | |||||
At 31 Dec 2022 | |||||
Assets | |||||
Loans and advances to banks | 6,357 | — | 6,357 | — | 6,357 |
Loans and advances to customers | 204,143 | — | — | 199,957 | 199,957 |
Reverse repurchase agreements – non-trading | 7,406 | — | 7,406 | — | 7,406 |
Financial investments – at amortised cost | 5,160 | 4,772 | — | — | 4,772 |
Liabilities | |||||
Deposits by banks | 10,721 | — | 10,721 | — | 10,721 |
Customer accounts | 281,095 | — | 281,095 | — | 281,095 |
Repurchase agreements – non-trading | 9,333 | — | 9,333 | — | 9,333 |
Debt securities in issue | 1,299 | — | 1,094 | 185 | 1,279 |
Subordinated liabilities | 12,349 | — | 11,765 | — | 11,765 |
At 31 Dec 2021 | |||||
Assets | |||||
Loans and advances to banks | 1,914 | — | 1,914 | — | 1,914 |
Loans and advances to customers | 195,526 | — | 224 | 195,922 | 196,146 |
Reverse repurchase agreements – non-trading | 7,988 | — | 7,988 | — | 7,988 |
Financial investments – at amortised cost | — | — | — | — | — |
Liabilities | |||||
Deposits by banks | 11,180 | — | 11,180 | — | 11,180 |
Customer accounts | 281,870 | — | 281,870 | — | 281,870 |
Repurchase agreements – non-trading | 10,438 | — | 10,438 | — | 10,438 |
Debt securities in issue | 900 | — | 675 | 217 | 892 |
Subordinated liabilities | 12,487 | — | 12,686 | — | 12,686 |
The bank | |||||
At 31 Dec 2022 | |||||
Assets | |||||
Loans and advances to banks | 9,304 | — | 9,296 | — | 9,296 |
Loans and advances to customers | 199,666 | — | — | 195,606 | 195,606 |
Reverse repurchase agreements – non-trading | 7,406 | — | 7,406 | — | 7,406 |
Financial investments held at amortised cost | 5,160 | 4,772 | — | — | 4,772 |
Liabilities | |||||
Deposits by banks | 11,619 | — | 11,619 | — | 11,619 |
Customer accounts | 279,575 | — | 279,575 | — | 279,575 |
Repurchase agreements – non-trading | 9,333 | — | 9,333 | — | 9,333 |
Debt securities in issue | 1,091 | — | 1,094 | — | 1,094 |
Subordinated liabilities | 12,349 | — | 11,765 | — | 11,765 |
At 31 Dec 2021 | |||||
Assets | |||||
Loans and advances to banks | 4,405 | — | 4,406 | — | 4,406 |
Loans and advances to customers | 191,208 | — | 224 | 191,617 | 191,841 |
Reverse repurchase agreements – non-trading | 7,988 | — | 7,988 | — | 7,988 |
Financial investments held at amortised cost | — | — | — | — | — |
Liabilities | |||||
Deposits by banks | 12,095 | — | 12,095 | — | 12,095 |
Customer accounts | 280,023 | — | 280,022 | — | 280,022 |
Repurchase agreements – non-trading | 10,438 | — | 10,438 | — | 10,438 |
Debt securities in issue | 675 | — | 675 | — | 675 |
Subordinated liabilities | 12,487 | — | 12,686 | — | 12,686 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 103 |
Notional contract amount | Fair value – Assets | Fair value – Liabilities | ||||||
Trading | Hedging | Trading | Hedging | Total | Trading | Hedging | Total | |
The group and bank | £m | £m | £m | £m | £m | £m | £m | £m |
Foreign exchange | 21,892 | 106 | 145 | — | 145 | 83 | 8 | 91 |
Interest rate | 37,231 | 46,121 | 1,265 | 1,298 | 2,563 | 1,326 | 1,049 | 2,375 |
Gross total fair values | 59,123 | 46,227 | 1,410 | 1,298 | 2,708 | 1,409 | 1,057 | 2,466 |
Offset (Note 22) | (2,162) | (2,162) | ||||||
At 31 Dec 2022 | 59,123 | 46,227 | 1,410 | 1,298 | 546 | 1,409 | 1,057 | 304 |
Foreign exchange | 19,845 | 106 | 58 | — | 58 | 171 | 10 | 181 |
Interest rate | 10,998 | 37,179 | 478 | 265 | 743 | 479 | 369 | 848 |
Gross total fair values | 30,843 | 37,285 | 536 | 265 | 801 | 650 | 379 | 1,029 |
Offset (Note 22) | (737) | (737) | ||||||
At 31 Dec 2021 | 30,843 | 37,285 | 536 | 265 | 64 | 650 | 379 | 292 |
104 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Hedging Instrument | |||||
Carrying amount | |||||
Notional amount1 | Assets | Liabilities | Balance sheet Presentation | Change in fair value2 | |
Hedged risk | £m | £m | £m | £m | |
Interest rate3 | 18,520 | 1,297 | 837 | Derivatives | 723 |
At 31 Dec 2022 | 18,520 | 1,297 | 837 | 723 | |
Interest rate3 | 14,628 | 256 | 251 | Derivatives | (90) |
At 31 Dec 2021 | 14,628 | 256 | 251 | (90) |
Hedged item | Ineffectiveness | |||||||
Carrying amount | Accumulated fair value hedge adjustments included in carrying amount2 | Change in fair value1 | Recognised in profit and loss | Profit and loss presentation | ||||
Assets | Liabilities | Assets | Liabilities | Balance sheet presentation | ||||
Hedged risk | £m | £m | £m | £m | £m | £m | ||
Interest rate4 | 9,937 | (912) | Financial investments measured at fair value through other comprehensive income | (1,300) | 2 | Net income from financial instruments held for trading or managed on a fair value basis | ||
1,250 | (112) | Loans and advances to customers | (110) | |||||
5,326 | (573) | Subordinated Liabilities3 | 689 | |||||
At 31 Dec 2022 | 11,187 | 5,326 | (1,024) | (573) | (721) | 2 | ||
Interest rate4 | 9,075 | 14 | Financial investments measured at fair value through other comprehensive income | (226) | 1 | Net income from financial instruments held for trading or managed on a fair value basis | ||
397 | — | Loans and advances to customers | (3) | |||||
— | 122 | Subordinated Liabilities3 | 320 | |||||
At 31 Dec 2021 | 9,472 | — | 14 | 122 | 91 | 1 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 105 |
Hedging Instrument | Hedged Item | Ineffectiveness | ||||||
Carrying amount | Change in fair value2 | Change in fair value3 | Recognised in profit and loss | Profit and loss presentation | ||||
Notional amount1 | Assets | Liabilities | Balance sheet presentation | |||||
Hedged risk | £m | £m | £m | £m | £m | £m | ||
Foreign currency | 106 | — | 8 | Derivatives | (8) | (8) | — | Net income from financial instruments held for trading or managed on a fair value basis |
Interest rate | 27,601 | 1 | 212 | Derivatives | (1,876) | (1,876) | — | |
At 31 Dec 2022 | 27,707 | 1 | 220 | (1,884) | (1,884) | — | ||
Foreign currency | 106 | — | 10 | Derivatives | (7) | (7) | — | Net income from financial instruments held for trading or managed on a fair value basis |
Interest rate | 22,551 | 9 | 118 | Derivatives | (108) | (108) | — | |
At 31 Dec 2021 | 22,657 | 9 | 128 | (115) | (115) | — |
Interest rate | Foreign Currency | |
£m | £m | |
Cash flow hedging reserve at 1 Jan 2022 | (89) | (1) |
Fair value gains/(losses) | (1,876) | (8) |
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of: | ||
– hedged items that have affected profit or loss | 170 | 10 |
Income taxes | 470 | — |
Cash flow hedging reserve at 31 Dec 2022 | (1,325) | 1 |
Cash flow hedging reserve at 1 Jan 2021 | 1 | — |
Fair value gains/(losses) | (108) | (7) |
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of: | ||
– hedged items that have affected profit or loss | (26) | 6 |
Income taxes | 44 | — |
Cash flow hedging reserve at 31 Dec 2021 | (89) | (1) |
The group and bank | ||
2022 | 2021 | |
£m | £m | |
Financial investments measured at fair value through other comprehensive income | 10,932 | 14,377 |
– treasury and other eligible bills | 512 | 1,252 |
– debt securities | 10,419 | 13,125 |
– equity securities | 1 | — |
Debt instruments measured at amortised cost | 5,160 | — |
– treasury and other eligible bills | 448 | — |
– debt securities | 4,712 | — |
At 31 Dec | 16,092 | 14,377 |
106 | HSBC UK Bank plc Annual Report and Accounts 2022 |
The group and bank | ||
2022 | 2021 | |
£m | £m | |
Debt securities | 8,375 | 4,804 |
Loans and advances to banks | 4,700 | — |
Loans and advances to customers | 14,598 | 13,440 |
Other | 294 | 349 |
Assets pledged at 31 Dec | 27,967 | 18,593 |
The group and bank | ||
2022 | 2021 | |
£m | £m | |
Financial investments | 7,536 | 4,478 |
At 31 Dec | 7,536 | 4,478 |
2022 | 2021 | |||
Carrying amount of: | Carrying amount of: | |||
Transferred assets | Associated liabilities | Transferred assets | Associated liabilities | |
The group | £m | £m | £m | £m |
Repurchase agreements | 5,064 | 4,367 | 2,630 | 2,608 |
Securities lending agreements | 2,472 | — | 1,848 | — |
The bank | ||||
Repurchase agreements | 5,064 | 4,367 | 2,630 | 2,608 |
Securities lending agreements | 2,472 | — | 1,848 | — |
Other sales (recourse for full amount) | 1,245 | 499 | — | — |
HSBC UK Bank plc Annual Report and Accounts 2022 | 107 |
Country of incorporation or registration | HSBC UK Bank plc’s interest in equity capital | Share class | |
% | |||
HSBC Equipment Finance (UK) Limited | England and Wales | 100.00 | Ordinary £1 |
HSBC Invoice Finance (UK) Limited | England and Wales | 100.00 | Ordinary £1 |
Marks and Spencer Financial Services plc | England and Wales | 100.00 | Ordinary £1 |
Securitisations | Other | Total | |
£m | £m | £m | |
At 31 Dec 2022 | 315 | 502 | 817 |
At 31 Dec 2021 | 348 | — | 348 |
108 | HSBC UK Bank plc Annual Report and Accounts 2022 |
The group | The bank | |||
2022 | 2021 | 2022 | 2021 | |
£m | £m | £m | £m | |
Goodwill | 3,285 | 3,285 | 223 | 223 |
Other intangible assets1 | 973 | 908 | 962 | 905 |
At 31 Dec | 4,258 | 4,193 | 1,185 | 1,128 |
Goodwill at 1 Oct 2022 | Discount rate | Growth rate beyond initial cash flow projections | Goodwill at 1 Oct 2021 | Discount rate | Growth rate beyond initial cash flow projections | |
Cash-generating unit | £m | % | % | £m | % | % |
WPB | 2,046 | 9.6 | 2.1 | 2,046 | 9.8 | 2.0 |
CMB | 1,239 | 8.6 | 2.1 | 1,239 | 7.9 | 2.0 |
Total | 3,285 | 3,285 | ||||
HSBC UK Bank plc Annual Report and Accounts 2022 | 109 |
The group | The bank | |||
2022 | 2021 | 2022 | 2021 | |
£m | £m | £m | £m | |
Prepayments and accrued income | 986 | 660 | 1,011 | 661 |
Settlement accounts | 9 | 10 | 9 | 10 |
Cash collateral and margin receivables | 222 | 284 | 222 | 284 |
Endorsements and acceptances | 49 | 78 | 49 | 78 |
Employee benefit assets (Note 3) | 5,257 | 6,745 | 5,257 | 6,745 |
Right-of-use assets | 171 | 222 | 158 | 210 |
Other accounts | 1,610 | 625 | 1,439 | 467 |
Owned property, plant and equipment | 458 | 512 | 382 | 406 |
At 31 Dec | 8,762 | 9,136 | 8,527 | 8,861 |
The group | The bank | |||
2022 | 2021 | 2022 | 2021 | |
£m | £m | £m | £m | |
Bonds and medium-term notes1 | 358 | 376 | 150 | 151 |
Covered bonds | 499 | — | 499 | — |
Other debt securities in issue2 | 442 | 524 | 442 | 524 |
At 31 Dec | 1,299 | 900 | 1,091 | 675 |
The group | The bank | |||
2022 | 2021 | 2022 | 2021 | |
£m | £m | £m | £m | |
Accruals and deferred income | 645 | 418 | 615 | 379 |
Settlement accounts | 81 | 2 | 81 | 2 |
Cash collateral and margin payable | 234 | — | 234 | — |
Endorsements and acceptances | 51 | 78 | 51 | 78 |
Lease liabilities | 198 | 243 | 184 | 231 |
Other liabilities | 2,334 | 933 | 2,165 | 824 |
At 31 Dec | 3,543 | 1,674 | 3,330 | 1,514 |
110 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Restructuring costs2 | Legal proceedings and regulatory matters | Customer remediation3,4 | Other provisions | Total | |
The group | £m | £m | £m | £m | £m |
Provisions (excluding contractual commitments) | |||||
At 1 Jan 2022 | 22 | 39 | 256 | 96 | 413 |
Additions | 65 | 5 | 38 | 33 | 141 |
Amounts utilised | (20) | (10) | (75) | (6) | (111) |
Unused amounts reversed | (27) | (2) | (83) | (25) | (137) |
Exchange and other movements | 23 | — | 6 | (16) | 13 |
At 31 Dec 2022 | 63 | 32 | 142 | 82 | 319 |
Contractual commitments1 | |||||
At 1 Jan 2022 | 82 | ||||
Net change in expected credit loss provision and other movements | 23 | ||||
At 31 Dec 2022 | 105 | ||||
Total provisions | |||||
At 31 Dec 2021 | 495 | ||||
At 31 Dec 2022 | 424 |
Provisions (excluding contractual commitments) | |||||
At 1 Jan 2021 | 93 | 64 | 588 | 11 | 756 |
Additions | 49 | 27 | 120 | 40 | 236 |
Amounts utilised | (82) | (48) | (375) | (2) | (507) |
Unused amounts reversed | (38) | (4) | (74) | (8) | (124) |
Exchange and other movements | — | — | (3) | 55 | 52 |
At 31 Dec 2021 | 22 | 39 | 256 | 96 | 413 |
Contractual commitments1 | |||||
At 1 Jan 2021 | 223 | ||||
Net change in expected credit loss provision and other movements | (141) | ||||
At 31 Dec 2021 | 82 | ||||
Total provisions | |||||
At 31 Dec 2020 | 979 | ||||
At 31 Dec 2021 | 495 |
Restructuring costs2 | Legal proceedings and regulatory matters | Customer remediation3,4 | Other provisions | Total | |
The bank | £m | £m | £m | £m | £m |
Provisions (excluding contractual commitments) | |||||
At 1 Jan 2022 | 22 | 39 | 205 | 96 | 362 |
Additions | 65 | 5 | 33 | 33 | 136 |
Amounts utilised | (20) | (10) | (62) | (6) | (98) |
Unused amounts reversed | (27) | (2) | (76) | (25) | (130) |
Exchange and other movements | 23 | — | 7 | (16) | 14 |
At 31 Dec 2022 | 63 | 32 | 107 | 82 | 284 |
Contractual commitments1 | |||||
At 1 Jan 2022 | 80 | ||||
Net change in expected credit loss provision and other movements | 22 | ||||
At 31 Dec 2022 | 102 | ||||
Total provisions | |||||
At 31 Dec 2021 | 442 | ||||
At 31 Dec 2022 | 386 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 111 |
Restructuring costs2 | Legal proceedings and regulatory matters | Customer remediation3,4 | Other provisions | Total | |
The bank | £m | £m | £m | £m | £m |
Provisions (excluding contractual commitments) | |||||
At 1 Jan 2021 | 93 | 64 | 486 | 11 | 654 |
Additions | 49 | 27 | 101 | 40 | 217 |
Amounts utilised | (82) | (48) | (315) | (2) | (447) |
Unused amounts reversed | (38) | (4) | (64) | (8) | (114) |
Exchange and other movements | — | — | (3) | 55 | 52 |
At 31 Dec 2021 | 22 | 39 | 205 | 96 | 362 |
Contractual commitments1 | |||||
At 1 Jan 2021 | 216 | ||||
Net change in expected credit loss provision and other movements | (136) | ||||
At 31 Dec 2021 | 80 | ||||
Total provisions | |||||
At 31 Dec 2020 | 870 | ||||
At 31 Dec 2021 | 442 |
The group | The bank | |||
2022 | 2021 | 2022 | 2021 | |
£m | £m | £m | £m | |
At amortised cost | 12,349 | 12,487 | 12,349 | 12,487 |
– subordinated liabilities1 | 12,349 | 12,487 | 12,349 | 12,487 |
At 31 Dec | 12,349 | 12,487 | 12,349 | 12,487 |
112 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Carrying amount | |||||
2022 | 2021 | ||||
First call date | Maturity date | £m | £m | ||
Capital instruments | |||||
Tier 2 instruments | |||||
£550m | HSBC UK Bank plc Subordinated Floating Loan 20281 | Jul 2023 | Jul 2028 | 550 | 550 |
$840m | HSBC UK Bank plc Subordinated Floating Loan 20282 | Jul 2023 | Jul 2028 | 697 | 620 |
£100m | HSBC UK Bank plc 2.8594% Subordinated Loan 2029 | Mar 2024 | Mar 2029 | 100 | 100 |
£1,000m | HSBC UK Bank plc Subordinated Floating Loan 20303 | Jul 2025 | Jul 2030 | 1,000 | 1,000 |
£650m | HSBC UK Bank plc Subordinated Floating Loan 20334 | Sep 2028 | Sep 2033 | 650 | 650 |
£79m | HSBC UK Bank plc 2.1250% Subordinated Loan 2031 | Mar 2026 | Mar 2031 | 79 | 79 |
Other instruments | |||||
Subordinated loan instruments not eligible for inclusion in regulatory capital | |||||
$2000m | HSBC UK Bank plc 0.9760% MREL eligible Subordinated Loan 2025 | May 2024 | May 2025 | 1,558 | 1,455 |
£350m | HSBC UK Bank plc 1.8777% MREL eligible Subordinated Loan 2025 | Oct 2024 | Oct 2025 | 350 | 350 |
£150m | HSBC UK Bank plc 2.1003% MREL eligible Subordinated Loan 2025 | Oct 2024 | Oct 2025 | 150 | 150 |
€500m | HSBC UK Bank plc MREL eligible Subordinated Floating Loan 20265 | Sep 2025 | Sep 2026 | 449 | 427 |
£1,000m | HSBC UK Bank plc 1.1250% MREL eligible Subordinated Loan 2026 | Nov 2025 | Nov 2026 | 1,000 | 1,000 |
£1,000m | HSBC UK Bank plc 1.7500% MREL eligible Subordinated Loan 2027 | Jul 2026 | Jul 2027 | 998 | 998 |
£1,000m | HSBC UK Bank plc 3.0000% MREL eligible Subordinated Loan 2028 | Jul 2027 | Jul 2028 | 880 | 1,009 |
£1,000m | HSBC UK Bank plc 1.7500% MREL eligible Subordinated Loan 2029 | Aug 2028 | Aug 2029 | 1,000 | 1,000 |
$3000m | HSBC UK Bank plc 3.9730% MREL eligible Subordinated Loan 2030 | May 2029 | May 2030 | 2,259 | 2,346 |
£750m | HSBC UK Bank plc 3.0000% MREL eligible Subordinated Loan 2030 | May 2029 | May 2030 | 629 | 753 |
At 31 Dec | 12,349 | 12,487 | |||
HSBC UK Bank plc Annual Report and Accounts 2022 | 113 |
Due not more than 1 month | Due over 1 month but not more than 3 months | Due over 3 months but not more than 6 months | Due over 6 months but not more than 9 months | Due over 9 months but not more than 1 year | Due over 1 year but not more than 2 years | Due over 2 years but not more than 5 years | Due over 5 years | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | |
The group | |||||||||
Financial assets | |||||||||
Cash and balances at central banks | 94,407 | — | — | — | — | — | — | — | 94,407 |
Items in the course of collection from other banks | 353 | — | — | — | — | — | — | — | 353 |
Financial assets mandatorily measured at fair value | 72 | — | — | — | — | — | — | 36 | 108 |
Derivatives | 84 | 1 | 1 | 1 | — | 2 | 117 | 340 | 546 |
Loans and advances to banks | 5,283 | — | 1,074 | — | — | — | — | — | 6,357 |
Loans and advances to customers | 16,645 | 10,575 | 8,753 | 6,128 | 5,462 | 18,412 | 34,746 | 103,422 | 204,143 |
– personal | 6,195 | 2,254 | 1,843 | 1,888 | 1,851 | 7,059 | 20,301 | 96,363 | 137,754 |
– corporate and commercial | 10,178 | 8,033 | 6,650 | 4,071 | 3,469 | 10,732 | 13,978 | 6,809 | 63,920 |
– financial | 272 | 288 | 260 | 169 | 142 | 621 | 467 | 250 | 2,469 |
Reverse repurchase agreements – non-trading | 573 | 3,012 | 1,749 | 1,322 | 750 | — | — | — | 7,406 |
Financial investments | 300 | 1,200 | 70 | 137 | 131 | 529 | 3,874 | 9,851 | 16,092 |
Accrued income and other financial assets | 1,614 | 179 | 52 | 19 | 3 | — | — | — | 1,867 |
Total financial assets at 31 Dec 2022 | 119,331 | 14,967 | 11,699 | 7,607 | 6,346 | 18,943 | 38,737 | 113,649 | 331,279 |
Non-financial assets | — | — | — | — | — | — | — | 11,162 | 11,162 |
Total assets at 31 Dec 2022 | 119,331 | 14,967 | 11,699 | 7,607 | 6,346 | 18,943 | 38,737 | 124,811 | 342,441 |
Financial liabilities | |||||||||
Deposits by banks | 393 | 30 | — | — | — | — | 10,298 | — | 10,721 |
Customer accounts1 | 275,777 | 2,558 | 997 | 381 | 1,016 | 360 | 6 | — | 281,095 |
– personal | 177,548 | 767 | 391 | 296 | 828 | 348 | 2 | — | 180,180 |
– corporate and commercial | 94,229 | 1,606 | 532 | 77 | 174 | 12 | 4 | — | 96,634 |
– financial | 4,000 | 185 | 74 | 8 | 14 | — | — | — | 4,281 |
Repurchase agreements – non-trading | 9,333 | — | — | — | — | — | — | — | 9,333 |
Items in the course of transmission to other banks | 308 | — | — | — | — | — | — | — | 308 |
Derivatives | 83 | 2 | — | 6 | 17 | 33 | 74 | 89 | 304 |
Debt securities in issue | 44 | 398 | — | 150 | — | — | 707 | — | 1,299 |
Accruals and other financial liabilities | 2,061 | 351 | 235 | 94 | 13 | 39 | 535 | 36 | 3,364 |
Subordinated liabilities | — | — | — | 1,247 | — | 2,158 | 4,406 | 4,538 | 12,349 |
Total financial liabilities at 31 Dec 2022 | 287,999 | 3,339 | 1,232 | 1,878 | 1,046 | 2,590 | 16,026 | 4,663 | 318,773 |
Non-financial liabilities | — | — | — | — | — | — | — | 1,442 | 1,442 |
Total liabilities at 31 Dec 2022 | 287,999 | 3,339 | 1,232 | 1,878 | 1,046 | 2,590 | 16,026 | 6,105 | 320,215 |
Off-balance sheet commitments given | |||||||||
Loan and other credit-related commitments | 70,263 | 39 | — | 10 | — | 24 | 124 | 23 | 70,483 |
– personal | 42,059 | — | — | — | — | — | — | — | 42,059 |
– corporate and commercial | 27,094 | 39 | — | 10 | — | 24 | 124 | 23 | 27,314 |
– financial | 1,110 | — | — | — | — | — | — | — | 1,110 |
114 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Due not more than 1 month | Due over 1 month but not more than 3 months | Due over 3 months but not more than 6 months | Due over 6 months but not more than 9 months | Due over 9 months but not more than 1 year | Due over 1 year but not more than 2 years | Due over 2 years but not more than 5 years | Due over 5 years | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | |
The group | |||||||||
Financial assets | |||||||||
Cash and balances at central banks | 112,478 | — | — | — | — | — | — | — | 112,478 |
Items in the course of collection from other banks | 299 | — | — | — | — | — | — | — | 299 |
Financial assets mandatorily measured at fair value | 65 | — | — | — | — | — | — | 14 | 79 |
Derivatives | 58 | — | — | — | — | — | — | 6 | 64 |
Loans and advances to banks | 857 | — | 1,057 | — | — | — | — | — | 1,914 |
Loans and advances to customers | 16,717 | 9,830 | 7,932 | 5,965 | 5,551 | 17,836 | 34,353 | 97,342 | 195,526 |
– personal | 6,880 | 2,117 | 1,846 | 1,868 | 1,819 | 7,060 | 19,208 | 89,753 | 130,551 |
– corporate and commercial | 9,497 | 7,449 | 5,885 | 3,955 | 3,610 | 10,508 | 14,627 | 7,311 | 62,842 |
– financial | 340 | 264 | 201 | 142 | 122 | 268 | 518 | 278 | 2,133 |
Reverse repurchase agreements – non-trading | 318 | 555 | 2,379 | 3,494 | 1,242 | — | — | — | 7,988 |
Financial investments | 854 | 622 | 290 | 475 | 102 | 1,233 | 2,298 | 8,503 | 14,377 |
Accrued income and other financial assets | 1,276 | 102 | 19 | 3 | 3 | — | — | — | 1,403 |
Total financial assets at 31 Dec 2021 | 132,922 | 11,109 | 11,677 | 9,937 | 6,898 | 19,069 | 36,651 | 105,865 | 334,128 |
Non-financial assets | — | — | — | — | — | — | — | 11,935 | 11,935 |
Total assets at 31 Dec 2021 | 132,922 | 11,109 | 11,677 | 9,937 | 6,898 | 19,069 | 36,651 | 117,800 | 346,063 |
Financial liabilities | |||||||||
Deposits by banks | 862 | 18 | — | — | — | — | 10,300 | — | 11,180 |
Customer accounts1 | 279,674 | 861 | 422 | 286 | 362 | 260 | 5 | — | 281,870 |
– personal | 175,815 | 558 | 267 | 209 | 274 | 258 | 4 | — | 177,385 |
– corporate and commercial | 99,838 | 287 | 102 | 46 | 88 | 2 | 1 | — | 100,364 |
– financial | 4,021 | 16 | 53 | 31 | — | — | — | — | 4,121 |
Repurchase agreements – non-trading | 9,938 | 500 | — | — | — | — | — | — | 10,438 |
Items in the course of transmission to other banks | 151 | — | — | — | — | — | — | — | 151 |
Derivatives | 172 | — | — | — | — | 19 | 22 | 79 | 292 |
Debt securities in issue | 250 | 275 | — | 150 | — | — | 225 | — | 900 |
Accruals and other financial liabilities | 1,110 | 176 | 23 | 14 | 13 | 47 | 93 | 49 | 1,525 |
Subordinated liabilities | — | — | — | — | — | 1,170 | 5,558 | 5,759 | 12,487 |
Total financial liabilities at 31 Dec 2021 | 292,157 | 1,830 | 445 | 450 | 375 | 1,496 | 16,203 | 5,887 | 318,843 |
Non-financial liabilities | — | — | — | — | — | — | — | 3,415 | 3,415 |
Total liabilities at 31 Dec 2021 | 292,157 | 1,830 | 445 | 450 | 375 | 1,496 | 16,203 | 9,302 | 322,258 |
Off-balance sheet commitments given | |||||||||
Loan and other credit-related commitments | 70,205 | 1 | 2 | 50 | — | 18 | 164 | — | 70,440 |
– personal | 39,889 | — | — | — | — | — | — | — | 39,889 |
– corporate and commercial | 29,464 | 1 | 2 | 50 | — | 18 | 164 | — | 29,699 |
– financial | 852 | — | — | — | — | — | — | — | 852 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 115 |
Due not more than 1 month | Due over 1 month but not more than 3 months | Due over 3 months but not more than 6 months | Due over 6 months but not more than 9 months | Due over 9 months but not more than 1 year | Due over 1 year but not more than 2 years | Due over 2 years but not more than 5 years | Due over 5 years | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | |
The bank | |||||||||
Financial assets | |||||||||
Cash and balances at central banks | 94,407 | — | — | — | — | — | — | — | 94,407 |
Items in the course of collection from other banks | 154 | — | — | — | — | — | — | — | 154 |
Financial assets mandatorily measured at fair value | 72 | — | — | — | — | — | — | 36 | 108 |
Derivatives | 84 | 1 | 1 | 1 | — | 2 | 117 | 340 | 546 |
Loans and advances to banks | 5,675 | 370 | 1,588 | 145 | 145 | 486 | 895 | — | 9,304 |
Loans and advances to customers | 20,286 | 7,041 | 7,218 | 6,157 | 5,391 | 18,036 | 32,667 | 102,870 | 199,666 |
– personal | 4,147 | 1,988 | 1,740 | 1,790 | 1,759 | 6,741 | 19,869 | 96,334 | 134,368 |
– corporate and commercial | 9,978 | 4,589 | 5,099 | 3,981 | 3,297 | 10,078 | 11,510 | 6,173 | 54,705 |
– financial | 6,161 | 464 | 379 | 386 | 335 | 1,217 | 1,288 | 363 | 10,593 |
Reverse repurchase agreements – non-trading | 573 | 3,012 | 1,749 | 1,322 | 750 | — | — | — | 7,406 |
Financial investments | 300 | 1,200 | 70 | 137 | 131 | 530 | 3,874 | 9,850 | 16,092 |
Accrued income and other financial assets | 1,652 | 164 | 52 | 19 | 3 | — | 7 | — | 1,897 |
Total financial assets at 31 Dec 2022 | 123,203 | 11,788 | 10,678 | 7,781 | 6,420 | 19,054 | 37,560 | 113,096 | 329,580 |
Non-financial assets | — | — | — | — | — | — | — | 8,830 | 8,830 |
Total assets at 31 Dec 2022 | 123,203 | 11,788 | 10,678 | 7,781 | 6,420 | 19,054 | 37,560 | 121,926 | 338,410 |
Financial liabilities | |||||||||
Deposits by banks | 911 | 50 | 65 | 45 | 55 | 115 | 10,378 | — | 11,619 |
Customer accounts1 | 274,258 | 2,558 | 997 | 381 | 1,015 | 360 | 6 | — | 279,575 |
– personal | 176,657 | 767 | 391 | 296 | 828 | 348 | 2 | — | 179,289 |
– corporate and commercial | 93,220 | 1,606 | 532 | 77 | 173 | 12 | 4 | — | 95,624 |
– financial | 4,381 | 185 | 74 | 8 | 14 | — | — | — | 4,662 |
Repurchase agreements – non-trading | 9,333 | — | — | — | — | — | — | — | 9,333 |
Items in the course of transmission to other banks | 304 | — | — | — | — | — | — | — | 304 |
Derivatives | 83 | 2 | — | 6 | 17 | 33 | 74 | 89 | 304 |
Debt securities in issue | 44 | 398 | — | 150 | — | — | 499 | — | 1,091 |
Accruals and other financial liabilities | 1,993 | 341 | 231 | 94 | 12 | 37 | 529 | 32 | 3,269 |
Subordinated liabilities | — | — | — | 1,247 | — | 2,158 | 4,406 | 4,538 | 12,349 |
Total financial liabilities at 31 Dec 2022 | 286,926 | 3,349 | 1,293 | 1,923 | 1,099 | 2,703 | 15,892 | 4,659 | 317,844 |
Non-financial liabilities | — | — | — | — | — | — | — | 1,272 | 1,272 |
Total liabilities at 31 Dec 2022 | 286,926 | 3,349 | 1,293 | 1,923 | 1,099 | 2,703 | 15,892 | 5,931 | 319,116 |
Off-balance sheet commitments given | |||||||||
Loan and other credit-related commitments | 57,179 | — | — | — | — | — | — | — | 57,179 |
– personal | 31,527 | — | — | — | — | — | — | — | 31,527 |
– corporate and commercial | 24,560 | — | — | — | — | — | — | — | 24,560 |
– financial | 1,092 | — | — | — | — | — | — | — | 1,092 |
116 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Due not more than 1 month | Due over 1 month but not more than 3 months | Due over 3 months but not more than 6 months | Due over 6 months but not more than 9 months | Due over 9 months but not more than 1 year | Due over 1 year but not more than 2 years | Due over 2 years but not more than 5 years | Due over 5 years | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | |
The bank | |||||||||
Financial assets | |||||||||
Cash and balances at central banks | 112,477 | — | — | — | — | — | — | — | 112,477 |
Items in the course of collection from other banks | 132 | — | — | — | — | — | — | — | 132 |
Financial assets mandatorily measured at fair value | 65 | — | — | — | — | — | — | 14 | 79 |
Derivatives | 58 | — | — | — | — | — | — | 6 | 64 |
Loans and advances to banks | 1,002 | 295 | 1,483 | 125 | 135 | 475 | 890 | — | 4,405 |
Loans and advances to customers | 18,992 | 6,767 | 7,170 | 5,948 | 5,519 | 17,491 | 32,353 | 96,968 | 191,208 |
– personal | 5,028 | 1,862 | 1,744 | 1,772 | 1,727 | 6,747 | 18,797 | 89,725 | 127,402 |
– corporate and commercial | 9,359 | 4,227 | 4,885 | 3,851 | 3,505 | 9,818 | 12,373 | 6,872 | 54,890 |
– financial | 4,605 | 678 | 541 | 325 | 287 | 926 | 1,183 | 371 | 8,916 |
Reverse repurchase agreements – non-trading | 318 | 555 | 2,379 | 3,494 | 1,242 | — | — | — | 7,988 |
Financial investments | 854 | 622 | 290 | 475 | 102 | 1,232 | 2,298 | 8,504 | 14,377 |
Accrued income and other financial assets | 1,287 | 92 | 19 | 3 | 3 | — | — | — | 1,404 |
Total financial assets at 31 Dec 2021 | 135,185 | 8,331 | 11,341 | 10,045 | 7,001 | 19,198 | 35,541 | 105,492 | 332,134 |
Non-financial assets | — | — | — | — | — | — | — | 9,604 | 9,604 |
Total assets at 31 Dec 2021 | 135,185 | 8,331 | 11,341 | 10,045 | 7,001 | 19,198 | 35,541 | 115,096 | 341,738 |
Financial liabilities | |||||||||
Deposits by banks | 1,468 | 73 | 55 | 25 | 30 | 55 | 10,389 | — | 12,095 |
Customer accounts1 | 277,826 | 861 | 422 | 286 | 362 | 260 | 6 | — | 280,023 |
– personal | 174,723 | 558 | 267 | 209 | 274 | 258 | 4 | — | 176,293 |
– corporate and commercial | 98,743 | 287 | 102 | 46 | 87 | 2 | 2 | — | 99,269 |
– financial | 4,360 | 16 | 53 | 31 | 1 | — | — | — | 4,461 |
Repurchase agreements – non-trading | 9,938 | 500 | — | — | — | — | — | — | 10,438 |
Items in the course of transmission to other banks | 148 | — | — | — | — | — | — | — | 148 |
Derivatives | 172 | — | — | 1 | — | 18 | 22 | 79 | 292 |
Debt securities in issue | 250 | 275 | — | 150 | — | — | — | — | 675 |
Accruals and other financial liabilities | 1,066 | 167 | 20 | 13 | 12 | 44 | 88 | 45 | 1,455 |
Subordinated liabilities | — | — | — | — | — | 1,171 | 5,558 | 5,758 | 12,487 |
Total financial liabilities at 31 Dec 2021 | 290,868 | 1,876 | 497 | 475 | 404 | 1,548 | 16,063 | 5,882 | 317,613 |
Non-financial liabilities | — | — | — | — | — | — | — | 3,262 | 3,262 |
Total liabilities at 31 Dec 2021 | 290,868 | 1,876 | 497 | 475 | 404 | 1,548 | 16,063 | 9,144 | 320,875 |
Off-balance sheet commitments given | |||||||||
Loan and other credit-related commitments | 56,733 | — | — | — | — | — | — | — | 56,733 |
– personal | 29,223 | — | — | — | — | — | — | — | 29,223 |
– corporate and commercial | 26,743 | — | — | — | — | — | — | — | 26,743 |
– financial | 767 | — | — | — | — | — | — | — | 767 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 117 |
Due not more than 1 month | Due over 1 month but not more than 3 months | Due over 3 months but not more than 1 year | Due over 1 year but not more than 5 years | Due over 5 years | Total | |
The group | £m | £m | £m | £m | £m | £m |
Deposits by banks | 406 | 57 | 121 | 10,942 | — | 11,526 |
Customer accounts | 275,781 | 2,561 | 2,401 | 370 | — | 281,113 |
Repurchase agreements – non-trading | 9,346 | — | — | — | — | 9,346 |
Derivatives | 84 | 16 | 286 | 308 | 354 | 1,048 |
Debt securities in issue | 44 | 405 | 173 | 882 | — | 1,504 |
Subordinated liabilities | 29 | 56 | 1,485 | 7,369 | 4,683 | 13,622 |
Other financial liabilities | 2,174 | 326 | 335 | 584 | 39 | 3,458 |
287,864 | 3,421 | 4,801 | 20,455 | 5,076 | 321,617 | |
Loan and other credit-related commitments | 70,263 | 39 | 10 | 148 | 23 | 70,483 |
Financial guarantees | 1,148 | — | — | — | — | 1,148 |
At 31 Dec 2022 | 359,275 | 3,460 | 4,811 | 20,603 | 5,099 | 393,248 |
Proportion of cash flows payable in period % | 92 | 1 | 1 | 5 | 1 | 100 |
Deposits by banks | 862 | 18 | 2 | 10,310 | — | 11,192 |
Customer accounts | 279,674 | 861 | 1,071 | 265 | — | 281,871 |
Repurchase agreements – non-trading | 9,938 | 500 | — | — | — | 10,438 |
Derivatives | 171 | 19 | — | 135 | 354 | 679 |
Debt securities in issue | 250 | 282 | 169 | 324 | — | 1,025 |
Subordinated liabilities | 24 | 48 | 216 | 7,588 | 5,856 | 13,732 |
Other financial liabilities | 1,262 | 170 | 50 | 154 | 54 | 1,690 |
292,181 | 1,898 | 1,508 | 18,776 | 6,264 | 320,627 | |
Loan and other credit-related commitments | 70,205 | 1 | 52 | 182 | — | 70,440 |
Financial guarantees | 1,102 | — | — | — | — | 1,102 |
At 31 Dec 2021 | 363,488 | 1,899 | 1,560 | 18,958 | 6,264 | 392,169 |
Proportion of cash flows payable in period % | 93 | — | — | 5 | 2 | 100 |
The bank | ||||||
Deposits by banks | 925 | 78 | 289 | 11,145 | — | 12,437 |
Customer accounts | 274,261 | 2,561 | 2,401 | 370 | — | 279,593 |
Repurchase agreements – non-trading | 9,346 | — | — | — | — | 9,346 |
Derivatives | 84 | 16 | 286 | 308 | 354 | 1,048 |
Debt securities in issue | 44 | 399 | 155 | 591 | — | 1,189 |
Subordinated liabilities | 29 | 56 | 1,485 | 7,369 | 4,683 | 13,622 |
Other financial liabilities | 2,106 | 319 | 330 | 576 | 35 | 3,366 |
286,795 | 3,429 | 4,946 | 20,359 | 5,072 | 320,601 | |
Loan and other credit-related commitments | 57,179 | — | — | — | — | 57,179 |
Financial guarantees | 1,148 | — | — | — | — | 1,148 |
At 31 Dec 2022 | 345,122 | 3,429 | 4,946 | 20,359 | 5,072 | 378,928 |
Proportion of cash flows payable in period % | 91 | 1 | 1 | 5 | 2 | 100 |
Deposits by banks | 1,468 | 73 | 112 | 10,455 | — | 12,108 |
Customer accounts | 277,827 | 861 | 1,071 | 265 | — | 280,024 |
Repurchase agreements – non-trading | 9,938 | 500 | — | — | — | 10,438 |
Derivatives | 171 | 19 | — | 135 | 354 | 679 |
Debt securities in issue | 250 | 275 | 151 | — | — | 676 |
Subordinated liabilities | 24 | 48 | 216 | 7,588 | 5,856 | 13,732 |
Other financial liabilities | 1,216 | 164 | 46 | 147 | 50 | 1,623 |
290,894 | 1,940 | 1,596 | 18,590 | 6,260 | 319,280 | |
Loan and other credit-related commitments | 56,733 | — | — | — | — | 56,733 |
Financial guarantees | 1,102 | — | — | — | — | 1,102 |
At 31 Dec 2021 | 348,729 | 1,940 | 1,596 | 18,590 | 6,260 | 377,115 |
Proportion of cash flows payable in period % | 92 | 1 | — | 5 | 2 | 100 |
118 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Amounts subject to enforceable netting arrangements | Amounts not subject to enforceable netting arrangements4 | Total | ||||||
Amounts not set off in the balance sheet | Net amount | |||||||
Gross amounts | Amounts offset | Net amounts in the balance sheet | Financial instruments, including non-cash collateral5 | Cash collateral | ||||
£m | £m | £m | £m | £m | £m | £m | £m | |
Financial assets | ||||||||
Derivatives (Note 9) | 2,708 | (2,162) | 546 | (288) | (234) | 24 | — | 546 |
Reverse repos, stock borrowing and similar agreements classified as: | ||||||||
– non-trading assets | 10,937 | (3,531) | 7,406 | (7,406) | — | — | — | 7,406 |
Loans and advances to customers2 | 5,555 | (2,175) | 3,380 | (2,786) | — | 594 | — | 3,380 |
At 31 Dec 2022 | 19,200 | (7,868) | 11,332 | (10,480) | (234) | 618 | — | 11,332 |
Derivatives (Note 9) | 801 | (737) | 64 | (49) | — | 15 | — | 64 |
Reverse repos, stock borrowing and similar agreements classified as: | ||||||||
– non-trading assets | 8,311 | (323) | 7,988 | (7,988) | — | — | — | 7,988 |
Loans and advances to customers2 | 5,018 | (1,977) | 3,041 | (2,457) | — | 584 | — | 3,041 |
At 31 Dec 2021 | 14,130 | (3,037) | 11,093 | (10,494) | — | 599 | — | 11,093 |
Financial liabilities | ||||||||
Derivatives1 (Note 9) | 2,466 | (2,162) | 304 | (41) | (218) | 45 | — | 304 |
Repos, stock lending and similar agreements classified as: | ||||||||
– non-trading liabilities | 12,864 | (3,531) | 9,333 | (9,333) | — | — | — | 9,333 |
Customer accounts3 | 9,057 | (2,175) | 6,882 | (2,786) | — | 4,096 | 2 | 6,884 |
At 31 Dec 2022 | 24,387 | (7,868) | 16,519 | (12,160) | (218) | 4,141 | 2 | 16,521 |
Derivatives1 (Note 9) | 1,029 | (737) | 292 | (33) | (261) | (2) | — | 292 |
Repos, stock lending and similar agreements classified as: | ||||||||
– non-trading liabilities | 10,761 | (323) | 10,438 | (10,438) | — | — | — | 10,438 |
Customer accounts3 | 7,673 | (1,977) | 5,696 | (2,457) | — | 3,239 | 1 | 5,697 |
At 31 Dec 2021 | 19,463 | (3,037) | 16,426 | (12,928) | (261) | 3,237 | 1 | 16,427 |
2022 | 2021 | |||
Number | £m | Number | £m | |
At 1 Jan and 31 Dec | 50,002 | — | 50,002 | — |
2022 | 2021 | |
£m | £m | |
At 31 Dec | 9,015 | 9,015 |
2022 | 2021 | |
£m | £m | |
At 31 Dec | 9,015 | 9,015 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 119 |
2022 | 2021 | ||
£m | £m | ||
£1,096m | Undated Subordinated Additional Tier 1 instrument issued 2014 (Callable December 2019 onwards) | 1,096 | 1,096 |
£1,100m | Undated Subordinated Additional Tier 1 instrument issued 2014 (Callable December 2024 onwards) | 1,100 | 1,100 |
At 31 Dec | 2,196 | 2,196 | |
The group | The bank | |||
2022 | 2021 | 2022 | 2021 | |
£m | £m | £m | £m | |
Guarantees and other contingent liabilities: | ||||
– financial guarantees1 | 1,148 | 1,102 | 1,148 | 1,102 |
– performance and other guarantees | 2,530 | 2,192 | 2,530 | 2,192 |
At 31 Dec | 3,678 | 3,294 | 3,678 | 3,294 |
Commitments2: | ||||
– documentary credits and short-term trade-related transactions | 52 | 134 | 52 | 134 |
– forward asset purchases and forward deposits placed | 327 | 236 | 102 | — |
– standby facilities, credit lines and other commitments to lend | 70,104 | 70,071 | 57,025 | 56,599 |
At 31 Dec | 70,483 | 70,441 | 57,179 | 56,733 |
120 | HSBC UK Bank plc Annual Report and Accounts 2022 |
2022 | 2021 | |||||
Total future minimum payments | Unearned finance income | Present Value | Total future minimum payments | Unearned finance income | Present Value | |
£m | £m | £m | £m | £m | £m | |
Lease receivables1 | ||||||
– No later than one year | 1,256 | (87) | 1,169 | 1,232 | (61) | 1,171 |
– One to two years | 878 | (62) | 816 | 818 | (41) | 777 |
– Two to three years | 680 | (40) | 640 | 553 | (27) | 526 |
– Three to four years | 387 | (24) | 363 | 353 | (16) | 337 |
– Four to five years | 176 | (14) | 162 | 177 | (10) | 167 |
– Later than 5 years | 330 | (57) | 273 | 314 | (52) | 262 |
31 Dec2 | 3,707 | (284) | 3,423 | 3,447 | (207) | 3,240 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 121 |
2022 | 2021 | |
£000 | £000 | |
Short-term employee benefits | 9,306 | 8,009 |
Post-employment benefits | 12 | 10 |
Other long-term employee benefits | 1,179 | 520 |
Share-based payments | 2,046 | 1,231 |
Year ended 31 Dec | 12,543 | 9,770 |
2022 | 2021 | |||
Balance at 31 Dec | Highest amounts outstanding during year | Balance at 31 Dec | Highest amounts outstanding during year | |
£m | £m | £m | £m | |
Advances and credits | 10 | 11 | 12 | 13 |
Deposits | 8 | 27 | 8 | 27 |
2022 | 2021 | |
Balance at 31 Dec | Balance at 31 Dec | |
£000 | £000 | |
Loans | 6,677 | 6,785 |
2022 | 2021 | |||
Balance at 31 Dec | Highest amounts outstanding during the year | Balance at 31 Dec | Highest amounts outstanding during the year | |
£m | £m | £m | £m | |
Advances and credits | 2 | 6 | 6 | 8 |
Deposits | 12 | 30 | 13 | 18 |
2022 | 2021 | |||
Balance at 31 Dec | Highest balance during the year | Balance at 31 Dec | Highest balance during the year | |
£m | £m | £m | £m | |
Unsubordinated amounts due from the joint venture | 74 | 115 | 70 | 114 |
Amounts due to joint venture | 42 | 43 | 33 | 75 |
Guarantees and commitments | 219 | 244 | 107 | 294 |
122 | HSBC UK Bank plc Annual Report and Accounts 2022 |
2022 | 2021 | |||||||
Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc | Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc | |||||
31 Dec | Highest balance | 31 Dec | Highest balance | 31 Dec | Highest balance | 31 Dec | Highest balance | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Assets | ||||||||
Derivatives | — | — | 49 | 161 | — | — | 31 | 87 |
Loans and advances to banks | — | — | 528 | 872 | — | — | 827 | 932 |
Reverse repos | — | — | — | 3,085 | — | — | — | 213 |
Prepayments and accrued income | — | — | 9 | 17 | — | — | 2 | 27 |
Other assets | 1 | 1 | 935 | 935 | — | 2 | 180 | 284 |
Total related party assets at 31 Dec | 1 | 1 | 1,521 | 5,070 | — | 2 | 1,040 | 1,543 |
Liabilities | ||||||||
Deposits by banks | — | — | 378 | 1,238 | — | — | 795 | 1,250 |
Customer accounts | — | — | 2,104 | 2,104 | — | — | 1 | 4 |
Repos | — | — | 511 | 1,610 | — | — | 126 | 126 |
Other liabilities | 40 | 40 | 278 | 432 | 32 | 95 | 138 | 190 |
Accruals & Deferred Income | 89 | 140 | 5 | 40 | 71 | 98 | 4 | 97 |
Derivatives | — | — | 42 | 84 | — | — | 66 | 145 |
Subordinated liabilities | 12,349 | 12,648 | — | — | 12,487 | 12,590 | — | 10,015 |
Total related party liabilities at 31 Dec | 12,478 | 12,828 | 3,318 | 5,508 | 12,590 | 12,783 | 1,130 | 11,827 |
Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc | |||
2022 | 2021 | 2022 | 2021 | |
£m | £m | £m | £m | |
Income statement | ||||
Interest income | — | — | 5 | (3) |
Interest expense | 325 | 181 | 4 | 83 |
Fee income | — | — | 80 | 66 |
Fee expense | — | — | 48 | 45 |
Other operating income | — | — | 11 | 11 |
General and administrative expenses | 48 | 40 | 1,823 | 1,783 |
2022 | 2021 | |||||||||||
Due to/from subsidiaries of HSBC UK Bank plc subsidiaries | Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc | Due to/from subsidiaries of HSBC UK Bank plc subsidiaries | Due to/from HSBC Holdings plc | Due to/from subsidiaries of HSBC Holdings plc | |||||||
31 Dec | Highest balance | 31 Dec | Highest balance | 31 Dec | Highest balance | 31 Dec | Highest balance | 31 Dec | Highest balance | 31 Dec | Highest balance | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
Assets | ||||||||||||
Derivatives | — | — | — | — | 49 | 161 | — | — | — | — | 31 | 87 |
Loans and advances to banks | 2,953 | 2,966 | — | — | 527 | 871 | 2,495 | 2,500 | — | — | 827 | 932 |
Loans and advances to customers | 8,232 | 8,313 | — | — | — | — | 6,822 | 6,822 | — | — | — | — |
Reverse repos | — | — | — | — | — | 3,085 | — | — | — | — | — | 213 |
Prepayments and accrued income | 37 | 37 | — | — | 9 | 17 | 12 | 15 | — | — | 2 | 27 |
Other assets | 1,040 | 1,068 | 1 | 1 | 935 | 935 | 1,029 | 1,042 | — | 2 | 179 | 284 |
Total related party assets at 31 Dec | 12,262 | 12,384 | 1 | 1 | 1,520 | 5,069 | 10,358 | 10,379 | — | 2 | 1,039 | 1,543 |
Liabilities | ||||||||||||
Deposits by banks | 898 | 1,053 | — | — | 378 | 1,238 | 915 | 1,927 | — | — | 795 | 1,250 |
Customer accounts | 381 | 381 | — | — | 2,104 | 2,104 | 339 | 379 | — | — | 1 | 1 |
Repos | — | — | — | — | 511 | 1,610 | — | — | — | — | 126 | 126 |
Derivatives | — | — | — | — | 42 | 84 | — | — | — | — | 66 | 145 |
Other liabilities | 11 | 23 | 40 | 40 | 274 | 428 | 17 | 39 | 32 | 95 | 134 | 182 |
Accruals & Deferred Income | 5 | 10 | 89 | 140 | 5 | 40 | 3 | 7 | 71 | 98 | 4 | 97 |
Subordinated liabilities | — | — | 12,349 | 12,648 | — | — | — | — | 12,487 | 12,590 | — | 9,936 |
Total related party liabilities at 31 Dec | 1,295 | 1,467 | 12,478 | 12,828 | 3,314 | 5,504 | 1,274 | 2,352 | 12,590 | 12,783 | 1,126 | 11,737 |
HSBC UK Bank plc Annual Report and Accounts 2022 | 123 |
124 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Subsidiaries | % of share class held by immediate parent company (or by HSBC UK Bank plc where this varies) | Footnotes |
Assetfinance December (F) Limited | 100.00 | 3 |
Assetfinance June (D) Limited | 100.00 | 3 |
Assetfinance March (D) Limited | 100.00 | 3 |
Assetfinance September (G) Limited | 100.00 | 3 |
B&Q Financial Services Limited | 100.00 | 1, 4 |
Canada Square Nominees (UK) Limited | 100.00 | 1, 4 |
HSBC Bank Pension Trust (UK) Limited | 100.00 | 1, 4 |
HSBC Branch Nominee (UK) Limited | 100.00 | 1, 3 |
HSBC UK Covered Bonds LLP | N/A | 0, 3 |
HSBC Equipment Finance (UK) Limited | 100.00 | 1, 3 |
HSBC Executor & Trustee Company (UK) Limited | 100.00 | 3 |
HSBC Finance Limited | 100.00 | 1, 4 |
HSBC Invoice Finance (UK) Limited | 100.00 | 1, 3 |
HSBC Private Bank (UK) Limited | 100.00 | 1, 4 |
HSBC Trust Company (UK) Limited | 100.00 | 1, 4 |
HSBC UK Client Nominee Limited | 100.00 | 1, 3 |
HSBC Wealth Client Nominee Limited | 100.00 | 1, 3 |
John Lewis Financial Services Limited | 100.00 | 1, 4 |
Marks and Spencer Financial Services plc | 100.00 | 1, 6 |
Marks and Spencer Unit Trust Management Limited | 100.00 | 1, 6 |
Midland Bank (Branch Nominees) Limited | 100.00 | 1, 3 |
Midland Nominees Limited | 100.00 | 3 |
St Cross Trustees Limited | 100.00 | 3 |
Turnsonic (Nominees) Limited | 100.00 | 3 |
Joint venture | % of share class held by immediate parent company (or by HSBC UK Bank plc where this varies) | Footnotes | |
Vaultex UK Limited | 50.00 | 2, 7 | |
Footnotes | |
0 | Where an entity is governed by voting rights, HSBC consolidates when it holds – directly or indirectly – the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power to direct relevant activities, and whether power is held as an agent or principal. HSBC’s consolidation policy is described in Note 1.2(a) |
1 | Directly held by HSBC UK Bank plc |
2 | Financial year ended 30 September 2022 |
Registered Offices | |
3 | 1 Centenary Square, Birmingham, United Kingdom, B1 1HQ |
4 | 8 Canada Square, London, United Kingdom, E14 5HQ |
5 | 21 Farncombe Road, Worthing, United Kingdom, BN11 2BW |
6 | Kings Meadow Chester Business Park, Chester, United Kingdom, CH99 9FB |
7 | All Saints Triangle, Caledonian Road, London, United Kingdom, N1 9UT |
HSBC UK Bank plc Annual Report and Accounts 2022 | 125 |
Year ended | ||
31 Dec | 31 Dec | |
2022 | 2021 | |
$m | $m | |
Profit | ||
Profit attributable to the ordinary shareholders of the parent company | 3,385 | 3,090 |
Significant items (net of tax) | 341 | 280 |
Adjusted profit attributable to the ordinary shareholders of the parent company | 3,726 | 3,370 |
Equity | ||
Average shareholders’ equity | 28,757 | 31,541 |
Additional Tier 1 | (2,722) | (2,999) |
Average ordinary shareholders’ equity | 26,035 | 28,542 |
Effect of goodwill and other intangibles (net of deferred tax) | (5,249) | (5,680) |
Average tangible ordinary shareholders' equity | 20,786 | 22,862 |
Ratio | % | % |
Return on equity | 13.0 | 10.8 |
Return on average tangible equity | 16.3 | 13.5 |
Adjusted return on average tangible equity1 | 17.9 | 14.7 |
126 | HSBC UK Bank plc Annual Report and Accounts 2022 |
Currencies | |
£ | British pound sterling |
€ | Euro |
$ | United States dollar |
Abbreviations | |
A | |
AGM | Annual General Meeting |
AIEA | Average interest-earning assets |
ALCO | Asset and Liability Management Committee |
AML | Anti-money laundering |
AT1 | Additional tier 1 |
B | |
Basel | Basel Committee on Banking Supervision |
Basel III | Basel Committee’s reforms to strengthen global capital and liquidity rules |
BB | Business Banking |
BoE | Bank of England |
Bps | Basis points. One basis point is equal to one hundredth of a percentage point |
C | |
CAPM | Capital asset pricing model |
CBDC | Central Bank Digital Currencies |
CBES | Climate Biennial Exploratory Scenario |
CEO | Chief Executive Officer |
CET1 | Common equity tier 1 |
CFO | Chief Financial Officer |
CGU | Cash-generating Unit |
CMB | Commercial Banking |
CODM | Chief Operating Decision Maker |
CRR | Customer risk rating |
CRR II | Revised Capital Requirements Regulation and Directive, as implemented |
CPI | Consumer Price Index |
D | |
DBS | Digital Business Services |
DCF | Discounted cash flows |
DPD | Days past due |
DRA | Dynamic Risk Assessment |
E | |
EAD | Exposure at default |
EBA | European Banking Authority |
EC | European Commission |
ECL | Expected credit losses. In the income statement, ECL is recorded as a change in expected credit losses and other credit impairment charges. In the balance sheet, ECL is recorded as an allowance for financial instruments to which only the impairment requirements in IFRS 9 are applied. |
EIR | Effective interest rate |
Eonia | Euro Overnight Index Average |
ESG | Environmental, social and governance |
EU | European Union |
Euribor | Euro interbank offered rate |
EVE | Economic value of equity |
EPC | Energy Performance Certificate |
F | |
FCA | Financial Conduct Authority (UK) |
FSCS | Financial Services Compensation Scheme |
FTE | Full-time equivalent staff |
FVOCI | Fair value through other comprehensive income |
FX | Foreign exchange |
FY | Full Year |
G | |
GAAP | Generally accepted accounting principles |
GBM | Global Banking and Markets |
GDP | Gross domestic product |
GMP | Guaranteed Minimum Pension |
GPSP | Group Performance Share Plans |
group | HSBC UK Bank plc together with its subsidiary undertakings |
Group | HSBC Holdings plc together with its subsidiary undertakings |
GTRF | Global Trade and Receivables Finance |
H | |
HQLA | High-quality liquid assets |
HSBC Group | HSBC Holdings plc together with its subsidiary undertakings |
HSBC Holdings plc | HSBC Holdings plc, the parent company of HSBC UK |
HSBC UK | HSBC UK Bank plc together with its subsidiary undertakings |
HIF | HSBC Invoice Finance (UK) Limited |
HEF | HSBC Equipment Finance (UK) Limited |
HR | Human Resources |
I | |
IAS | International Accounting Standards |
IASB | International Accounting Standards Board |
Ibor | Interbank offered rate |
ICAAP | Internal capital adequacy assessment process |
IFRSs | International Financial Reporting Standards |
ILAAP | Internal liquidity adequacy assessment process |
IRRBB | Interest rate risk in the banking book |
IRB | Internal ratings-based |
IT | Information technology |
K | |
KMP | Key management personnel |
KPI | Key performance indicator |
L | |
LC | Large Corporates |
LCR | Liquidity coverage ratio |
LFRF | Liquidity and Funding Risk management Framework |
LGD | Loss given default |
Libor | London interbank offered rate |
LTI | Long-term incentive |
LTV | Loan to value |
M | |
MME | Mid-Market Enterprises |
MREL | EU minimum requirements for own funds and eligible liabilities |
M&S | Marks and Spencer Financial Services plc |
N | |
NII | Net interest income |
NPS | Net Promoter Score |
NSFR | Net stable funding ratio |
Neon | Neon Portfolio Distribution DAC |
O | |
OCI | Other comprehensive income |
P | |
PD | Probability of default |
PLCA | Purpose Led Conduct Approach |
POCI | Purchased or originated credit impaired |
PPA | Power Purchase Agreement |
PPI | Payment protection insurance |
PRA | Prudential Regulation Authority |
PwC | PricewaterhouseCoopers LLP and its network of firms |
R | |
RAS | Risk Appetite Statement |
Revenue | Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit provisions, also referred to as revenue |
RFR | Risk-free rate |
RMM | Risk Management Meeting |
RoE | Return on average ordinary shareholders’ equity |
RoTE | Return on average tangible equity |
HSBC UK Bank plc Annual Report and Accounts 2022 | 127 |
RPI | Retail Price Index |
RWA | Risk-weighted asset |
S | |
SBB | Small Business Banking |
SICR | Significant increase in credit risk |
SME | Small and medium-sized enterprise |
SOFR | Secured Overnight Financing Rate |
Sonia | Sterling Overnight Index Average |
SPPI | Solely payments of principal and interest |
STD | Standardised Approach |
U | |
UK | United Kingdom |
US | United States of America |
V | |
VaR | Value at risk |
VAT | Value-added tax |
VIU | Value in use |
W | |
WPB | Wealth and Personal Banking |
Y | |
YoY | Year-on-year |
128 | HSBC UK Bank plc Annual Report and Accounts 2022 |