Standard Chartered Regulatory News (STAN)

Standard Chartered PLC - Half Year Results 2022 - Part 1

Table of contents

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

The information within this report is unaudited.

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

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

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

Page 1

Standard Chartered PLC - Results for the first half and second quarter ended30 June 2022

All figures are presented on an underlying basis and comparisons are made to 2021 on a reported currency basis, unless otherwise stated. A reconciliation of restructuring and other items excluded from underlying results is set out below.

Bill Winters, Group Chief Executive, said:

"We've posted a strong set of results for the first half of the year, with income up 10% on a normalised basis, supported by continued positive momentum in the second quarter, in which we grew income 11%. We remain disciplined on expenses, with significant savings delivered and maintained a strong capital position, with a CET1 ratio of 13.9%. We are also announcing today a new $500m share buy-back to start imminently. We remain confident in the delivery of the financial targets we set out in February."

Update on the five strategic actions

• CCIB: drive improved returns: Income RoRWA up 110bps to 6.0%; FI income now 44% of CCIB, up 3%pts

• CPBB: transform profitability: Cost-to-income ratio improved 2%pts from FY'21 to 72%; $98m gross expense savings delivered in 1H'22; added over 350k new partnership clients

• Seize China opportunity: Record first half income for China onshore; strong network income growth in China-ASEAN corridor, up 36%, and China-South Asia, up 24% YoY

• Cost discipline to create operational leverage: $199m gross structural cost savings delivered in 1H'22

• Substantial shareholder distributions: CET1 ratio remains towards the top of our 13-14% target range; new $500m share buy-back to start imminently. $1.4bn total shareholder distributions announced so far this year

Sustainability

• Sustainable Finance income up 43% with 11% asset growth YoY

Selected information concerning financial performance (1H'22 unless otherwise stated)

• Return on tangible equity of 10.1%, up 20bps on 1H'21

• Income up 8% to $8.2bn, up 10% at constant currency (ccy) and excluding debit valuation adjustment (DVA) and normalising for the 2021 IFRS9 interest rate adjustment

- Net interest income up 12% at ccy

- Record half in Financial Markets, up $0.5bn or 18% at ccy and excluding DVA

- Continued positive momentum in Transaction Banking with income up 14% at ccy

- Wealth Management down $0.2bn or 16% at ccy

- 2Q'22 income up 6% YoY, or up 11% at ccy excluding DVA and normalising for the 2021 IFRS9 interest rate adjustment

- 2Q'22 Net interest margin (NIM) up 6bps QoQ to 1.35%, from rising interest rates

• Expenses increased 4% YoY to $5.3bn, or up 7% at ccy and up 6% at ccy excluding higher performance-related-pay accruals

- $199m gross expense savings more than offsetting increased investment spend in strategic initiatives and in Ventures

- Positive 2% income-to-cost jaws at ccy and excluding DVA, cost-to-income ratio down to 65%

• Credit impairment charge of $267m, up $314m YoY; 2Q'22 down $133m QoQ

- Includes $237m relating to China CRE stage 3 exposures and $70m for the foreign currency sovereign grading downgrade of Sri Lanka

- Management overlay down $129m in 1H'22; total now $216m; COVID-19 overlay $90m and China CRE overlay $126m

- High-risk assets up $0.4bn in 1H'22, driven by an increase in Early Alert accounts

• Underlying profit before tax up 7% at ccy to $2.8bn; statutory profit before tax up 10% at ccy to $2.8bn

• Tax charge of $684m: underlying effective tax rate of 24.6% up 0.5%pts due to a change in the geographic mix of profits

• The Group's balance sheet remains liquid and well diversified

- Customer loans and advances down $2bn or 1% since 31.03.22, up $5bn or 2% excluding FX and RWA optimisation actions

- Advances-to-deposit ratio 59.6% (31.03.22: 60.0%); liquidity coverage ratio 142% (31.03.22: 140%)

• Risk-weighted assets (RWA) of $255bn down $16bn since 31.12.21

- Credit RWA down $14bn: $8bn of asset growth & mix, $6bn adverse regulatory changes, offset by $14bn efficiency actions, $8bn favourable FX impact and $6bn positive credit migration

- Market risk RWA down $2bn to $23bn; Operational risk RWA broadly flat

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• The Group remains strongly capitalised

- CET1 ratio 13.9% (31.12.21: 14.1%): Profits and lower RWAs offset by 100bps of regulatory changes, $750m share buy-back programme and 50bps from FVOCI due to impact of rising yields on Treasury securities portfolio

- Interim ordinary dividend of $119m; equivalent to 4c per share

- $500m share buy-back starting imminently is expected to reduce the CET1 ratio by approximately 20bps

• Earnings per share increased 5.1 cents or 9% to 63.4 cents

2022 Outlook

The start to 2022 has been strong, albeit external conditions remain difficult to predict. Taking account of current performance and the external environment, our updated guidance for FY'22 that we expect is:

• Income ex-DVA growth of around 10% at constant currency; adverse currency translation impact estimated at $0.4bn

• Further NIM progression in the second half of the year taking the outlook for the full year average to be around 140bps and 160bps for 2023

• Expenses ex-UK bank levy of around $10.6bn; inclusive of favourable currency translation impact currently estimated at $0.3bn

• Risk-weighted assets to be broadly similar to FY'21 on a constant currency basis

• Credit impairment to normalise towards the medium-term loan-loss rate of 30-35bps

• To operate dynamically within the full 13-14% CET1 target range

We are on track to deliver 10% return on tangible equity by 2024 if not earlier.

Page 3

Statement of results

1 Variance is better/(worse) other than assets, liabilities and risk-weighted assets. Change is percentage points difference between two points rather than percentage change for total capital ratio (%), common equity tier 1 ratio (%), net interest margin (%), advances-to-deposits ratio (%), liquidity coverage ratio (%), UK leverage ratio (%). Change is cents difference between two points rather than percentage change for earnings per share, net asset value per share and tangible net asset valueper share

2 Profit/(loss) attributable to ordinary shareholders is after the deduction of dividends payable to the holders of non-cumulative redeemable preference shares and Additional Tier 1 securities classified as equity

3 When calculating this ratio, total loans and advances to customers excludes reverse repurchase agreements and other similar secured lending, excludes approved balances held with central banks, confirmed as repayable at the point of stress and includes loans and advances to customers held at fair value through profit and loss. Total customer accounts include customer accounts held at fair value through profit or loss

4 Represents the underlying or statutory earnings divided by the basic weighted average number of shares. Prior period refers to 6 months ended 30.06.21

5 Calculated on period end net asset value, tangible net asset value and number of shares

Page 4

Group Chief Executive's review

Strong performance in difficult conditions

We've posted a strong set of results for the first half of the year, with income up 10 per cent on a normalised constant currency basis, supported by continued positive momentum in the second quarter in which we grew income 11 per cent. We also generated a 10.1 per cent return on tangible equity (RoTE). We've seen healthy business momentum driving top line growth with a record Financial Markets performance and double-digit growth in net interest income. We will pay an increased interim dividend of $119 million equal to 4 cents per share. We are also announcing today a new share buy-back of $500 million, to start imminently, as we actively manage our capital with the aim of returning in excess of $5 billion to shareholders over the next three years.

We've achieved this by actively supporting our clients and communities in what continue to be difficult conditions. The external environment is likely to remain challenging in light of the Russia/Ukraine war, the continuing impacts of COVID-19 and widespread supply chain disruptions. Recession risks are rising in the US and Europe as central banks are compelled to raise interest rates to address the rapid and sizeable increases in inflation.

However, in the East, many of the markets in which we operate are in the early stages of a post-pandemic recovery. China is deploying strong policy stimulus that should help kick-start the economy so boosting domestic and regional activity. We are well equipped to navigate this complex macroeconomic picture with the solid risk-management foundations that the Group has built over time and the resilience of our diversified business model.

Against this backdrop, we remain confident in the delivery of the financial and strategic targets laid out back in February, to deliver at least a 10 per cent RoTE by 2024, if not earlier.

Our five strategic actions

In February we set out five strategic actions to help us achieve our 2024 targets.

Since then we have seen geopolitical and macroeconomic volatility that has adversely impacted the global economic environment. It appears at this stage that our markets have been less impacted than those in the West, and several are rebounding well from the COVID-19 pandemic. And you can see this coming through in our results. The five strategic actions remain highly appropriate and serve as catalysts for the whole organisation. I am extremely pleased with the progress that we have made since we made these commitments.

CCIB: drive improved returns

In CCIB we are going to drive improved returns, targeting an improvement in Income return on risk weighted assets by 160 basis points. In the first six months of the year, Income return on risk weighted assets was 6.0 per cent, already a 110 basis points improvement from 2021. This was driven by strong growth in income from Financial Institution clients, up 16 per cent, which now accounts for 44 per cent of CCIB income. In addition, the CCIB team successfully delivered around a third of their $22 billion 3-year RWA optimisation target, in the first half of the year, enabling the business to remain well under their RWA target for 2024.

CPBB: transform profitability

The CPBB team has made steady early progress on their journey to transform profitability, with the cost-to-income ratio down 2 percentage points so far this year to 72 per cent. Of the $500 million, three-year gross expenses saving target, CPBB is targeting to deliver $200 million in 2022 and has delivered half of that so far. Actions taken include a further 31 branch closures, and CPBB is executing plans to deliver the remainder of this year's target.

The business also continues to onboard a very healthy number of new clients through partners, with over 350,000 added so far this year. This is a key contributor in driving growth in the number of mass retail clients. As we go into the second half of 2022, CPBB should see tailwinds from both interest rates and hopefully an improving Wealth Management outlook should COVID-19 restrictions ease which will help the cost income ratio further.

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Seize China opportunity

China presents the Group with one of its biggest strategic opportunities over the coming years and our China business delivered its best ever first half income performance this year. Our CCIB business made good progress and China network income grew strongly along a number of key corridors in ASEAN, up 36 per cent and South Asia, up 24 per cent. We saw strong growth particularly in flows to Singapore, India and Bangladesh. In addition, there was strong growth in both sustainable finance income and income from new economy clients.

Unsurprisingly, our CPBB business in China has faced headwinds with large scale COVID-19 lockdowns and weaker market sentiment impacting Wealth Management. Despite this, we continue to make great progress with our focus on digital partnerships with a number of new launches including JD.com and WeBank.

The long-term prospects from the structural shifts relating to China opening its financial and capital markets remain intact. We believe we are in a unique position to capitalise on the significant opportunities from this opening, and are investing $50 million this year, in both onshore and offshore capabilities, as part of the overall $300 million three-year investment plan, to further strengthen our position.

Creating operational leverage

Expense efficiency is core to enabling us to create positive operating leverage, whilst creating capacity for us to continue investing into strategic initiatives, and here we have already delivered around $200 million of the $1.3 billion gross structural cost savings target.

Substantial shareholder distributions

Finally, we plan to return in excess of $5 billion of capital to our shareholders over the next three years and are dynamically managing our CET1 ratio within our 13 to 14 per cent target range. So far this year we have completed a $750 million share buy-back and have just announced a new $500 million buy-back which will start imminently. These buy-backs together with our $119 million interim dividend will put us on a good trajectory to deliver our $5 billion target.

Strategic priorities and the Network

At the start of 2021, we also set out our four strategic priorities; continue to grow our Network business, continue to grow our Affluent business, return to growth in Mass Retail and advance on all fronts of our Sustainability agenda. We are making good progress in every area.

Given the changing economic environment, I'll drill down a bit on our Network business. The Group's unique and differentiated network continues to be a source of competitive advantage through which we facilitate investment, trade and capital flows for our clients. Network income, that is income booked outside a client's headquarter country, is around 55 per cent of CCIB income and is up strongly so far this year, with 14 per cent year-on-year growth, with all of our main trade corridors showing good progress.

Network income is highly attractive for us. It produces higher returns for the Group, with an Income return on risk weighed assets of 7.2 per cent, 120 basis points higher than the CCIB average. Asia is the largest originator of Network income, with $1.1 billion of income for the first six months of the year, which was up 14 per cent. Intra-Asia corridors account for around three quarters of this, with growth of 10 per cent, with China being the largest single network market. The fastest growing regional corridor out of Asia was East to West, which was up 39 per cent.

Europe and Americas Network income of $1 billion was up 10 per cent, with more than half into Asia, with particularly strong growth in the ASEAN and South Asia corridors, up 22 per cent. Lastly, Africa and Middle East generates about $0.3 billion of Network income for the Group and is also an important corridor for Europe and Americas and Asia.

And whilst the overall Network picture is a positive for the Group, we are also taking action as we sharpen our focus on the most significant opportunities for growth, while also simplifying our business. To that end, back in April we announced that we are exiting the onshore operations in seven markets and focusing solely on the CCIB segment in two additional markets. This will allow us to refocus resources in the AME region into new markets, like Saudi Arabia and Egypt, as well as ongoing investments into several of our larger markets in sub-Saharan Africa, building on the strong corporate, retail and digital banking operations we have in those markets.

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Sustainability

We continue to see strong income momentum in our Sustainable Finance business with income up 43 per cent and asset growth of 11 per cent year-on-year. Our pipeline continues to build, and we remain confident in delivering our $1 billion income ambition in the medium term.

The Russia/Ukraine war is creating some negative sentiment for sustainable finance as companies and countries are having to switch supplies to meet their needs. Volatility and higher prices in core commodities will also impact supply chain issues at renewable companies. However, this is likely to accelerate the climate transition in the medium term, with energy independence now becoming a security issue.

I am excited by the appointment of Marisa Drew as our Chief Sustainability Officer (CSO). Marisa is a highly experienced CSO, and she will lead the newly created CSO organisation across sustainability strategy, client solutions and our net zero programme. We continue to implement our ambitious net zero pathway, including those enhancements we announced in March.

We are also continuing to demonstrate our thought leadership with the release of our 'Just in Time' report that investigated the cost and socio-economic implications of a net-zero carbon transition. Emerging markets are most in need of capital and require almost $95 trillion to effect their transition. The funding needed is significant and reaching net zero in our markets will therefore be no mean feat. However, we remain optimistic in our ability to play a pivotal role in supporting this just and sustainable transition.

Ventures

Lastly, looking at the new Ventures segment. We've built-up a diverse portfolio of over 30 ventures and 20 plus investments across six high conviction themes which provide optionality for our future and we are making meaningful progress across a number of areas.

We now have over 1.2 million customers across the various ventures, including over 350,000 customers in Mox, our Hong Kong virtual bank, up 100,000 in the second quarter alone. The total value of customer assets across the various platforms is now almost $2.5 billion with transaction flows of around $8 billion in the first six months of this year.

Our recently announced partnership with SBI Holdings will help us accelerate growth of Solv, the B2B digital marketplace for Micro, Small and Medium Enterprises.

We also have in the pipeline some exciting new ventures that are close to launch. Trust, our second separately licenced digital bank in Asia, in partnership with NTUC is in beta testing and plans to go-live in the next couple of months. Our plug-and-play banking as a service solution, Nexus, now has regulatory approval for launch in Indonesia, which is planned imminently, and we are looking at expanding this to a second market. We will provide further updates in the year.

As you can see, since its creation, Ventures has come a long way, with promising future potential.

Concluding remarks

We've delivered a strong financial performance in the first half of the year and we are making very encouraging early progress against the five strategic actions we laid out in February. Looking forward, whilst recession risks are rising inthe West, we are seeing the early stages of a post-pandemic recovery in many of the markets in which we operate, underpinning our prospects for growth. We have the right strategy, business model and ambition to deliver our 2024targets. The Management Team and I remain focused on delivering these targets while we create exceptional long-term value for the Group.

Bill Winters

Group Chief Executive

Page 7

Group Chief Financial Officer's review

The Group delivered a strong performance in the first six months of 2022

Summary of financial performance

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

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

3 Not meaningful

Summary of Statutory financial performance

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

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

3 Not meaningful

Page 8

The Group delivered a strong performance in the first half of 2022 as underlying profit before tax increased 7 per cent on a constant currency basis despite a non-recurrence of last year's net impairment release. Income grew 10 per cent on a constant currency basis excluding positive movements in Debit Valuation Adjustment (DVA) and adjusting for the non-repeat of 2021's IFRS9 interest income catch-up adjustment (IFRS9 adjustment). Volatile market conditions led to increased client demand for our Financial Markets capabilities and rising interest rates supported a strong expansion in the net interest margin. The Group generated 2 per cent positive income-to-cost jaws at constant currency excluding DVA as expenses rose 7 per cent on a constant currency basis. Credit impairment charges were equivalent to an annualised loan loss rate of 15 basis points, well below our medium-term guidance of 30 to 35 basis points. The Group remains well capitalised and highly liquid. The liquidity coverage ratio at 142 per cent is well above minimum regulatory requirements. The CET1 ratio of 13.9 per cent remains towards the top end of the 13 to 14 per cent target range, despite the completion a $750 million share buy-back programme announced in February, benefiting from a 6 per cent reduction in risk-weighted assets since 31 December 2021, enabling the imminent commencement of a new $500 million share buy-back programme.

• Operating income increased 8 per cent in the first half and was up 10 per cent on a constant currency basis excluding both a $121 million positive movement in DVA and the prior year $50 million IFRS9 adjustment. A record Financial Markets performance and an expansion in the net interest margin were partly offset by lower Wealth Management income

• Net interest income increased 8 per cent or 13 per cent on a constant currency basis and adjusting for the non-recurrence of 2021's IFRS9 adjustment. The net interest margin is 10 basis points higher year-on-year benefiting from rising interest rates

• Other income increased 7 per cent on both a reported basis and constant currency basis excluding the impact of positive movements in DVA, with a strong Financial Markets performance including $202 million from gains on mark-to-market liabilities from widening funding spreads. This was partially offset by lower Wealth Management income and reduced realisation gains within Treasury

• Operating expenses excluding the UK bank levy increased 4 per cent or 7 per cent on a constant currency basis. Expenses were up due to an increase in performance-related pay accruals, salary increases, and higher investment spend as the Group continued to develop its transformational digital capabilities. The cost-to-income ratio decreased 2 percentage points to 65 per cent excluding DVA and UK bank levy and the Group generated 2 per cent positive income-to-cost jaws at constant currency excluding DVA

• Credit impairment was a charge of $267 million, compared to a $47 million net release in the first half of 2021, representing an annualised loan loss rate of 15 basis points. Impairment charges relating to China Commercial Real Estate Stage 3 exposures totalled $237 million and there was a $70 million charge due to Sri Lanka's foreign currency sovereign grading downgrade. This is partly offset by a net $129 million release of management overlays. The remaining management overlay now totals $216 million with $90 million relating to COVID-19 and $126 million in relation to the China Commercial Real Estate sector

• Other impairment of $2 million, a reduction of $23 million, as a result of no further impairment charges relating to the aviation leasing portfolio

• Profit from associates and joint ventures increased 14 per cent to $153 million due to increased profits at China Bohai Bank

• Charges relating to restructuring decreased $78 million to $45 million, reflecting a non-recurrence of expenses relating to moving to new ways of working during COVID-19

• Taxation was $684 million on a statutory basis with an underlying year-to-date effective tax rate of 24.6 per cent, marginally up from the 1H'21 rate of 24.1 per cent reflecting a change in the geographic mix of profits

• Underlying return on tangible equity (RoTE) increased by 20 basis points to 10.1 per cent. Prior period RoTE has been restated to reflect a change in methodology in computing RoTE, with the change in the equity valuation of the Group's Ventures portfolio now incorporated as a normalising item to the profit in the period. This captures the change in the value of the Group's Ventures portfolio within the Group's primary return metric. This has increased the RoTE for 1H'21 from the previously reported 9.3 per cent to 9.9 per cent. The change in methodology has not had a material impact on the current period's RoTE. The 20 basis points increase year-on-year results from lower tangible equity reflecting shareholder distributions including share buy-backs, and adverse movements in reserves due to movements in interest rates and FX. Increased profits year-on-year are offset by the non-repeat of an unrealised gain in the prior year in relation to the valuation of the Ventures portfolio

Page 9

Operating income by product

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

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

3 Income related to Group Special Asset Management, the Group's specialist recovery unit previously reported in Other products has been allocated to the relevant products. Prior periods have been re-presented and there is no change in total income

4 Not meaningful

Transaction Banking income increased 11 per cent. Cash Management was up 22 per cent benefiting from margin expansion on the back of recent interest rate rises, balance sheet growth and increased fee income. Trade & Working Capital was down 1 per cent, but up 2 per cent excluding the impact of currency translation, with balance sheet growth offset by margin compression reflecting abundant market liquidity and a shift towards lower margin but more RWA efficient products.

Financial Markets income increased 20 per cent or 17 per cent excluding DVA and the non-repeat of the prior year IFRS9 adjustment. Macro trading increased 29 per cent with FX income delivering strong double-digit growth as macro events led to increased client demand and elevated volatility, widening bid-offer spreads. Commodities also delivered strong double-digit growth, including a record first quarter, when it benefited from volatility in energy prices, while Rates also recorded a double-digit increase in income. Credit Markets income decreased 9 per cent with strong growth in origination and distribution activities in tough market conditions more than offset by widening credit spreads. Structured Finance declined 14 per cent with lower fee income within Aviation Finance. Financing & Securities Services income increased 77 per cent, including $202 million from gains on mark-to-market liabilities which are expected to reverse once funding spreads normalise.

Lending and Portfolio Management income decreased 22 per cent, or 18 per cent excluding the impact of last years' IFRS9 adjustment, with RWA optimisation actions driving loan sale losses and a reduction in IPO-related lending.

Wealth Management income declined 18 per cent in comparison to a record performance in the first half of 2021. Customer sentiment became more risk-averse in volatile market conditions leading to lower transaction volumes as well as from the impact of COVID-19 restrictions, in particular in North Asia, resulting in a number of branch closures and lower footfall which negatively impacted face-to-face sales. Managed Investments income was down a third, there was a double-digit decline in Treasury Products income while Bancassurance income was flat. Negative market movements reduced assets under management volumes whilst net new sales remained positive albeit at a lower level than the first half of 2021.

Page 10

Retail Products income increased 6 per cent on a reported basis and was up 11 per cent on a constant currency basis. Deposits income increased 38 per cent as the higher interest rate environment widened margins and higher volumes when the impact of currency translation is excluded. Mortgages & Auto income declined 2 per cent on a constant currency basis with margin compression as a result of increased funding costs and lower fees due to a slowdown in sales in North Asia. Credit Cards & Personal Loans income was flat on a constant currency basis with strong growth in Credit Card balances offset by lower fee income, in particular in Hong Kong which has seen activity levels disrupted by COVID-19.

Treasury income increased 32 per cent, with net interest income up 75 per cent, benefiting from an increase in hedged balances and an increased return on assets as interest rates rose in several markets, partly offset by a $85 million reduction in realisation gains to $34 million.

Profit before tax by client segment and geographic region

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

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

3 Not meaningful

As part of the ongoing execution of its refreshed strategy, the Group has expanded and reorganised its reporting structure with the creation of a third client segment, Ventures, effective on 1 January 2022. Ventures is a consolidation of SC Ventures and its related entities as well as the Group's two majority-owned digital banks Mox in Hong Kong and Trust in Singapore. It is reported alongside the current client segments; Corporate, Commercial & Institutional Banking (CCIB) serving larger companies and institutions and Consumer, Private & Business Banking (CPBB) serving individual and business banking clients. There is no change to the regional reporting structure.

CCIB income increased 14 per cent, or 12 per cent excluding both movements in DVA and the prior year IFRS9 adjustment, with Financial Markets income up 17 per cent on a normalised basis and Cash Management income up 22 per cent. Profits grew 8 per cent with increased income partly offset by 5 per cent higher expenses and $332 million increase in credit impairment charges.

CPBB profit declined 16 per cent or 13 per cent on a constant currency basis. Income declined 3 per cent and was flat on a constant currency basis with lower Wealth Management income offset by increased Deposit income on the back of improved margins. Expenses increased 5 per cent on a constant currency basis while impairments reduced by $14 million.

Ventures loss increased to $151 million, reflecting the Group's continued investment in transformational digital initiatives with a 24 per cent increase in expenses.

Central & other items (segment) profit more than doubled to $281 million with income up 25 per cent due to higher Treasury income. Profits from China Bohai Bank also increased.

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Asia profits decreased 17 per cent with credit impairments increasing by $351 million reflecting charges relating to the China Commercial Real Estate sector and the foreign currency sovereign grading downgrade of Sri Lanka. A 4 per cent increase in income on a constant currency basis was offset by a 6 per cent increase in expenseson a constant currency basis.

Africa & Middle East profits increased 22 per cent to $581 million, our highest half-year profit performance in the last six years. Income increased 8 per cent on a constant currency basis and there was a $99 million net impairment release partly offset by 3 per cent increase in expenses on a constant currency basis.

Europe & Americas profit more than doubled as income grew 46 per cent, or 39 per cent excluding movements in DVA with a strong performance in Financial Markets including gains on mark-to-market liabilities from widening funding spreads. Expenses increased 9 per cent on a constant currency basis while the net release in impairments reduced by $33 million to $29 million.

Central & other items (region) recorded a loss of $330 million, a reduction of $39 million, with income increasing $30 million and a non-recurrence of prior year other impairment partly offset by a $17 million increase in expenses.

Adjusted net interest income and margin

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

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

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

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

Adjusted net interest income increased 10 per cent driven by an 8 per cent increase in the net interest margin which averaged 132 basis points in the first half, increasing 10 basis points year-on-year or 13 basis points adjusting for the non-repeat of 2021's catch-up IFRS9 interest income adjustment. The net interest margin increased 6 basis points quarter-on-quarter in the second quarter to 135 basis points:

• Average interest-earning assets declined 1 per cent in the quarter and were broadly flat excluding the impact of currency translation and RWA optimisation actions. Gross yields increased 29 basis points compared with the average in the prior quarter due to the impact of rising interest rates on customer loan pricing and on Treasury portfolio yields

• Average interest-bearing liabilities decreased 1 per cent in the quarter impacted by currency translation, whilst the rate paid on liabilities increased 24 basis points reflecting the impact of rising interest rates on the rate paid on Retail time deposits and Corporate deposits as well as the interest paid on Treasury external funding

Credit risk summary

Income Statement

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

Page 12

Balance sheet

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

2 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $7,894 million at 30 June 2022, $12,571 million at 31 March 2022, $7,331 million at 31 December 2021 and $4,584 million at 30 June 2021

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

Asset quality remained resilient in the half, with an improvement in a number of underlying credit metrics despite a year-on-year increase in the impairment charge. However, the Group continues to remain alert to an unpredictable and challenging external environment including the continued impact of COVID-19 in key markets, pressures in the China commercial real estate sector, commodity price volatility and the impact of the Russia/Ukraine war. This war in part contributed to both commodity price volatility and the accelerated trajectory of inflation and interest rate rises across our footprint, which in turn have supported both an increased risk of global recession and the appreciation of the US dollar versus the majority of developed and emerging market currencies.

Credit impairment was a $267 million charge in the first half, compared to a net $47 million release in the first half of 2021, and represents an annualised loan loss rate of 15 basis points which is below the Group's medium-term guidance of 30-35 basis points.

The $10 million release in stage 1 and 2 impairment reflects revised macroeconomic outlook, continued delinquency-related charge-offs and post model adjustments for multiple economic scenarios in CPBB offset by a net $129 million release from management overlays, $18 million of which was is in stage 3. There was a $160 million reduction in the COVID-19 element of the overlay partly offset by a $31 million increase in the element relating to the China Commercial Real Estate sector. Management overlays total $216 million as at 30 June 2022, with $126 million relating to the China Commercial Real Estate sector and the COVID-19 element totalling $90 million.

Stage 3 impairments of $277 million includes $237 million relating to China Commercial Real Estate exposures and $70 million relating to the foreign currency sovereign grading downgrade of Sri Lanka, partly offset by releases relating to select stage 3 provisions within CCIB.

Gross stage 3 loans and advances to customers of $7.1 billion were down $1 billion compared with 31 December 2021 primarily due to repayments, loan sales, client upgrades and write-offs partly offset by the foreign currency sovereign grading of Sri Lanka as Sri Lanka suspended external debt payments. These credit-impaired loans represented 2.4 per cent of gross loans and advances, a decrease of 30 basis points compared with 31 December 2021.

The stage 3 cover ratio of 61 per cent increased 3 percentage points compared with the position as at 31 December 2021, and the cover ratio post collateral at 80 per cent was up 5 percentage points, with both ratios increasing due to a few material accounts that were either upgraded or sold and additional stage 3 provisions.

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Credit grade 12 balances have more than halved since 31 December 2021 to $835 million reflecting the downgrade of foreign currency sovereign grading of Sri Lanka into stage 3 and client upgrades out of credit grade 12.

Early Alert accounts of $7.5 billion have increased by $2.0 billion since 31 December 2021, primarily relating to the volatility seen in the China Commercial Real Estate sector and uncertainties driven by the Russia/Ukraine war. The Group is continuing to carefully monitor its exposures in vulnerable sectors and select markets, given the unusual stresses caused by the currently challenging macro-economic environment.

The proportion of investment-grade corporate exposures has increased by 2 percentage points since 31 December 2021 to 71 per cent due to high-quality origination.

Restructuring, goodwill impairment and other items

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

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

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

Balance sheet and liquidity

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

2 The Group now excludes $16,918 million held with central banks (31.03.22: $11,970 million, 31.12.21: $15,168 million, 30.06.21: $16,213 million) that has been confirmed as repayable at the point of stress

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

• Loans and advances to banks were 18 per cent or $8 billion lower from 31 December 2021 to $36 billion due to a reduction in Treasury loans and Financial Institutions Trade loans

• Loans and advances to customers decreased 2 per cent since 31 December 2021 to $294 billion, but grew 4 per cent on an underlying basis, or $10 billion, excluding the impact of adverse currency translation and risk-weighted asset optimisation actions undertaken by CCIB in the half. The underlying growth was driven by an increase in Treasury and Trade loan balances

• Customer accounts of $454 billion declined 4 per cent since 31 December 2021 and were down an underlying $7 billion excluding the impact of currency translation due to client activities and management action resulting in the rolling off of certain non-operational deposits

• Other assets increased 4 per cent since 31 December 2021 with increased derivative balances and unsettled trade balances. Other liabilities increased 11 per cent from increased derivative liabilities, cash collateral liabilities and unsettled trade liabilities

The advances-to-deposits ratio increased to 59.6 per cent from 59.1 per cent at 31 December 2021 reflecting the outflow of customer accounts in the half. The liquidity coverage ratio decreased 1 percentage point to 142 per cent and remains well above the minimum regulatory requirement of 100 per cent.

Risk-weighted assets

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

Total risk-weighted assets (RWA) decreased 6 per cent or $16.2 billion since 31 December 2021 to $255.1 billion:

• Credit risk RWA decreased by $14.4 billion in the first half to $205.2 billion. There was a $8.1 billion reduction from currency translation, a $6.9 billion reduction in the CCIB low-returning portfolio targeted for optimisation, $7.5 billion from other RWA efficiency actions and $5.8 billion impact from positive credit migration. This was partly offset by a $5.8 billion increase from regulatory changes and $8.1 billion increase from a combination of asset growth and mix

• Operational risk RWA was broadly flat at $27.2 billion

• Market risk RWA decreased by $1.8 billion to $22.7 billion reflecting reduced standardised specific interest rate risk positions, and changes in value at risk methodology

Capital base and ratios

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

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

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The Group's CET1 ratio of 13.9 per cent was 28 basis points lower than at 31 December 2021, but 42 basis points above the CET1 ratio at 1 January 2022 when regulatory changes, which reduced the Group's CET1 ratio, came into force. The underlying 42 basis points increase reflects approximately 150 basis points uplift from the impact of RWA optimisation actions and profit accretion during the half despite funding a $750 million share buyback. The CET1 ratio is 3.7 percentage points above the Group's latest regulatory minimum of 10.2 per cent and towards the top of the 13-14 per cent medium-term target range.

The regulatory changes which came into force on 1 January 2022, include the cessation of software relief, the impact from the IRB model repair programme and the introduction of standardised rules for counterparty credit risk on derivatives and other instruments (SA-CCR). In aggregate, these regulatory changes resulted in a decrease in the CET1 ratio of approximately 70 basis points by reducing CET1 capital by $1.1 billion and increasing RWAs by $5.8 billion.

The CET1 ratio was reduced by 57 basis points from a reduction in reserves mainly relating to a reversal of prior year unrealised gains on debt securities as a result of higher market yields and movements in currency translation reducing both the translation reserve and RWAs.

The Board has recommended a proposed interim 2022 ordinary share dividend of 4 cents a share for the first half of the year which is calculated formulaically at one-third of the prior year's full-year dividend, reducing the CET1 ratio by approximately 4 basis points.

The Group spent $754 million purchasing 111 million ordinary shares of $0.50 each during the first half, representing a volume-weighted average price per share of £5.18. These shares were subsequently cancelled, reducing the total issued share capital by 4 per cent and the CET1 ratio by 27 basis points.

The Board has decided to carry out an additional share buy-back commencing imminently for up to a maximum consideration of $500 million to further reduce the number of ordinary shares in issue by cancelling the repurchased shares. The terms of the buy-back will be announced and the programme will start shortly and is expected to reduce the Group's CET1 ratio in the third quarter of 2022 by approximately 20 basis points.

The Group's leverage ratio of 4.5 per cent is 35 basis points lower than the 4.9 per cent ratio as at 31 December 2021. This reflects lower Tier 1 capital from the reduction in both CET1 capital and a call of $1 billion of AT1 balances as well as increased leverage exposures driven by asset growth. The Group's leverage ratio remains significantly above its minimum requirement of 3.7 per cent.

Outlook

The start to 2022 has been strong, albeit external conditions remain difficult to predict. Taking account of current performance and the external environment, our updated guidance for FY'22 is that we expect:

• Income ex DVA growth of around 10 per cent at constant currency; adverse currency translation impact currently estimated at $0.4 billion

• Further NIM progression in the second half of the year taking the outlook for the full year average to be around 140 basis points and 160 basis points for 2023

• Expenses excluding UK bank levy of around $10.6 billion inclusive of favourable currency translation impact currently estimated at $0.3 billion

• Risk-weighted assets to be broadly similar to FY'21 on a constant currency basis

• Credit impairment in FY'22 to normalise towards the medium-term loan-loss rate of 30-35 basis points

• To operate dynamically within the full 13-14 per cent CET1 target range

We are on track to deliver 10 per cent return on tangible equity by 2024, if not earlier.

Andy Halford

Group Chief Financial Officer

29 July 2022

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Supplementary financial information

Underlying performance by client segment

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

2 Customer accounts includes FVTPL and repurchase agreements

3 Not meaningful

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Corporate, Commercial & Institutional Banking1