TIDMHSBA
RNS Number : 7706F
HSBC Holdings PLC
12 July 2023
12 July 2023
STATEMENT ON THE BANK OF ENGLAND
2022 ANNUAL CYCLICAL SCENARIO STRESS TEST RESULTS
HSBC Holdings plc ('HSBC' or together with its subsidiaries,
'the Group' or 'HSBC Group') and HSBC UK Bank plc (together with
its subsidiaries, 'HSBC UK') note the publication today of the Bank
of England's 2022 Annual Cyclical Scenario Stress Test ('ACS')
results.
The severe stress scenario used for the 2022 ACS is not a
forecast. It is designed to test the resilience of the UK banking
system to deep simultaneous recessions in the UK and global
economies, large falls in asset prices and higher global interest
rates, and a separate stress of misconduct costs.
HSBC Group
Under this stress scenario, the Bank of England's results
indicate that the Group's common equity tier 1 ('CET1') capital
ratio on an IFRS 9 transitional basis(b) would fall to a low point
of 10.7%, above the Group's CET1 hurdle rate of 7.0%. On an IFRS 9
non-transitional basis, the Group's CET1 capital ratio is projected
to reach a low point of 9.9%, which is above its IFRS 9
non-transitional CET1 hurdle rate of 6.2%.
HSBC UK
Under this stress scenario, the Bank of England's results
indicate that HSBC UK's CET1 capital ratio on an IFRS 9
transitional basis(b) would fall to a low point of 10.1%, above its
CET1 hurdle rate of 6.2%. On an IFRS 9 non-transitional basis, HSBC
UK's CET1 capital ratio is projected to reach a low point of 8.9%,
which is above its IFRS 9 non-transitional CET1 hurdle rate of
6.4%.
Both the Group and HSBC UK's results incorporate strategic
management actions, which have been accepted by the Bank of England
for the purposes of this exercise. In practice, under such adverse
economic circumstances, the Group would consider a variety of
management actions depending on the prevailing circumstances at the
time.
The Group's intention, as evidenced by its past actions, is to
maintain a conservative and prudent approach to capital management.
Today's results demonstrate the Group and HSBC UK's continued
capital strength under this severe downside scenario.
The Bank of England's 2022 ACS results are available to view in
full at: www.bankofengland.co.uk/stress-testing
HSBC Group results
Actual Minimum stressed Minimum stress Hurdle Actual
(30 ratio (before ratio (after rate (1Q23)
June strategic the impact
2022) management of strategic
actions) management
actions)
------------------------------ ------ ---------------- -------------- ------ -------
IFRS9 Transitional
Common equity tier
1 ratio(a)(b) 13.6% 9.0%(g) 10.7% 7.0% 14.7%
Tier 1 capital ratio(c) 16.1% 11.3%(g) 13.2%(g) 17.0%
Total capital ratio(d) 18.6% 13.6%(g) 15.8%(g) 19.8%
Memo: risk weighted
assets (US$ bn) 852 958(g) 846(g) 854
Memo: CET1 (US$
bn) 116 86(g) 90(g) 126
------------------------------ ------ ---------------- -------------- ------ -------
Tier 1 leverage ratio(a)(e) 5.5% 4.3%(h) 5.0% 3.6% 5.8%
Memo: leverage exposure
(US$ bn) 2,484 2,496(h) 2,259 (h) 2,486
------------------------------ ------ ---------------- -------------- ------ -------
IFRS9 non-transitional
Common equity tier
1 ratio(f) 13.6% 8.3% 9.9% 6.2% 14.7%
Tier 1 leverage ratio(e)(f) 5.5% 4.1% 4.7% 3.3% 5.8%
------------------------------ ------ ---------------- -------------- ------ -------
Source: HSBC accounts and STDF data submissions, Bank of England
analysis and calculations
HSBC UK results
Actual Minimum stressed Minimum stress Hurdle Actual
(30 ratio (before ratio (after rate (1Q23)
June strategic the impact
2022) management of strategic
actions) management
actions)
------------------------------ ------ ---------------- -------------- ------ -------
IFRS9 Transitional
Common equity tier
1 ratio(a)(b) 13.7% 9.9%(g) 10.1% 6.2% 14.3%
Tier 1 capital ratio(c) 16.2% 11.7%(g) 11.9%(g) 16.6%
Total capital ratio(d) 19.6% 14.7%(g) 14.9%(g) 19.6%
Memo: risk weighted
assets (GBP bn) 90 124(g) 122(g) 100
Memo: CET1 (GBP
bn) 12 12(g) 12(g) 14
------------------------------ ------ ---------------- -------------- ------ -------
Tier 1 leverage ratio(a)(e) 5.8% 5.3%(h) 5.4% 3.3% 6.3%
Memo: leverage exposure
(GBP bn) 253 253(h) 249(h) 262
------------------------------ ------ ---------------- -------------- ------ -------
IFRS9 non-transitional
Common equity tier
1 ratio(f) 13.7% 8.7% 8.9% 6.4% 14.3%
Tier 1 leverage ratio(e)(f) 5.8% 4.8% 4.9% 3.3% 6.3%
------------------------------ ------ ---------------- -------------- ------ -------
Source: HSBC UK accounts and STDF data submissions, Bank of
England analysis and calculations
Notes
a) The low points for the common equity Tier 1 (CET1) ratio and
leverage ratio shown in the table do not necessarily occur in the
same year of the stress scenario and correspond to the year where
the minimum stressed ratio is calculated after strategic management
actions. There is no conversion of banks' AT1 instruments in the
stress.
b) The CET1 capital ratio is defined as CET1 capital expressed
as a percentage of the total risk exposure amount (risk-weighted
assets or RWAs), where CET1 capital and RWAs are determined in
accordance with the CRR.
c) The Tier 1 capital ratio is defined as Tier 1 capital
expressed as a percentage of RWAs, where Tier 1 capital is defined
as the sum of CET1 capital and additional Tier 1 capital determined
in accordance with the CRR.
d) The Total capital ratio is defined as total capital expressed
as a percentage of RWAs, where total capital is defined as the sum
of Tier 1 capital and Tier 2 capital determined in accordance with
the CRR.
e) The Tier 1 leverage ratio is Tier 1 capital expressed as a
percentage of the leverage exposure measure, as defined in Article
429(2) of the Leverage Ratio (CRR) part of the PRA Rulebook. If a
firm does not have sufficient CET1 capital to meet 75% of the
leverage ratio minimum requirement and 100% of its leverage ratio
buffers (as required by PRA rules), additional Tier 1 capital has
been capped at 25% of the leverage ratio minimum requirement for
the purpose of calculating the Tier 1 leverage ratio.
f) The low point year for the non-transitional IFRS 9 may differ
to the low point year on a transitional IFRS 9 basis.
g) Corresponds to the same year as the minimum CET1 ratio over
the stress scenario after strategic management actions.
h) Corresponds to the same year as the minimum leverage ratio
over the stress scenario after strategic management actions.
Investor enquiries to:
Richard O'Connor (London) +44 (0) 20 7991 6590 richard.j.oconnor@hsbc.com
Yafei Tian (Hong Kong) +852 2899 8909 yafei.tian@hsbc.com.hk
Media enquiries to:
Press Office +44 (0) 20 7991 8096 pressoffice@hsbc.com
Notes to editors:
1. HSBC Holdings plc
HSBC Holdings plc, the parent company of the HSBC Group, is
headquartered in London. The Group serves customers worldwide from
offices in 62 countries and territories. With total assets of
US$2,990bn at 31 March 2023, the HSBC Group is one of the world's
largest banking and financial services organisations.
2. HSBC UK
HSBC UK serves over 14.75 million customers across the UK,
supported by 24,000 colleagues. HSBC UK offers a complete range of
retail banking and wealth management to personal and private
banking customers, as well as commercial banking for small to
medium businesses and large corporates. HSBC UK is a wholly owned
subsidiary of HSBC Holdings plc.
Forward-looking statements
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations,
capital position, strategy and business of HSBC and its
consolidated subsidiaries (together, the 'Group') which can be
identified by the use of forward-looking terminology such as "may",
"will", "should", "expect", "anticipate", "project", "plan",
"estimate", "seek", "intend", "target", "believe", "potential" and
"reasonably possible" or the negatives thereof or other variations
thereon or comparable terminology (together, "forward-looking
statements"), including any financial, investment and capital
targets described herein. Any such forward-looking statements are
not a reliable indicator of future performance, as they may involve
significant stated or implied assumptions and subjective judgements
which may or may not prove to be correct. There can be no assurance
that any of the matters set out in forward-looking statements are
attainable, will actually occur or will be realised or are complete
or accurate. The assumptions and judgments may prove to be
incorrect and
involve known and unknown risks, uncertainties, contingencies
and other important factors, many of which are outside the control
of the Group.
Actual achievements, results, performance or other future events
or conditions may differ materially from those stated, implied
and/or reflected in any forward-looking statements due to a variety
of risks, uncertainties and other factors (including without
limitation those which are referable to general market or economic
conditions, regulatory changes, increased volatility in the
financial services and banking sector, geopolitical tensions such
as the Russia-Ukraine war, the impact of the Covid-19 pandemic or
as a result of data limitations and changes in applicable
methodologies in relation to ESG related matters). Any such
forward-looking statements are based on the beliefs, expectations
and opinions of the Group at the date the statements are made, and
the Group does not assume, and hereby disclaims, any obligation or
duty to update, revise or supplement them if circumstances or
management's beliefs, expectations or opinions should change. For
these reasons, recipients should not place reliance on, and are
cautioned about relying on, any forward-looking statements. No
representations or warranties, expressed or implied, are given by
or on behalf of the Group as to the achievement or reasonableness
of any projections, estimates, forecasts, targets, commitments,
ambitions, prospects or returns contained herein.
Additional detailed information concerning important factors
that could cause actual results to differ materially from this
announcement is available in our Annual Report and Accounts for the
fiscal year ended 31 December 2022 filed with the Securities and
Exchange Commission (the "SEC") on Form 20-F on 22 February 2023
(the "2022 Form 20-F") and our 1Q 2023 Earnings Release furnished
with the SEC on Form 6-K on 2 May 2023 (the "1Q 2023 Earnings
Release").
ends/all
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