Report of the directors financial review risk report
Jun. 30, 2025
The following disclosure presents the gross carrying/nominal amount of financial instruments to which the impairment requirements in IFRS 9
are applied and the associated allowance for ECL.
The following tables analyse loans by industry sector and represent the concentration of exposures on which credit risk is managed.
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied | ||||
At 30 Jun 2025 | At 31 Dec 2024 | |||
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 | 79,551 | (670) | 83,524 | (858) |
Loans and advances to banks at amortised cost | 15,806 | (3) | 14,524 | (3) |
Other financial assets measured at amortised cost | 244,062 | (6) | 237,475 | (6) |
– cash and balances at central banks | 96,155 | — | 119,184 | — |
– reverse repurchase agreements – non-trading | 68,408 | — | 53,612 | — |
– financial investments | 14,953 | — | 12,226 | — |
– assets held for sale | 3,473 | (3) | 2,591 | (3) |
– prepayments, accrued income and other assets2 | 61,073 | (3) | 49,862 | (3) |
Total on-balance sheet | 339,419 | (679) | 335,523 | (867) |
Loans and other credit-related commitments | 145,621 | (46) | 121,764 | (49) |
Financial guarantees3 | 2,855 | (4) | 2,876 | (9) |
Total off-balance sheet4 | 148,476 | (50) | 124,640 | (58) |
487,895 | (729) | 460,163 | (925) | |
Fair value | Memorandum allowance for ECL5 | Fair value | Memorandum allowance for ECL5 | |
£m | £m | £m | £m | |
Debt instruments measured at fair value through other comprehensive income (‘FVOCI’) | 52,547 | (26) | 46,649 | (22) |
– of which: assets held for sale | 11,574 | — | 6,776 | — |
1The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which
case the ECL is recognised as a provision.
2Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’ as
presented within the consolidated balance sheet on page 31 comprises both financial and non-financial assets, including cash collateral and settlement
accounts.
3Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
4Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in
‘Change for expected credit losses and other credit impairment charges’ in the income statement.
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 30 June 2025 | |||||||||||||||
Gross carrying/nominal amount1 | Allowance for ECL | ECL coverage % | |||||||||||||
Stage 1 | Stage 2 | Stage 3 | POCI2 | Total | Stage 1 | Stage 2 | Stage 3 | POCI2 | Total | Stage 1 | Stage 2 | Stage 3 | POCI2 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | % | % | % | % | |
Loans and advances to customers at amortised cost | 72,761 | 5,051 | 1,700 | 39 | 79,551 | (68) | (103) | (481) | (18) | (670) | 0.1 | 2.0 | 28.3 | 46.2 | 0.8 |
– personal | 13,401 | 766 | 295 | — | 14,462 | (13) | (14) | (86) | — | (113) | 0.1 | 1.8 | 29.2 | — | 0.8 |
– corporate and commercial | 41,803 | 3,703 | 1,301 | 39 | 46,846 | (44) | (84) | (372) | (18) | (518) | 0.1 | 2.3 | 28.6 | 46.2 | 1.1 |
– non-bank financial institutions | 17,557 | 582 | 104 | — | 18,243 | (11) | (5) | (23) | — | (39) | 0.1 | 0.9 | 22.1 | — | 0.2 |
Loans and advances to banks at amortised cost | 15,752 | 53 | 1 | — | 15,806 | (1) | (1) | (1) | — | (3) | — | 1.9 | 100.0 | — | — |
Other financial assets measured at amortised cost | 243,979 | 48 | 35 | — | 244,062 | (3) | — | (3) | — | (6) | — | — | 8.6 | — | — |
Loans and other credit-related commitments | 142,777 | 2,701 | 140 | 3 | 145,621 | (17) | (15) | (14) | — | (46) | — | 0.6 | 10.0 | — | — |
– personal | 1,050 | 27 | 2 | — | 1,079 | — | — | — | — | — | — | — | — | — | — |
– corporate and commercial | 60,314 | 2,361 | 136 | 3 | 62,814 | (13) | (14) | (13) | — | (40) | — | 0.6 | 9.6 | — | 0.1 |
– financial | 81,413 | 313 | 2 | — | 81,728 | (4) | (1) | (1) | — | (6) | — | 0.3 | 50.0 | — | — |
Financial guarantees | 2,582 | 229 | 44 | — | 2,855 | (1) | (1) | (2) | — | (4) | — | 0.4 | 4.5 | — | 0.1 |
– personal | 124 | 1 | — | — | 125 | — | — | — | — | — | — | — | — | — | — |
– corporate and commercial | 1,102 | 176 | 44 | — | 1,322 | (1) | (1) | (2) | — | (4) | 0.1 | 0.6 | 4.5 | — | 0.3 |
– financial | 1,356 | 52 | — | — | 1,408 | — | — | — | — | — | — | — | — | — | — |
At 30 Jun 2025 | 477,851 | 8,082 | 1,920 | 42 | 487,895 | (90) | (120) | (501) | (18) | (729) | — | 1.5 | 26.1 | 42.9 | 0.1 |
1Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2Purchased or originated credit impaired (‘POCI‘).
Stage 2 days past due analysis at 30 June 2025 | |||||||||
Gross carrying amount | Allowance for ECL | ECL coverage % | |||||||
of which: | of which: | of which: | of which: | of which: | of which: | ||||
Stage 2 | 1 to 29 DPD1,2 | 30 and > DPD1,2 | Stage 2 | 1 to 29 DPD1,2 | 30 and > DPD1,2 | Stage 2 | 1 to 29 DPD1,2 | 30 and > DPD1,2 | |
£m | £m | £m | £m | £m | £m | % | % | % | |
Loans and advances to customers at amortised cost | 5,051 | 45 | 38 | (103) | (1) | (1) | 2.0 | 2.2 | 2.6 |
– personal | 766 | 43 | 11 | (14) | (1) | (1) | 1.8 | 2.3 | 9.1 |
– corporate and commercial | 3,703 | 2 | 25 | (84) | — | — | 2.3 | — | — |
– non-bank financial institutions | 582 | — | 2 | (5) | — | — | 0.9 | — | — |
Loans and advances to banks at amortised cost | 53 | — | — | (1) | — | — | 1.9 | — | — |
Other financial assets measured at amortised cost | 48 | — | — | — | — | — | — | — | — |
1Up-to-date accounts in stage 2 are not shown in amounts presented above.
2The days past due amounts are presented on a contractual basis.
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2024 (continued) | |||||||||||||||
Gross carrying/nominal amount2 | 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 | 75,844 | 5,546 | 2,096 | 38 | 83,524 | (56) | (107) | (677) | (18) | (858) | 0.1 | 1.9 | 32.3 | 47.4 | 1.0 |
– personal | 18,733 | 955 | 259 | — | 19,947 | (14) | (19) | (79) | — | (112) | 0.1 | 2.0 | 30.5 | — | 0.6 |
– corporate and commercial | 41,386 | 4,375 | 1,628 | 38 | 47,427 | (35) | (85) | (454) | (18) | (592) | 0.1 | 1.9 | 27.9 | 47.4 | 1.2 |
– non-bank financial institutions | 15,725 | 216 | 209 | — | 16,150 | (7) | (3) | (144) | — | (154) | — | 1.4 | 68.9 | — | 1.0 |
Loans and advances to banks at amortised cost | 14,457 | 67 | — | — | 14,524 | (2) | (1) | — | — | (3) | — | 1.5 | — | — | — |
Other financial assets measured at amortised cost | 237,375 | 59 | 41 | — | 237,475 | (4) | — | (2) | — | (6) | — | — | 4.9 | — | — |
Loan and other credit-related commitments | 116,787 | 4,812 | 162 | 3 | 121,764 | (14) | (24) | (11) | — | (49) | — | 0.5 | 6.8 | — | — |
– personal | 1,149 | 4 | 2 | — | 1,155 | — | — | — | — | — | — | — | — | — | — |
– corporate and commercial | 58,281 | 3,775 | 146 | 3 | 62,205 | (12) | (22) | (10) | — | (44) | — | 0.6 | 6.8 | — | 0.1 |
– financial | 57,357 | 1,033 | 14 | — | 58,404 | (2) | (2) | (1) | — | (5) | — | 0.2 | 7.1 | — | — |
Financial guarantees1 | 2,763 | 69 | 44 | — | 2,876 | (2) | (1) | (6) | — | (9) | 0.1 | 1.4 | 13.6 | — | 0.3 |
– personal | 130 | 1 | — | — | 131 | — | — | — | — | — | — | — | — | — | — |
– corporate and commercial | 1,288 | 43 | 43 | — | 1,374 | (2) | (1) | (5) | — | (8) | 0.2 | 2.3 | 11.6 | — | 0.6 |
– financial | 1,345 | 25 | 1 | — | 1,371 | — | — | (1) | — | (1) | — | — | 100.0 | — | 0.1 |
At 31 Dec 2024 | 447,226 | 10,553 | 2,343 | 41 | 460,163 | (78) | (133) | (696) | (18) | (925) | — | 1.3 | 29.7 | 43.9 | 0.2 |
1Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
Stage 2 days past due analysis at 31 December 2024 (continued) | |||||||||
Gross carrying amount | Allowance for ECL | ECL coverage % | |||||||
of which: | of which: | of which: | of which: | of which: | of which: | ||||
Stage 2 | 1 to 29 DPD1,2 | 30 and > DPD1,2 | Stage 2 | 1 to 29 DPD1,2 | 30 and > DPD1,2 | Stage 2 | 1 to 29 DPD1,2 | 30 and > DPD1,2 | |
£m | £m | £m | £m | £m | £m | % | % | % | |
Loans and advances to customers at amortised cost | 5,546 | 81 | 48 | (107) | (3) | (1) | 1.9 | 3.7 | 2.1 |
– personal | 955 | 74 | 19 | (19) | (3) | (1) | 2.0 | 4.1 | 5.3 |
– corporate and commercial | 4,375 | 6 | 28 | (85) | — | — | 1.9 | — | — |
– non-bank financial institutions | 216 | 1 | 1 | (3) | — | — | 1.4 | — | — |
Loans and advances to banks at amortised cost | 67 | — | — | (1) | — | — | 1.5 | — | — |
Other financial assets measured at amortised cost | 59 | — | — | — | — | — | — | — | — |
1Up-to-date accounts in stage 2 are not shown in amounts presented above.
2The days past due amounts presented above are on a contractual basis.
Assets held for saleAt 30 June 2025, the most material balance of loans and advances
held for sale came from our custody business in Germany.
‘Loans and other credit-related commitments’ and ‘financial
guarantees’, as reported in credit disclosures, also include exposures
and allowances relating to financial assets classified as ‘assets held
for sale’.
Loans and advances to customers and banks measured at amortised cost | ||||
At 30 Jun 2025 | At 31 Dec 2024 | |||
Total gross loans and advances | Allowance for ECL | Total gross loans and advances | Allowance for ECL | |
£m | £m | £m | £m | |
As reported | 95,357 | (673) | 98,048 | (861) |
Reported in ‘Assets held for sale’ | 1,575 | (3) | 887 | (3) |
Total | 96,932 | (676) | 98,935 | (864) |
At 30 June 2025, gross loans and advances classified as ‘Assets held
for sale’ were £1,575m and the related impairment allowances for
ECL were £3m.
Lending balances held for sale continue to be measured at amortised
cost less allowances for impairment and, therefore, such carrying
amounts may differ from fair value.
These lending balances are part of associated disposal groups that
are measured in their entirety at the lower of carrying amount and fair
value less costs to sell. Any difference between the carrying amount
of these assets and their sales price is part of the overall gain or loss
on the associated disposal group as a whole.
uFor further details of the carrying amount and the fair value at 30 June 2025
of loans and advances to banks and customers classified as held for sale,
see Note 11 on the interim condensed consolidated financial statements.
Measurement uncertainty and sensitivity analysis of ECL estimatesThe recognition and measurement of ECL involves the use of
significant judgement and estimation. We form multiple scenarios
based on economic forecasts and distributional estimates and apply
these to credit risk models to estimate future credit losses. The
results are then probability-weighted to determine an unbiased ECL
estimate.
Management assessed the current economic environment, reviewed
the latest economic forecasts and discussed key risks before
selecting the economic scenarios and their weightings.
Management judgemental adjustments are used where modelled
allowance for ECL does not fully reflect the identified risks and
related uncertainty, or to capture significant late-breaking events.
Methodology
At 30 June 2025, four scenarios were used to capture the latest
economic expectations and to articulate management’s view of the
range of risks and potential outcomes. Scenarios are updated with
the latest economic forecasts and distributional estimates in each
quarter.
Three scenarios, the Upside, Central and Downside, are drawn from
external consensus forecasts, market data and distributional
estimates of the entire range of economic outcomes. Consensus
estimates are deployed as conditioning variables in a proprietary
expansion of the scenario variables. The fourth scenario, the
Downside 2, represents management’s view of severe downside
risks.
The consensus Central scenario is deemed the ‘most likely’ scenario,
and usually attracts the largest probability weighting. The consensus
outer scenarios represent short-term cyclical deviations from the
Central scenario, where variable paths converge back to long-term
trend expectations. They are calibrated to a 10% probability.
The Downside 2 scenario is narrative-driven and explores a more
extreme economic outcome than those captured by the consensus
scenarios. In this scenario variables do not, by design, revert to long-
term trend expectations and may instead explore alternative states of
equilibrium, where economic variables move permanently away from
past trends. It is calibrated to a 5% probability.
This weighting scheme is deemed appropriate for the unbiased
estimation of ECL in most circumstances. However, management
may depart from this probability-based scenario weighting approach
when the economic outlook and forecasts are determined to be
particularly uncertain and risks are elevated.
Management assessed that risk and uncertainty around the Central
scenario projection remained elevated in the first half of the year
2025 and scenario weights were adjusted. Weight was reassigned
from the Central scenario to the consensus Downside scenario.
In the first half of the year 2025, outer scenarios for most markets
have been configured as demand shocks. To the downside, the
crystallisation of economic risks causes consumption and investment
to fall sharply and commodity prices to decline. Inflation is lower
relative to the Central scenario in most markets. In the upside
scenario, robust economic growth drives investment and
consumption higher, causing a temporary acceleration of inflation.
Scenarios produced to calculate ECL are aligned to HSBC’s top and
emerging risks.
Description of economic scenarios
The economic assumptions presented in this section are formed by
HSBC with reference to external forecasts and estimates for the
purpose of calculating ECL.
Forecasts may change and remain subject to uncertainty. Outer
scenarios are designed to capture potential crystallisation of key
economic and financial risks and alternative paths for economic
variables.
The scenarios used to calculate ECL are described below.
The consensus Central scenario
HSBC’s Central scenario incorporates an expectation of slower global
growth across many of our key markets in 2025-2026, relative to the
fourth quarter of 2024. The deterioration reflects the anticipated
effect of greater policy uncertainty and higher US tariff rates on trade,
investment and employment. The scenario is consistent with the
tariff rate, measured as an effective trade-weighted average, of
13.7% in 2025 and 8.6% in 2026.
In the UK, household and business confidence has weakened amid
high policy uncertainty and restrictive interest rates. In Europe,
manufacturing remains in a protracted downturn, and trade policy
uncertainty is also weighing on sentiment. Planned increases in fiscal
spending to support tax cuts, welfare spending and defence are
expected to deliver only incremental additional growth, spread out
over several years.
Global GDP is expected to grow by 2.3% in 2025 in the Central
scenario and the average rate of global GDP growth is forecast to be
2.5% over the entire forecast period.
The key features of our Central scenario are:
–GDP growth rates in most of our main markets are expected to
slow in 2025 compared with 2024, with only moderate recovery
expected in 2026.
–Consistent with weaker expected growth, unemployment is
forecast to rise moderately in 2025, but remain low by historical
standards.
–The expected evolution of inflation is more mixed by market. In
the UK, it is set to remain above target through 2025 and 2026.
Changes to utility prices and employer taxes and wage costs are
seen as the main driver of higher inflation in the UK.
–Challenging conditions are also forecast to continue in certain
segments of the commercial property sector in a number of our
key markets. Structural changes to demand in the office segment
in particular are driving lower valuations.
–Policy interest rates in key markets are forecast to gradually
decline in 2025 and 2026. In the longer term, they are expected to
remain at a higher level than in the pre-pandemic period.
–The Brent crude oil price is forecast to average around $65 per
barrel over the forecast period.
The Central scenario was created from consensus forecasts available
in May, and reviewed continually until the end of June 2025.
The following table describes key macroeconomic variables in the consensus Central scenario.
Consensus Central scenario 3Q25-2Q30 (as at 2Q25) | ||
UK | France | |
GDP (annual average growth rate, %) | ||
2025 | 0.9 | 0.5 |
2026 | 1.2 | 1.0 |
2027 | 1.5 | 1.3 |
2028 | 1.5 | 1.3 |
2029 | 1.5 | 1.2 |
5-year average1 | 1.4 | 1.1 |
Unemployment rate (%) | ||
2025 | 4.6 | 7.6 |
2026 | 4.7 | 7.7 |
2027 | 4.5 | 7.5 |
2028 | 4.3 | 7.4 |
2029 | 4.1 | 7.2 |
5-year average1 | 4.4 | 7.5 |
House prices (annual average growth rate, %) | ||
2025 | 3.5 | 2.1 |
2026 | 1.2 | 4.3 |
2027 | 2.4 | 4.9 |
2028 | 3.3 | 4.1 |
2029 | 2.7 | 3.3 |
5-year average1 | 2.4 | 3.9 |
Inflation (annual average growth rate, %) | ||
2025 | 3.0 | 1.3 |
2026 | 2.3 | 1.6 |
2027 | 2.0 | 1.9 |
2028 | 2.1 | 2.3 |
2029 | 2.0 | 2.2 |
5-year average1 | 2.2 | 1.9 |
Central bank policy rate (annual average, %) | ||
2025 | 4.2 | 2.1 |
2026 | 3.7 | 1.6 |
2027 | 3.7 | 1.9 |
2028 | 3.8 | 2.2 |
2029 | 3.9 | 2.4 |
5-year average1 | 3.8 | 2.1 |
1The five-year average is calculated over the 20 quarter projection.
Consensus Central scenario 2025–2029 (as at 4Q24) | ||
UK | France | |
GDP (annual average growth rate, %) | ||
2025 | 1.2 | 0.9 |
2026 | 1.3 | 0.9 |
2027 | 1.8 | 1.4 |
2028 | 1.6 | 1.5 |
2029 | 1.6 | 1.4 |
5-year average1 | 1.5 | 1.2 |
Unemployment rate (%) | ||
2025 | 4.9 | 7.5 |
2026 | 4.7 | 7.3 |
2027 | 4.5 | 7.2 |
2028 | 4.3 | 7.0 |
2029 | 4.3 | 7.0 |
5-year average1 | 4.5 | 7.2 |
House prices (annual average growth rate, %) | ||
2025 | 1.4 | 2.1 |
2026 | 3.8 | 4.4 |
2027 | 4.6 | 4.4 |
2028 | 3.5 | 3.8 |
2029 | 2.7 | 3.1 |
5-year average1 | 3.2 | 3.6 |
Inflation (annual average growth rate, %) | ||
2025 | 2.4 | 1.2 |
2026 | 2.1 | 1.6 |
2027 | 2.1 | 2.0 |
2028 | 2.0 | 2.3 |
2029 | 2.0 | 2.2 |
5-year average1 | 2.1 | 1.9 |
Central bank policy rate (annual average, %) | ||
2025 | 4.2 | 2.1 |
2026 | 3.9 | 1.8 |
2027 | 3.8 | 2.0 |
2028 | 3.7 | 2.0 |
2029 | 3.7 | 2.1 |
5-year average1 | 3.9 | 2.0 |
1The five-year average is calculated over the 20 quarter projection.
The graphs compare the respective Central scenario with current
economic expectations beginning in the first half of the year 2025.
GDP growth: Comparison of Central scenarios
UK |
Note: Real GDP shown as year-on-year percentage change.
France |
Note: Real GDP shown as year-on-year percentage change.
The consensus Upside scenario
Compared to the Central scenario, the consensus Upside scenario
features stronger economic activity in the near term, before
converging to long-run trend expectations. It also incorporates lower
unemployment and higher asset prices than incorporated in the
Central scenario.
The scenario is consistent with a number of key upside risk themes.
These include a rollback of tariff measures, deregulation, a de-
escalation in geopolitical tensions as the Russia-Ukraine war moves
quickly towards a conclusion and the conflict in the Middle East
subsides, and an improvement in the US-China relationship.
The following table describes key macroeconomic variables in the
consensus Upside scenario.
Consensus Upside scenario (3Q25-2Q30) | ||||
UK | France | |||
GDP level (%, start-to-peak)1 | 11.0 | (2Q30) | 8.4 | (2Q30) |
Unemployment rate (%, min)2 | 3.0 | (1Q27) | 6.6 | (2Q27) |
House price index (%, start-to- peak)1 | 18.2 | (2Q30) | 23.3 | (2Q30) |
Inflation rate (YoY % change, max)3 | 3.3 | (4Q25) | 2.3 | (4Q27) |
Central bank policy rate (%, max)3 | 4.3 | (3Q25) | 2.5 | (2Q30) |
Consensus Upside scenario 2025–2029 (as at 4Q24) | ||||
UK | France | |||
GDP level (%, start-to-peak)1 | 11.3 | (4Q29) | 8.9 | (4Q29) |
Unemployment rate (%, min)2 | 3.5 | (3Q26) | 6.4 | (4Q26) |
House price index (%, start-to- peak)1 | 24.2 | (4Q29) | 22.8 | (4Q29) |
Inflation rate (YoY % change, min)3 | 1.4 | (1Q26) | 0.1 | (4Q25) |
Central bank policy rate (%, min)3 | 3.6 | (4Q25) | 1.4 | (3Q25) |
1Cumulative change to the highest level of the series during the 20-quarter
projection.
2Lowest projected unemployment in the scenario.
3Highest/lowest projected policy rate and year-on-year percentage change in
inflation in the scenario.
Downside scenarios
Downside scenarios explore the intensification and crystallisation of a
number of key economic and financial risks. The scenarios are
modelled so that economic shocks drive consumption and
investment lower and commodity prices fall. The nature of the shock
varies with the evolution of the risk profile of each country.
Key downside risks include:
–an increase in protectionist policies, as countries that impose
tariffs are met with countermeasures. This lowers investment,
complicates international supply chains and reduces trade flows;
–a broader and more prolonged conflict in the Middle East and the
Russia-Ukraine war, which undermine confidence and investment;
and
–continued differences between the US and China, which affects
economic confidence, and the global goods trade and supply
chains for critical technologies.
The consensus Downside scenario
In the consensus Downside scenario, economic activity is weaker
compared with the Central scenario and the impact of tariffs on the
global economy is worse than expected. The scenario is consistent
with the tariff rate, measured as an effective trade-weighted average,
rising to 27.6% in 2025, remaining at that level in 2026.
In this scenario, GDP declines, rates of unemployment rise and asset
prices fall. The scenario features an increase in tariffs over and above
those assumed in the Central scenario and an escalation of
geopolitical tensions. In most markets, inflation declines relative to
the Central scenario, as tariffs are assumed to drive a drop in US
import demand. Rising unemployment and falling commodity prices
are also calibrated so that they weigh on activity.
The following table describes key macroeconomic variables in the
consensus Downside scenario.
Consensus Downside scenario (3Q25-2Q30) | ||||
UK | France | |||
GDP level (%, start-to-trough)1 | (0.9) | (3Q27) | (0.6) | (1Q26) |
Unemployment rate (%, max)2 | 6.2 | (3Q26) | 8.8 | (1Q26) |
House price index (%, start-to- trough)1 | (6.4) | (4Q26) | 0.2 | (3Q25) |
Inflation rate (YoY % change)3 | 1.3 | (2Q26) | 0.6 | (2Q26) |
Central bank policy rate (%)3 | 2.4 | (1Q28) | 0.4 | (1Q26) |
Consensus Downside scenario 2025–2029 (as at 4Q24) | ||||
UK | France | |||
GDP level (%, start-to-trough)1 | (1.0) | (4Q26) | (0.6) | (1Q26) |
Unemployment rate (%, max)2 | 6.1 | (4Q25) | 8.3 | (3Q25) |
House price index (%, start-to- trough)1 | (4.5) | (1Q26) | (0.3) | (1Q25) |
Inflation rate (YoY % change, max)3 | 3.4 | (4Q25) | 2.6 | (3Q25) |
Central bank policy rate (%, max)3 | 5.0 | (1Q25) | 3.2 | (1Q25) |
1Cumulative change to the lowest level of the series during the 20-quarter
projection.
2The highest projected unemployment in the scenario.
3Due to the calibration of inflation and interest rates in 2Q25, the table
shows lowest year-on-year percentage change in inflation and projected
policy rates as at 2Q25, and the highest rates as at 4Q24.
Downside 2 scenario
The Downside 2 scenario features a deep global recession and
reflects management’s view of the tail of the economic distribution.
The narrative incorporates the crystallisation of a number of risks
simultaneously, including significant increases in tariffs and a further
escalation of geopolitical crises globally. The scenario is consistent
with the tariff rate, measured as an effective trade-weighted average,
rising to 31.6% in 2025, remaining at that level in 2026. In this
scenario, confidence and asset prices fall sharply. The subsequent
drop in demand leads to a steep fall in commodity prices, and a rapid
increase in unemployment.
The following table describes key macroeconomic variables in the
Downside 2 scenario.
Downside 2 scenario (3Q25-2Q30) | ||||
UK | France | |||
GDP level (%, start-to-trough)1 | (5.5) | (4Q26) | (6.3) | (4Q26) |
Unemployment rate (%, max)2 | 8.7 | (4Q26) | 10.8 | (2Q27) |
House price index (%, start-to- trough)1 | (26.8) | (2Q27) | (6.8) | (4Q26) |
Inflation rate (YoY % change)3 | (1.9) | (2Q26) | (0.4) | (3Q26) |
Central bank policy rate (%)3 | 1.6 | (3Q26) | (0.1) | (2Q26) |
Downside 2 scenario 2025–2029 (as at 4Q24) | ||||
UK | France | |||
GDP level (%, start-to-trough)1 | (9.1) | (2Q26) | (7.9) | (2Q26) |
Unemployment rate (%, max)2 | 8.4 | (2Q26) | 10.4 | (1Q27) |
House price index (%, start-to- trough)1 | (27.2) | (4Q26) | (14.0) | (2Q27) |
Inflation rate (YoY % change, max)3 | 10.1 | (2Q25) | 7.6 | (2Q25) |
Central bank policy rate (%, max)3 | 5.5 | (1Q25) | 4.2 | (1Q25) |
1Cumulative change to the lowest level of the series during the 20-quarter
projection.
2The highest projected unemployment in the scenario.
3Due to the calibration of inflation and interest rates in 2Q25, the table
shows lowest year-on-year percentage change in inflation and projected
policy rates as at 2Q25, and the highest rates as at 4Q24.
Scenario weightings
Scenario weightings are calibrated to probabilities that are
determined with reference to consensus forecast probability
distributions. Management may then choose to vary weights if they
assess that the calibration lags more recent events, or does not
reflect their view of the distribution of economic and geopolitical risk.
Management’s view of the scenarios and the probability distribution
takes into consideration the relationship of the consensus scenario
for both internal and external assessments of risk.
In the first half of the year 2025, key considerations around
uncertainty attached to the Central scenario projections focused on:
–US import tariffs and bilateral tariff escalations globally. Discussion
noted the impact on trade and manufacturing supply chains and
the uncertainty attached to tariff rate assumptions;
–the outlook for real estate in our key markets, particularly in the
UK;
–some reduction in estimation and forecast uncertainty for UK
unemployment given ongoing methodology updates at the Office
for National Statistics; and
–geopolitical risks, including those arising from the conflict in the
Middle East and the Russia-Ukraine war.
For the first half of the year 2025, scenario weights were adjusted to
the downside to reflect greater risk and uncertainty around the
Central scenario projection. Management assessed that the change
was appropriate given elevated market measures of volatility and
policy uncertainty.
As a consequence, the consensus Central scenario for all key
markets was assigned a weight of 65%, down from 75% at
31 December 2024. The weight assigned to the consensus Upside
scenario was left unchanged at 10%. The remaining 25% was
assigned to the two Downside scenarios. The consensus Downside
scenario received a weight of 20%, up from 10% at 31 December
2024. The weight assigned to the Downside 2 scenario was left
unchanged at 5%.
In light of the Israel-Iran conflict in the Middle East during June 2025,
management monitored developments and assessed potential
implications. Given the limited lasting consequences for global
markets, including oil, and the swift subsequent de-escalation, no
additional action was deemed necessary for economic scenarios or
weights.
The following table describes the probabilities assigned in each
scenario.
Scenario weightings, % | |||
Standard weights | UK | France | |
2Q25 | |||
Upside | 10 | 10 | 10 |
Central | 75 | 65 | 65 |
Downside | 10 | 20 | 20 |
Downside 2 | 5 | 5 | 5 |
4Q24 | |||
Upside | 10 | 10 | 10 |
Central | 75 | 75 | 75 |
Downside | 10 | 10 | 10 |
Downside 2 | 5 | 5 | 5 |
The following graphs show the historical and forecasted GDP growth
rate for the various economic scenarios in the UK and France.
UK |
France |
Note: Real GDP shown as year-on-year percentage change.
Critical estimates and judgements
The calculation of ECL under IFRS 9 involved significant judgements,
assumptions and estimates at 30 June 2025. These included:
–the selection and configuration of economic scenarios, given the
constant change in economic conditions and distribution of
economic risks; and
–estimating the economic effects of those scenarios on ECL,
where similar observable historical conditions cannot be captured
by the credit risk models.
How economic scenarios are reflected in ECL
calculations
The methodologies for the application of forward economic guidance
into the calculation of ECL for wholesale and retail portfolios are set
out on page 47 of the Annual Report and Accounts 2024. Models are
used to reflect economic scenarios in ECL estimates. These models
are based largely on historical observations and correlations with
default.
Economic forecasts and ECL model responses to these forecasts are
subject to a degree of uncertainty. The models continue to be
supplemented by management judgemental adjustments where
required.
Management judgemental adjustments
The management judgemental adjustments in relation to ECL
allowance are detailed on page 47 of the Annual Report and Accounts
2024.
Management judgemental adjustments to ECL at 30 Jun 20251 | |||
Retail | Wholesale2 | Total | |
£m | £m | £m | |
Modelled ECL (A)3 | 110 | 111 | 221 |
Corporate lending adjustments | — | 21 | 21 |
Other credit judgements | 11 | 39 | 50 |
Total management judgemental adjustments (B)4 | 11 | 60 | 71 |
Other adjustments (C)5 | 6 | — | 6 |
Final ECL (A+B+C)6 | 127 | 171 | 298 |
Management judgemental adjustments to ECL at 31 Dec 20241 | |||
Retail | Wholesale2 | Total | |
£m | £m | £m | |
Modelled ECL (A)3 | 125 | 154 | 279 |
Corporate lending adjustments | — | 25 | 25 |
Other credit judgements | 9 | (13) | (4) |
Total management judgemental adjustments (B)4 | 9 | 12 | 21 |
Other adjustments (C)5 | (15) | — | (15) |
Final ECL (A+B+C)6 | 119 | 166 | 285 |
1Management judgemental adjustments presented in the table reflect
increases or (decreases) in allowance for ECL, respectively.
2The wholesale portfolio corresponds to adjustments to the performing
portfolio (stage 1 and stage 2).
3(A) refers to probability-weighted allowance for ECL before any adjustments
are applied.
4(B) refers to adjustments that are applied where management believes
allowance for ECL does not sufficiently reflect the credit risk/expected
credit loses of any given portfolio at the reporting date. These can relate to
risks or uncertainties that are not reflected in the model and/or to any late-
breaking events.
5(C) refers to adjustments to allowance for ECL made to address process
limitations and data/model deficiencies and can also include, where
appropriate, the impact of new models where governance has sufficiently
progressed to allow an accurate estimate of ECL allowance to be
incorporated into the total reported ECL.
6As presented within our internal credit risk governance (see page 31 of the
Annual Report and Accounts 2024).
At 30 June 2025, wholesale management judgemental adjustments
were an increase to allowance for ECL of £60m (31 December 2024:
£12m increase). Corporate lending adjustments were made to reflect
heightened uncertainty to exposures in automotive and industrial
sectors in Germany, additionally an overlay was applied in UK to
better align ECL to recent portfolio performance. Other credit
judgements increase was largely due to adjustments applied to
France and Germany to better align Loss Given Default (‘LGD’) model
outputs to historical portfolio performance.
At 30 June 2025, retail management judgemental adjustments were
an increase to allowance for ECL £11m (31 December 2024: £9m
increase). Other adjustments were £6m increase to allowance for
ECL as of 30 June 2025 (31 December 2024: £15m decrease). These
adjustments are due to model limitations and country-specific risks
related to future macroeconomic conditions not fully captured by the
modelled output.
Economic scenarios sensitivity analysis of
ECL estimates
The economic scenarios sensitivity analysis of ECL estimates is
detailed on page 48 of the Annual Report and Accounts 2024.
Wholesale and retail sensitivity
The wholesale and retail sensitivity tables present the 100%-
weighted results. These exclude portfolios held by the insurance
business, private banking and small portfolios, and as such cannot be
directly compared with personal and wholesale lending presented in
other credit risk tables. In both the wholesale and retail analysis, the
comparative period results for Downside 2 scenarios are also not
directly comparable with the current period, because they reflect
different risks relative to the consensus scenarios for the period end.
The wholesale and retail sensitivity analysis is stated inclusive of
management judgemental adjustments, as appropriate to each
scenario.
For both retail and wholesale portfolios, the gross carrying amount of
financial instruments is the same under each scenario. For exposures
with similar risk profile and product characteristics, the sensitivity
impact is therefore largely the result of changes in macroeconomic
assumptions.
IFRS 9 ECL sensitivity to future economic conditions | ||||||
Reported Gross carrying amount | Reported allowance for ECL | Consensus Central scenario allowance for ECL | Consensus Upside scenario allowance for ECL | Consensus Downside scenario allowance for ECL | Consensus Downside 2 scenario allowance for ECL | |
At 30 Jun 2025 | £m | £m | £m | £m | £m | £m |
Corporate and commercial and NBFIs1,2,3 | 339,565 | 173 | 158 | 135 | 222 | 355 |
– of which: UK | 132,667 | 34 | 31 | 26 | 62 | 101 |
– of which: France | 141,818 | 93 | 87 | 76 | 106 | 141 |
Mortgages4 | 4,403 | 56 | 56 | 55 | 56 | 62 |
– of which: UK | 1,969 | 2 | 2 | 2 | 2 | 4 |
Credit cards and other retail4 | 68 | 1 | 1 | 1 | 1 | 1 |
At 31 Dec 2024 | ||||||
Corporate and commercial and NBFIs1,2,3 | 347,588 | 165 | 155 | 130 | 192 | 552 |
– of which: UK | 139,207 | 39 | 35 | 25 | 50 | 284 |
– of which: France | 145,484 | 64 | 63 | 55 | 76 | 99 |
Mortgages4 | 4,479 | 67 | 66 | 66 | 67 | 74 |
– of which: UK | 1,979 | 2 | 2 | 2 | 2 | 4 |
Credit cards and other retail4 | 68 | 1 | 1 | 1 | 1 | 1 |
1Allowance for ECL sensitivity includes off-balance sheet financial instruments. These are subject to significant measurement uncertainty.
2Includes low credit-risk financial instruments such as debt instruments at FVOCI, which have high carrying amounts but low ECL under all the above scenarios.
3Excludes defaulted obligors.
4Allowance for ECL sensitivities exclude portfolios utilising less complex modelling approaches.
Compared with 31 December 2024, the Downside 2 ECL impact decreased, mostly in the UK due to new PD models. These models include a
recent calibration of credit risk experience under a higher interest rate environment, and result in a reduction of sensitivity to severe stress
under similar conditions.
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments
and financial guarantees
The following disclosure provides a reconciliation by stage of the
group’s gross carrying/nominal amount and allowances for loans and
advances to banks and customers, including loan commitments and
financial guarantees. Movements are calculated on a quarterly basis
and therefore fully capture stage movements between quarters. If
movements were calculated on a year-to-date basis they would only
reflect the opening and closing position of the financial instrument.
The transfers of financial instruments represent the impact of stage
transfers upon the gross carrying/nominal amount and associated
allowance for ECL.
The net remeasurement of ECL arising from stage transfers
represents the increase or decrease due to these transfers, for
example, moving from a 12-month (stage 1) to a lifetime (stage 2)
ECL measurement basis. Net remeasurement excludes the
underlying CRR/PD movements of the financial instruments
transferring stage. This is captured, along with other credit quality
movements in the ‘changes in risk parameters – credit quality’ line
item.
Changes in ‘Net new and further lending/repayments’ represent the
impact from volume movements within the group’s lending portfolio
and include ‘New financial assets originated or purchased’, ‘assets
derecognised (including final repayments)’ and ‘changes to risk
parameters – further lending/repayment’.
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1 | ||||||||||
(Reviewed) | ||||||||||
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 2025 | 177,176 | (74) | 10,494 | (133) | 2,302 | (694) | 41 | (18) | 190,013 | (919) |
Transfers of financial instruments: | 834 | (23) | (987) | 25 | 156 | (2) | — | — | 3 | — |
– transfers from stage 1 to stage 2 | (4,377) | 4 | 4,377 | (4) | — | — | — | — | — | — |
– transfers from stage 2 to stage 1 | 5,318 | (27) | (5,318) | 27 | — | — | — | — | — | — |
– transfers to stage 3 | (111) | — | (149) | 9 | 262 | (9) | — | — | 2 | — |
– transfers from stage 3 | 4 | — | 103 | (7) | (106) | 7 | — | — | 1 | — |
Net remeasurement of ECL arising from transfer of stage | — | 21 | — | (15) | — | — | — | — | — | 6 |
Net new and further lending/ repayments | (449) | (6) | (1,551) | 20 | (341) | 13 | 1 | — | (2,340) | 27 |
Changes to risk parameters – credit quality | — | (11) | — | (47) | — | (64) | — | (1) | — | (123) |
Changes to model used for ECL calculation | — | 6 | — | 29 | — | — | — | — | — | 35 |
Assets written off | — | — | — | — | (259) | 259 | — | — | (259) | 259 |
Foreign exchange | 3,456 | 1 | 231 | (1) | 46 | (9) | — | — | 3,733 | (9) |
Others2,3,4 | (4,006) | (1) | (153) | 2 | (19) | (1) | — | 1 | (4,178) | 1 |
At 30 Jun 2025 | 177,011 | (87) | 8,034 | (120) | 1,885 | (498) | 42 | (18) | 186,972 | (723) |
ECL income statement change for the period | 10 | (13) | (51) | (1) | (55) | |||||
Recoveries | 1 | |||||||||
Others | (22) | |||||||||
Total ECL income statement change for the period | (76) | |||||||||
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1 | |||
At 30 Jun 2025 | Half-year ended 30 Jun 2025 | ||
Gross carrying/ nominal amount | Allowance for ECL | ECL charge | |
£m | £m | £m | |
As above | 186,972 | (723) | (76) |
Other financial assets measured at amortised cost | 244,062 | (6) | — |
Non-trading reverse purchase agreement commitments | 56,861 | — | — |
Performance and other guarantee not considered for IFRS 9 | — | — | 2 |
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/ Summary consolidated income statement | 487,895 | (729) | (74) |
Debt instruments measured at FVOCI | 52,547 | (26) | (1) |
Total allowance for ECL/total income statement ECL change for the period | N/A | (755) | (75) |
1Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2Includes the period on period movement in exposures relating to other HSBC Group companies. At 30 June 2025, this amount increased by £2.1bn and was
classified as stage 1 with no ECL.
3Total includes £0.7bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, reflecting business disposals
as disclosed in Note 11: ‘Assets held for sale and liabilities of disposal groups held for sale’ on page 48.
4This includes £5.6bn of gross carrying loans and advances to customers and corresponding allowance for ECL of £6m in relation to France retail portfolio of
home and certain other loans, which were classified to assets held for sale in 1H25, reflecting business disposals as disclosed in Note 11: ‘Assets held for sale
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1 (continued) | ||||||||||
(Reviewed) | ||||||||||
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 2024 | 162,228 | (91) | 15,445 | (147) | 2,556 | (903) | 35 | (6) | 180,264 | (1,147) |
Transfers of financial instruments: | 2,460 | (42) | (3,223) | 47 | 763 | (5) | — | — | — | — |
– transfers from stage 1 to stage 2 | (7,440) | 8 | 7,440 | (8) | — | — | — | — | — | — |
– transfers from stage 2 to stage 1 | 10,182 | (48) | (10,182) | 48 | — | — | — | — | — | — |
– transfers to stage 3 | (390) | 1 | (649) | 13 | 1,039 | (14) | — | — | — | — |
– transfers from stage 3 | 108 | (3) | 168 | (6) | (276) | 9 | — | — | — | — |
Net remeasurement of ECL arising from transfer of stage | — | 29 | — | (22) | — | — | — | — | — | 7 |
Net new and further lending/repayments | 10,816 | 7 | (1,409) | 3 | (635) | 322 | 6 | (7) | 8,778 | 325 |
Changes to risk parameters – credit quality | — | 23 | — | (31) | — | (504) | — | (5) | — | (517) |
Changes to model used for ECL calculation | — | (1) | — | 17 | — | — | — | — | — | 16 |
Assets written off | — | — | — | — | (257) | 255 | — | — | (257) | 255 |
Foreign exchange | (4,916) | 2 | (345) | 2 | (83) | 24 | — | — | (5,344) | 28 |
Others2 | 6,588 | (1) | 26 | (2) | (42) | 117 | — | — | 6,572 | 114 |
At 31 Dec 2024 | 177,176 | (74) | 10,494 | (133) | 2,302 | (694) | 41 | (18) | 190,013 | (919) |
ECL income statement change for the period | 58 | (33) | (182) | (12) | (169) | |||||
Recoveries | 2 | |||||||||
Others | 13 | |||||||||
(154) | ||||||||||
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1 (continued) | |||
At 31 Dec 2024 | 12 months ended 31 Dec 2024 | ||
Gross carrying/ nominal amount | Allowance for ECL | ECL charge | |
£m | £m | £m | |
As above | 190,013 | (919) | (154) |
Other financial assets measured at amortised cost | 237,475 | (6) | (6) |
Non-trading reverse purchase agreement commitments | 32,675 | — | — |
Performance and other guarantees not considered for IFRS 9 | (2) | ||
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/ Summary consolidated income statement | 460,163 | (925) | (162) |
Debt instruments measured at FVOCI | 46,649 | (22) | (1) |
Total allowance for ECL/total income statement ECL change for the period | N/A | (947) | (163) |
1Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
2Includes the period on period movement in exposures relating to other HSBC Group companies. At 31 December 2024, these amounted to £0.77bn and were
classified as stage 1 with no ECL.
Own funds disclosure | |||
At | |||
30 Jun 2025 | 31 Dec 2024 | ||
Ref* | £m | £m | |
6 | Common equity tier 1 capital before regulatory adjustments | 23,442 | 23,064 |
28 | Total regulatory adjustments to common equity tier 1 | (1,602) | (1,168) |
29 | Common equity tier 1 capital | 21,840 | 21,896 |
36 | Additional tier 1 capital before regulatory adjustments | 4,119 | 3,932 |
44 | Additional tier 1 capital | 4,119 | 3,932 |
45 | Tier 1 capital | 25,959 | 25,828 |
51 | Tier 2 capital before regulatory adjustments | 15,014 | 15,835 |
57 | Total regulatory adjustments to tier 2 capital | (361) | (357) |
58 | Tier 2 capital | 14,653 | 15,478 |
59 | Total capital | 40,612 | 41,306 |
Capital ratios | % | % | |
61 | Common equity tier 1 (as a percentage of total risk exposure amount) | 19.38 | 19.51 |
62 | Tier 1 (as a percentage of total risk exposure amount) | 23.03 | 23.01 |
63 | Total capital (as a percentage of total risk exposure amount) | 36.03 | 36.80 |
*These are references to lines prescribed in the Pillar 3 ‘Own funds disclosure’ template.
Trading portfoliosValue at risk of the trading portfolios
The Trading VaR predominantly resides within Market Securities
Services where it stood at £19.4m as at 30 June 2025, compared
with £21.8m at 31 December 2024. The Trading VaR was driven by
the market making activity in developed and emerging market on
rates, FX, equities and credit products. The Total Trading VaR peaked
at £32.3m in June 2025 following increased market making activities
on rates and FX products. The Trading VaR subsequently decreased
from the peak level and remained fairly stable.
The trading VaR for the half-year to 30 June 2025 is shown in the table below.Trading VaR, 99% 1 day | ||||||
Foreign exchange (‘FX’) and commodity | Interest rate (‘IR’) | Equity (‘EQ’) | Credit spread (‘CS’) | Portfolio diversification1 | Total2 | |
£m | £m | £m | £m | £m | £m | |
Half-year to 30 Jun 2025 | 7.5 | 7.4 | 10.5 | 9.0 | (15.0) | 19.4 |
Average | 9.3 | 11.2 | 11.1 | 6.6 | (14.7) | 23.5 |
Maximum | 20.1 | 19.2 | 15.3 | 11.0 | 32.3 | |
Minimum | 3.8 | 6.0 | 8.6 | 3.8 | 16.3 | |
Half-year to 30 Jun 2024 | 10.0 | 15.0 | 10.7 | 7.0 | (16.5) | 26.2 |
Average | 8.1 | 21.4 | 9.5 | 7.4 | (18.4) | 27.9 |
Maximum | 14.8 | 27.8 | 11.5 | 9.3 | 37.2 | |
Minimum | 4.2 | 12.6 | 8.1 | 4.5 | 18.7 | |
Half-year to 31 Dec 2024 | 6.9 | 11.2 | 12.6 | 4.6 | (13.5) | 21.8 |
Average | 8.5 | 13.7 | 11.3 | 5.7 | (14.7) | 24.5 |
Maximum | 14.8 | 23.9 | 13.4 | 7.7 | 36.1 | |
Minimum | 4.5 | 7.8 | 9.1 | 4.1 | 18.5 | |
1Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in unsystematic
market risk that occurs when combining a number of different risk types, for example, interest rate, equity and foreign exchange, together in one portfolio. It is
measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number represents the benefit of
portfolio diversification. As the maximum occurs on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit for
this measure.
2The Total VaR is non-additive across risk types due to diversification effect and it includes “Risks Not in VaR” (“RNIV”) add-ons.
Non-trading portfoliosValue at risk of the non-trading portfolios
Non-trading portfolios comprise of positions that primarily arise from
the interest rate management of our retail and wholesale banking
assets and liabilities, financial investments measured at fair value
through other comprehensive income (‘FVOCI’) or at amortised cost.
A summary of the methodology for our VaR of non-trading portfolios
can be found on page 75 of our Annual Report and Accounts 2024.
Insurance operations were excluded from non-trading VaR as of
30 June 2025, which resulted in an immaterial impact.
market risk impact of insurance operations on page 92 of the Annual
Report and Accounts 2024.
The non-trading 10d VaR in the half year to 30 June 2025 was driven
by interest rate risk in the banking book arising from Markets
Treasury positions. The non-trading VaR remained stable at £124m at
30 June 2025, compared with £134m at 31 December 2024, with the
minimal variation in VaR over this period driven by the duration risk
associated with Markets Treasury positioning in response to changing
rate expectations.
The non-trading VaR for the half-year to 30 June 2025 is shown in the table below.Non-trading VaR, 99% 10 day | ||||
Total2 | ||||
£m | £m | £m | £m | |
Half-year to 30 Jun 2025 | 88.1 | 41.9 | (6.0) | 123.9 |
Average | 89.1 | 42.9 | (3.7) | 128.3 |
Maximum | 115.9 | 45.7 | 147.2 | |
Minimum | 75.0 | 41.4 | 113.2 | |
Half-year to 30 Jun 2024 | 128.4 | 36.9 | (40.1) | 125.3 |
Average | 143.6 | 36.3 | (37.6) | 142.4 |
Maximum | 202.3 | 42.0 | 216.3 | |
Minimum | 66.2 | 29.6 | 70.0 | |
Half-year to 31 Dec 2024 | 101.0 | 41.1 | (8.4) | 133.7 |
Average | 85.2 | 39.7 | (25.7) | 99.1 |
Maximum | 131.9 | 57.7 | 133.7 | |
Minimum | 41.5 | 29.1 | 54.8 | |
1Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in unsystematic
market risk that occurs when combining a number of different risk types, for example, interest rate, equity and foreign exchange, together in one portfolio. It is
measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number represents the benefit of
portfolio diversification. As the maximum occurs on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit for
this measure.
2The total VaR is non-additive across risk types due to diversification effect.
The following table shows the composition of assets and liabilities by contract type.Balance sheet of insurance manufacturing subsidiaries by type of contract | |||||
Life other2 | Other contracts3 | Total | |||
£m | £m | £m | £m | £m | |
Financial assets | 4,010 | 45 | 1,021 | 429 | 5,505 |
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 3,506 | 30 | 1,014 | 363 | 4,913 |
– derivatives | 8 | — | — | — | 8 |
– financial investments – at amortised cost | — | — | — | 2 | 2 |
– financial assets at fair value through other comprehensive income | — | — | — | — | — |
– other financial assets4 | 496 | 15 | 7 | 64 | 582 |
Insurance contract assets | — | 45 | — | — | 45 |
Reinsurance contract assets | — | 132 | — | — | 132 |
Other assets and investment properties5 | 19,149 | 1 | 4 | 1,257 | 20,411 |
Total assets at 30 Jun 2025 | 23,159 | 223 | 1,025 | 1,686 | 26,093 |
Liabilities under investment contracts designated at fair value | — | — | 1,074 | — | 1,074 |
Insurance contract liabilities | 3,452 | 255 | — | — | 3,707 |
Reinsurance contract liabilities | — | 29 | — | — | 29 |
Deferred tax | — | — | — | 8 | 8 |
Other liabilities5 | 18,165 | 31 | — | 1,891 | 20,087 |
Total liabilities | 21,617 | 315 | 1,074 | 1,899 | 24,905 |
Total equity | — | — | — | 1,188 | 1,188 |
Total liabilities and equity at 30 Jun 2025 | 21,617 | 315 | 1,074 | 3,087 | 26,093 |
Financial assets | 3,749 | 48 | 1,026 | 421 | 5,244 |
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 3,223 | 32 | 1,018 | 365 | 4,638 |
– derivatives | 5 | — | — | — | 5 |
– financial investments – at amortised cost | — | — | — | 1 | 1 |
– financial assets at fair value through other comprehensive income | — | — | — | — | — |
– other financial assets4 | 521 | 16 | 8 | 55 | 600 |
Insurance contract assets | — | 38 | — | — | 38 |
Reinsurance contract assets | — | 132 | — | — | 132 |
Other assets and investment properties5 | 18,229 | 1 | — | 1,176 | 19,406 |
Total assets at 31 Dec 2024 | 21,978 | 219 | 1,026 | 1,597 | 24,820 |
Liabilities under investment contracts designated at fair value | — | — | 1,078 | — | 1,078 |
Insurance contract liabilities | 3,165 | 259 | — | — | 3,424 |
Reinsurance contract liabilities | — | 38 | — | — | 38 |
Deferred tax | — | — | — | 9 | 9 |
Other liabilities | 17,355 | 32 | — | 1,761 | 19,148 |
Total liabilities | 20,520 | 329 | 1,078 | 1,770 | 23,697 |
Total equity | — | — | — | 1,123 | 1,123 |
Total liabilities and equity at 31 Dec 2024 | 20,520 | 329 | 1,078 | 2,893 | 24,820 |
1‘Life direct participating and investment DPF’ contracts are substantially measured under the variable fee approach measurement model.
2‘Life other’ mainly includes protection type contracts as well as reinsurance contracts. The reinsurance contracts primarily provide diversification benefits over
the life participating and investment discretionary participation feature ('DPF') contracts.
3‘Other contracts’ includes investment contracts for which HSBC does not bear significant insurance risk.
4‘Other financial assets’ comprise mainly loans and advances to banks, cash and inter-company balances with other non-insurance legal entities.
5‘Other assets and investment properties’ includes £20,338m (31 December 2024: £19,309m) and ‘Other liabilities’ includes £19,606m (31 December 2024:
£18,668m) in respect of the classification of the French life insurance business to held for sale. Further details are provided on page 48.