Financial Performance - Shareholder profit increased by 79% to HKD 9.827 billion, compared to HKD 5.505 billion in the first half of 2022[1] - Pre-tax profit rose by 71% to HKD 10.961 billion, up from HKD 6.397 billion in the same period last year[1] - Operating profit increased by 67% to HKD 10.858 billion, compared to HKD 6.491 billion in the first half of 2022[1] - Net operating income before expected credit loss changes increased by 29% to HKD 19.940 billion, from HKD 15.409 billion in the previous year[1] - Return on average ordinary shareholders' equity was 12.8%, up from 7.1% in the first half of 2022[1] - Earnings per share rose by 83% to HKD 4.99, compared to HKD 2.73 in the same period last year[1] - The company declared an interim dividend of HKD 1.10 per share, totaling HKD 2.20 per share for the first half of 2023, compared to HKD 1.40 per share in the previous year[1] - The expected credit loss and other credit impairment charges decreased by 8% year-on-year to HKD 1.924 billion, and by 66% compared to the second half of the previous year[18][21] - The average return on common equity increased to 12.8%, up from 7.1% in the same period last year[19] - The total comprehensive income for the period was HKD 9,814 million, which includes a dividend payout of HKD 5,927 million[45] Income and Revenue Growth - Operating income before expected credit loss changes increased by 29% year-on-year, while profit attributable to shareholders rose by 79%[10] - Net interest income showed strong growth, with a net interest margin increase of 62 basis points to 2.09%[10] - Wealth management income grew by 10% year-on-year and increased by 40% compared to the second half of last year[10] - Non-interest income rose by 55%, driven by strong performance in equity-related wealth sales and new income sources from structured products[16] - Total operating income from wealth management and personal banking in the Greater Bay Area increased by 20%[17] - The company recorded a gain of HKD 6.110 billion from financial instruments measured at fair value, compared to a loss of HKD 18.196 billion in the same period last year[24] - Income from insurance business assets and liabilities measured at fair value reached HKD 5.773 billion, a significant recovery from a loss of HKD 18.545 billion in the previous year[24] - The company reported a significant increase in financial instrument income, netting HKD 6,110 million[34] - The bank's service fee income rose to HKD 4,056 million, an increase of 4.7% from HKD 3,873 million in 2022[42] Cost and Efficiency - The cost-to-income ratio improved to 35.9%, compared to 44.2% in the first half of 2022[1] - The cost-to-income ratio improved by 8.3 percentage points year-on-year, now at 35.9%[10] - Operating expenses increased by HKD 340 million, or 5%, to HKD 7.156 billion, primarily due to continued investment in technology and marketing[27] - The bank aims to enhance operational efficiency and customer experience through ongoing investments in technology[22] Customer and Market Growth - The number of high-end, mass-market, and emerging affluent clients increased by 25% year-on-year[13] - Digital service usage among new customers reached 98%, with active users of mobile finance and digital banking growing by 59% and 22% respectively[15] - The affluent customer base grew by 25% year-on-year, supported by enhanced customer programs and promotional activities[36] - Monthly active users of mobile wealth management services increased by 16% year-on-year, with retail transactions conducted digitally rising by 173%[38] Risk and Credit Quality - The expected credit loss provisions decreased by HKD 1.76 billion to HKD 19.24 billion, reflecting a favorable change in economic outlook and a reduction in total loan balances[22] - The ratio of total impaired loans to total customer loans increased to 2.85% as of June 30, 2023, compared to 1.92% and 2.56% at the end of June and December 2022, respectively[18] - Total impaired loans increased by HKD 1.7 billion to HKD 25.9 billion, with the impaired loan ratio rising to 2.85% from 2.56% at the end of 2022[27] - The expected credit loss ratio on total customer loans increased to 1.59% as of June 30, 2023, compared to 1.42% at the end of 2022[64] Capital and Liquidity - As of June 30, 2023, the common equity tier 1 capital ratio was 16.8%, up from 15.2% at the end of 2022[1] - The liquidity coverage ratio stood at 230.6%, significantly above the regulatory requirement of 100%[18] - The net stable funding ratio was 161.4% as of June 30, 2023, significantly above the regulatory requirement of 100%[32] - The total capital ratio as of June 30, 2023, was 20.0%, up from 18.1% in December 2022[76] Strategic Initiatives - The bank aims to achieve net-zero carbon emissions by 2030 and has launched sustainable finance solutions to assist clients in transitioning to a low-carbon economy[8] - The bank is set to open six cross-border wealth management centers in major cities in the Greater Bay Area, enhancing its service offerings and customer base[20] - The bank launched a new +FUN Dollars credit card rewards program and a simplified mobile wealth management app to enhance customer experience and attract new business[20] - The bank's strategy focuses on strengthening customer relationships and promoting deposit growth amid competitive market conditions[36] Regulatory and Governance - The company adhered to the corporate governance guidelines set by the Hong Kong Monetary Authority and complied with the majority of the best practices outlined in the Corporate Governance Code as of June 30, 2023[101] - The board of directors consists of 10 members, including 6 independent non-executive directors and 4 non-executive directors as of August 1, 2023[102] - The mid-year report for 2023 will be published on the company's website and sent to shareholders by the end of August 2023[103]

Financial Performance - The bank reported a profit attributable to shareholders of HKD 33,972 million for 2022, a 2.4% increase from HKD 33,182 million in 2021[12]. - Earnings per share fell to HKD 4.95 in 2022, down from HKD 6.93 in 2021, reflecting a decrease of 28.5%[12]. - Shareholder profit decreased by 27% year-on-year due to adverse market conditions affecting the life insurance investment portfolio, with a negative adjustment of HKD 3.1 billion[25]. - Pre-tax profit decreased by 30% to HKD 11.44 billion, with earnings per share down 29% to HKD 4.95[32]. - The bank's profit attributable to shareholders increased by 16% in the second half of 2022 compared to the first half, reflecting positive impacts from the bank's actions[33]. Asset and Capital Management - The bank's total assets reached HKD 1,893,805 million, up from HKD 1,820,185 million in 2021, representing a growth of 4%[12]. - The bank maintained a common equity tier 1 capital ratio of 15.2%, down from 15.9% in 2021, indicating a slight decline in capital strength[13]. - As of December 31, 2022, the bank's Common Equity Tier 1 capital ratio was 15.2%, Tier 1 capital ratio was 16.8%, and total capital ratio was 18.1%[33]. - The bank's equity remained stable at HKD 183.9 billion, with a slight decrease in total reserves[91]. Income and Revenue Streams - Net interest income rose by 35%, with a net interest margin increase of 48 basis points to 2.00%[25]. - Non-interest income grew by 31%, driven by a doubling of revenue from foreign exchange and options trading[30]. - Operating income, excluding expected credit loss changes, grew by 12% year-on-year, indicating positive effects from long-term business transformation strategies[25]. - The bank's total operating income before expected credit loss changes increased by 2% to HKD 339.72 billion[32]. - The board declared a fourth interim dividend of HKD 2.00 per share, totaling HKD 4.10 per share for the year, representing 77% of profit attributable to shareholders[26]. Risk Management and Credit Losses - The bank's expected credit loss provisions increased significantly by 172% year-on-year, primarily related to risks in the mainland commercial real estate sector[25]. - Expected credit loss provisions increased by HKD 48.19 billion year-on-year, totaling HKD 76.26 billion[32]. - The ratio of expected credit losses to total customer loans rose to 1.42% as of December 31, 2022, compared to 0.69% in 2021[68]. - Total impaired loans increased by HKD 138 billion, reaching HKD 242 billion, with the impaired loan ratio at 2.56% as of December 31, 2022, up from 1.04% in 2021[67]. Customer Engagement and Digital Transformation - The bank serves over 350 million customers, leveraging its extensive network of over 260 service points in Hong Kong and nearly 20 cities in mainland China[10]. - The bank is actively expanding its digital services to enhance customer experience and meet the growing demand for seamless online and offline banking solutions[10]. - The number of target customers in Hong Kong recorded a double-digit growth due to new service offerings and simplified account opening procedures[26]. - Monthly active users of mobile wealth management services rose by 11% year-on-year, while online transactions for deposits, foreign exchange, and loans increased by 98%[80]. - The bank launched over 460 digital innovation services and enhancements in 2022, emphasizing its commitment to digital transformation[80]. Sustainability and Community Initiatives - The bank aims to achieve net-zero carbon emissions in its operations by 2030 and supports the HSBC Group's goal of net-zero emissions in its financing portfolio by 2050[20]. - The bank is committed to supporting community initiatives, focusing on sustainable finance and enhancing financial literacy among the youth[10]. - The bank's green loans and sustainable performance-linked financing saw strong year-on-year growth in Hong Kong[49]. - The company revised its energy policy in December 2022 to gradually phase out coal and is working with clients to transition to cleaner energy alternatives[126]. Economic Outlook and Market Conditions - The Greater Bay Area's GDP is projected to reach USD 2.8 trillion by 2027, growing nearly USD 1 trillion from 2021[16]. - The economic growth forecast for Hong Kong and mainland China is expected to improve in 2023, with GDP growth projected at 2.7% over the next five years, higher than the average growth rate prior to the pandemic[163]. - Geopolitical risks, including the ongoing Russia-Ukraine conflict, continue to pose significant challenges to the economic outlook, impacting credit risk assessments[162]. - The unemployment rate in Hong Kong is forecasted to average 3.4% from 2023 to 2027, compared to 5.0% for mainland China[164].

Financial Performance - Hang Seng Bank reported a net operating income of HKD 33,972 million for 2022, an increase from HKD 33,182 million in 2021, representing a growth of 2.4%[5] - The bank's operating profit decreased to HKD 11,557 million in 2022, down 29% from HKD 16,231 million in 2021[5] - Profit attributable to shareholders fell to HKD 10,165 million, a decline of 27% compared to HKD 13,960 million in the previous year[5] - The average return on ordinary shareholders' equity was 5.5% in 2022, down from 7.7% in 2021[5] - Total assets increased by 4% to HKD 1,893,805 million as of December 31, 2022, compared to HKD 1,820,185 million in 2021[5] - The bank's cost-to-income ratio increased to 43.5% in 2022, compared to 42.6% in 2021, reflecting rising operational costs[5] - The bank's tier 1 capital ratio was 15.2% in 2022, down from 15.9% in 2021, indicating a slight decrease in capital adequacy[5] - Shareholder profit decreased by 27% year-on-year, reflecting the challenging operating environment due to the pandemic and geopolitical tensions[18] - Total operating income, excluding expected credit loss changes, increased by 2% to HKD 33.972 billion, with a 27% increase in the second half compared to the first half of the previous year[25] Liquidity and Capital Management - The bank's liquidity coverage ratio improved to 281.3% in 2022, up from 192.7% in 2021, indicating stronger liquidity management[5] - Customer deposits increased by HKD 50 billion, or 4%, to HKD 1,389 billion, driven by growth in time deposits despite a decrease in current and savings accounts[29] - The loan-to-deposit ratio decreased from 74.5% at the end of 2021 to 67.1% at the end of 2022[75] - As of December 31, 2022, shareholders' equity stood at HKD 184 billion, remaining roughly stable compared to the end of 2021[77] Credit Risk and Provisions - The company reported a significant increase in expected credit loss provisions, rising by 172% year-on-year, primarily related to risks in the mainland commercial real estate sector[18] - Expected credit loss provisions increased by HKD 4.819 billion year-on-year to HKD 7.626 billion, with the ratio of total impaired loans to total customer loans at 2.56%[26] - Total impaired loans increased by HKD 13.8 billion to HKD 24.2 billion, with the impaired loan ratio to total customer loans rising to 2.56% from 1.04% in 2021[52] - The expected credit loss ratio to total customer loans increased to 1.42% from 0.69% in 2021[52] - The expected credit loss provision for personal loans was 0.06%, while for corporate and commercial loans it was 0.12%[132] Business Segments and Growth - The bank's asset management business grew by 75% year-on-year, bolstered by the appointment as the new manager of the largest ETF in Hong Kong[31] - The number of target customers in wealth management and personal banking increased by 16% year-on-year, with customer loans rising by 2% and customer deposits growing by 6%[20] - Net premium income increased by 44% year-on-year, with digital policy sales rising by 135% and active users of the Hang Seng Olive health management app growing by 29%[21] - The commercial banking business reported a net operating income of HKD 9.625 billion, an increase of 8% year-on-year, while operating profit before tax decreased by 81% to HKD 775 million[34] Digital Transformation and Innovation - Digital transformation remains a key strategy, with over 460 digital innovation services launched in 2022, including mobile ticketing and green receipt services[32] - The company is actively participating in digital currency initiatives and has launched various fintech services, including mobile ticketing and US stock-linked investment services[19] - Monthly active users of mobile wealth management services increased by 11% year-on-year, demonstrating enhanced customer engagement[32] Risk Management - The company emphasizes a robust risk management culture, with all employees responsible for risk management and the board holding ultimate accountability[78] - The risk management framework includes a three-line defense model to support risk management efforts across the organization[81] - The company actively manages climate-related risks and integrates them into internal and client risk management considerations[78] - The risk management committee oversees the stress testing program, with results reported to the Risk Management Meeting and the Board[92] Economic Outlook and Challenges - The company acknowledges significant uncertainty in economic forecasts, particularly due to ongoing geopolitical risks such as the Russia-Ukraine conflict and U.S.-China tensions[143] - The expected credit loss estimation involves significant judgment and estimation, utilizing various economic forecasts and external predictions[142] - The company anticipates that fiscal support related to COVID-19 will diminish as economic activity restrictions are lifted, impacting future fiscal expenditures[144] - The ongoing geopolitical risks include the escalation of the Russia-Ukraine war and long-term tensions between the US and China, which may impact market sentiment and global economic activity[149] Sustainability and ESG Initiatives - The company aims to achieve net-zero carbon emissions in its operations by 2030 and supports the group’s goal of net-zero emissions in its financing portfolio by 2050[15] - The company has established a dedicated task force to oversee climate-related risk management and is actively communicating with stakeholders regarding these risks[106] - The company is committed to enhancing its climate risk management capabilities across four key areas: regulatory compliance, risk management, stress testing, and information disclosure[106]

Financial Performance - Net operating income before expected credit loss changes and other credit impairment charges decreased to HKD 14,944 million, down 13.4% from HKD 17,326 million in the same period last year[2]. - Operating profit fell to HKD 5,533 million, a decline of 45.5% compared to HKD 10,223 million in the previous year[2]. - Profit attributable to shareholders decreased to HKD 4,704 million, down 46.5% from HKD 8,767 million year-on-year[2]. - The average return on ordinary shareholders' equity dropped to 5.2%, down from 9.9% in the previous year[2]. - Earnings per share dropped by 48% to HKD 2.31, reflecting the challenging operating environment[23]. - The company reported a net profit of HKD 4,704 million for the period, contributing to a total comprehensive income of HKD 3,224 million[171]. - The total comprehensive income for the period attributable to shareholders was HKD 3,224 million, down from HKD 8,320 million in the previous year[169]. - The pre-tax profit for the six months ending June 30, 2022, was 5,439 million HKD, a decrease of 47.3% compared to 10,298 million HKD for the same period in 2021[175]. Asset and Liability Management - The bank's total assets increased to HKD 1,846,914 million, up from HKD 1,820,185 million at the end of the previous year[3]. - Customer deposits rose by HKD 19 billion, or 1%, to HKD 1,358 billion compared to the end of 2021[20]. - Total liabilities increased to HKD 1,664,344 million, compared to HKD 1,635,769 million, marking a rise of 1.7%[170]. - The bank's total capital as of June 30, 2022, was HKD 136,307 million, a slight decrease from HKD 138,758 million as of December 31, 2021[139]. - The total amount of loans and related credit commitments was HKD 365.054 billion, with a net amount of HKD 364.892 billion after expected credit loss provisions[130]. Credit Risk and Provisions - Expected credit loss provisions increased by HKD 17.57 billion to HKD 20.96 billion, primarily related to the mainland commercial real estate sector[19]. - The expected credit loss for customer loans was HKD (8,678) million as of June 30, 2022, compared to HKD (6,928) million as of December 31, 2021[78]. - Total impaired loans increased by HKD 8.595 billion, or 82%, to HKD 19.024 billion, with the impaired loan ratio rising to 1.92% from 0.69% a year earlier[29]. - The expected credit loss provision recorded in the income statement for the period was a net charge of 2,092 million[113]. - The expected credit loss provision for the mainland China commercial real estate portfolio was HKD 3.996 billion as of June 30, 2022, compared to HKD 2.820 billion on December 31, 2021[133]. Revenue Streams - The company's net interest income across all business segments recorded growth despite a challenging environment, with a significant increase in the number of target customers, particularly among young and affluent clients[10]. - The company's insurance premium income net increased by 78% due to strong customer response to new insurance products that provide both short-term and long-term protection[13]. - The company's wealth management business revenue decreased by HKD 2.633 billion, a decline of 57% year-on-year, primarily due to adverse market conditions affecting life insurance[14]. - The sales of ESG wealth management products increased by 3% year-on-year, while the asset size of ESG fund management rose by 59%[13]. - The company achieved a 175% year-on-year increase in green loans and sustainable development performance-linked loans, amounting to HKD 17 billion[15]. Operational Efficiency and Investments - Operating expenses rose by 8% year-on-year to HKD 73.13 billion, with a focus on investments in technology, staff, and brand[22]. - The company aims to enhance employee skills through a comprehensive data mastery training program to improve operational efficiency[7]. - The company launched over 350 digital innovation services and enhancements, including mobile ticketing services for both commercial and personal clients[10]. - The company is investing in information technology systems to improve service reliability and resilience[60]. - The company continues to enhance risk management practices in response to the ongoing COVID-19 pandemic and geopolitical tensions[61]. Market Conditions and Economic Outlook - The company has identified significant geopolitical risks, including the impact of the Ukraine conflict and the COVID-19 situation in Asia, as major sources of uncertainty[87]. - The consensus central scenario predicts GDP growth rates of 1.1% for Hong Kong and 4.5% for mainland China in 2022, with a gradual slowdown expected in 2023[90]. - The unemployment rate is projected to remain low, with averages of 4.4% for Hong Kong and 3.8% for mainland China in 2022[90]. - Inflation rates are expected to peak in 2022, with a return to central bank targets by the end of 2023, averaging 2.3% for Hong Kong and 2.2% for mainland China in 2022[90]. - The management's assessment of economic conditions reflects a high level of uncertainty regarding inflation and its impact on real income and GDP growth[97].

Financial Performance - Net operating income before expected credit loss changes and other credit impairment charges decreased to HKD 14,944 million from HKD 17,326 million, a decline of approximately 13.3%[4] - Operating profit fell to HKD 5,533 million, down 45.8% from HKD 10,223 million in the previous year[4] - Profit attributable to shareholders decreased to HKD 4,704 million, a drop of 46.5% compared to HKD 8,767 million in 2021[4] - The average return on ordinary shareholders' equity was 5.2%, down from 9.9% in the previous year[5] - The cost-to-income ratio increased to 48.9%, compared to 39.0% in the previous year[5] - Net profit for the period was HKD 4,696 million, down from HKD 8,761 million, indicating a decline of 46% year-over-year[175] - Basic and diluted earnings per share decreased to HKD 2.31 from HKD 4.44, a decline of 48%[174] - Total operating income reached HKD 27,534 million, compared to HKD 25,633 million in the previous year, reflecting a 7% increase[174] Income and Revenue - The company's net interest income across all businesses recorded growth, despite a challenging environment due to the pandemic and geopolitical tensions[11] - Net interest income increased by HKD 4.73 billion, or 4%, to HKD 123.56 billion, driven by a 3% rise in average interest-earning assets[26] - Net interest income for the first half of 2022 was HKD 12,823 million, an increase from HKD 12,343 million in the same period of 2021, reflecting a growth of 3.9%[27] - Interest income for the six months ended June 30, 2022, was HKD 15,379 million, up 8.5% from HKD 14,174 million for the same period in 2021[192] - The company reported a significant increase in net premium income to HKD 12,008 million, compared to HKD 6,798 million, marking a 77% rise[174] - Total investment service revenue decreased by HKD 8.46 billion, or 36%, to HKD 15.35 billion, particularly in retail investment funds and securities brokerage services[37] Expenses and Losses - Operating expenses rose by 8% year-on-year to HKD 73.13 billion, with a cost-to-income ratio increasing to 48.9% due to reduced operating income and higher expenses[24] - Non-interest income decreased by 52%, leading to a 14% year-on-year decline in net operating income before expected credit loss provisions, amounting to HKD 149.44 billion[25] - The company experienced a net loss from financial instruments measured at fair value through profit or loss of HKD 1,070 million, compared to a gain of HKD 2,685 million in the previous year[174] - The total operating expenses increased to HKD 7,313 million from HKD 6,754 million, reflecting an 8% rise[174] Credit Loss Provisions - The company's expected credit loss provisions increased due to refinancing risks in the mainland commercial real estate sector, leading to a 46% drop in profit attributable to shareholders[13] - Expected credit loss provisions increased by HKD 17.57 billion to HKD 20.96 billion, reflecting heightened risks in the mainland commercial real estate market[20] - Expected credit loss changes and other credit impairment charges amounted to HKD 2,096 million, compared to HKD 339 million in the previous year[174] - The expected credit loss (ECL) coverage ratio for customer loans is 0.69% for Stage 1, 2.45% for Stage 2, and 28.55% for Stage 3, with a total ECL of 1,004,325[88] Customer and Market Trends - The number of target customers increased, particularly among young clients, newly affluent individuals, and corporate clients[11] - The company expanded its market share in new mortgage approvals and maintained a top-three position in Hong Kong[15] - The bank's new customer acquisition rose by 72% year-on-year, expanding the sustainable growth base of deposits[52] - The number of active users for the Hang Seng Olive health management app increased by 127% year-on-year[14] Technology and Innovation - The bank has invested in technology and established a flexible operational infrastructure to support local fintech development[8] - The company launched over 230 digital innovation services and features in the first half of 2022[49] - Digital policy sales grew by 241% compared to the same period last year, leading the market in digital insurance[48] Economic and Market Outlook - The company anticipates continued challenges in the operating environment for the second half of 2022, while rising market interest rates may positively impact net interest income[23] - The company has identified geopolitical and macroeconomic risks as primary emerging risks, particularly related to the COVID-19 pandemic and the instability in the Chinese real estate sector[65] - The consensus central scenario predicts a gradual slowdown in GDP growth for 2022 and 2023, following a strong recovery in 2021, with inflation expected to peak in 2022[92] Regulatory and Compliance - The company continues to monitor and manage risks, including credit risk, market risk, and regulatory compliance risk, amidst ongoing geopolitical tensions and economic uncertainties[61] - The bank is committed to a smooth transition away from LIBOR by 2023, with ongoing collaboration with clients and investors to mitigate associated risks[77] - The company is developing an action plan to enhance organizational structure and data capabilities in line with new climate risk regulations[73]

Financial Performance - The bank reported a profit attributable to shareholders of HKD 13,960 million for the year, down from HKD 16,687 million in 2020, representing a decrease of approximately 16.4%[6]. - The bank's operating profit was HKD 16,231 million, compared to HKD 20,125 million in 2020, reflecting a decline of about 19.1%[6]. - The average return on ordinary shareholders' equity decreased to 7.7% from 9.6% in the previous year[6]. - The bank achieved a 16% decrease in shareholder profit for 2021, amounting to HKD 13.96 billion, primarily due to increased expected credit loss provisions and low interest rates impacting net interest income[26]. - The company's net profit attributable to shareholders for 2021 was HKD 139.60 billion, with a total dividend of HKD 5.10 per share[15]. - Pre-tax profit declined by 16% to HKD 16.385 billion, with earnings per share down 17% to HKD 6.93[32]. - Operating income before expected credit loss changes decreased by HKD 1.470 billion, or 8%, to HKD 15.856 billion, primarily due to a 28% decline in non-interest income in the second half of the year[95]. Asset and Loan Growth - The bank's total assets increased to HKD 1,820,185 million, up from HKD 1,759,787 million in 2020, marking a growth of approximately 3.4%[6]. - Total customer loans rose by 6% to HKD 1,004 billion compared to the end of 2020[32]. - Customer loans increased by HKD 53 billion, or 6%, to HKD 997.4 billion, with personal loans rising by 8% and trade finance loans increasing by 57%[112]. - New mortgage loans grew by 34% year-on-year, outperforming the market, while credit card spending rose by 10%[28]. - The total amount of loan commitments and other related credit commitments rose to 649,961 million in 2021, up from 556,503 million in 2020, marking an increase of approximately 16.8%[194]. Non-Interest Income and Revenue Streams - Non-interest income grew by 2% year-on-year, totaling HKD 93.6 billion, despite increased market uncertainties in the second half of the year[30]. - Non-interest income increased by 8%, amounting to HKD 5.493 billion, driven by enhanced digital banking services[45]. - Wealth management and personal banking business saw an 11% year-on-year growth in wealth management income, driven by enhanced data analytics and digital banking services[27]. - Insurance business revenue increased by 17% due to the launch of new products catering to customer needs in life protection and wealth transfer planning[28]. - The investment return from the life insurance fund increased by HKD 2.155 billion, or 298%, to HKD 2.879 billion, attributed to proactive management of the investment portfolio[91]. Digital Transformation and Innovation - The bank continues to invest in digital technology to enhance service capabilities and meet customer wealth management needs[14]. - The bank launched over 250 digital innovation services for corporate clients, resulting in a more than 100% increase in average monthly customer acquisition[30]. - The number of personal mobile banking app users increased by 12%, with login frequency growing by 26% and online transaction volume rising by 44%[45]. - The company launched 415 digital innovation services and features during the year, enhancing customer experience[47]. - The bank launched a virtual account service to enhance core banking services, allowing customers to manage collections and reconciliations more efficiently[106]. Risk Management and Compliance - The bank's risk management strategy emphasizes sustainable business practices and includes considerations for social, environmental, and economic factors[118]. - The company conducts regular reviews of its actual risk tolerance against limits set by the risk appetite statement, allowing senior management to monitor risk conditions and guide business activities[129]. - The compliance department is responsible for managing regulatory compliance and financial crime risks[127]. - The company is enhancing fraud and monitoring measures by applying advanced analytics and artificial intelligence to combat financial crime[150]. - The company has established processes for identifying, assessing, monitoring, managing, and reporting risks[125]. Community and Sustainability Initiatives - The bank is committed to community support through various projects focused on youth skills, sustainable finance, and climate change response[5]. - The bank is committed to becoming a leader in ESG, having made significant progress in 2021, including a commitment to achieve carbon neutrality by 2030[17]. - The bank plans to enhance its ESG performance and aims for carbon neutrality by 2030[33]. - The company is actively promoting green and sustainable financing as a key growth strategy[12]. - The company supports the goals of the Paris Agreement and is strengthening its climate risk management capabilities to assist clients in transitioning to a low-carbon economy[152]. Economic Outlook and Market Conditions - The company has reported a decrease in overall economic activity and global trade trends, impacting the banking sector for the second consecutive year[14]. - The center scenario predicts a GDP growth rate of 3.1% for Hong Kong and 5.3% for mainland China in 2022, with a five-year average growth rate of 2.7% and 5.1% respectively from 2022 to 2026[200]. - The unemployment rate is expected to average 4.1% in Hong Kong and 3.8% in mainland China for 2022, with a five-year average of 3.6% for Hong Kong and 3.8% for mainland China from 2022 to 2026[200]. - The company anticipates that fiscal support related to COVID-19 will diminish in 2022 as economic activity restrictions ease[200]. - The probability assigned to the center scenario is 70% for Hong Kong and 80% for mainland China, indicating a higher confidence in these forecasts[200].

Financial Performance - Net operating income for 2021 was HKD 33,182 million, a decrease of 8% from HKD 36,068 million in 2020[5]. - Operating profit fell by 19% to HKD 16,231 million in 2021 from HKD 20,125 million in 2020[5]. - Profit attributable to shareholders decreased by 16% to HKD 13,960 million in 2021 compared to HKD 16,687 million in 2020[5]. - The average return on ordinary shareholders' equity was 7.7% in 2021, down from 9.6% in 2020[5]. - The cost-to-income ratio increased to 42.6% in 2021 from 36.6% in 2020[5]. - Earnings per share for 2021 were HKD 6.93, a decline of 17% from HKD 8.36 in 2020[5]. - The pre-tax profit decreased by 16% to HKD 16.385 billion, down from HKD 19.414 billion in 2020[60]. - Non-interest income grew by 2% year-on-year, amounting to HKD 9.36 billion, while net interest income decreased by 11% to HKD 23.82 billion due to adverse interest rate environment[33]. Asset and Equity Management - Total assets as of December 31, 2021, were HKD 1,820,185 million, a 3% increase from HKD 1,759,787 million in 2020[5]. - Shareholders' equity at year-end was HKD 184,332 million, slightly up from HKD 183,100 million in 2020[5]. - The common equity tier 1 capital ratio decreased to 15.9% in 2021 from 16.8% in 2020[5]. - The liquidity coverage ratio was 192.7% in 2021, down from 230.4% in 2020[5]. - Total customer deposits increased by HKD 35 billion, or 3%, totaling HKD 1,339 billion[39]. Strategic Initiatives and Market Focus - The bank aims to become the preferred banking and financial services partner in the Greater Bay Area, which has a population of over 72 million[18][19]. - The Greater Bay Area's GDP is projected to exceed USD 4.6 trillion by 2030, more than doubling from 2020[19]. - The bank is committed to becoming a leader in ESG initiatives and aims to achieve carbon neutrality by 2030[20]. - The bank is focusing on expanding sustainable financing and ESG investments to drive "new economy" development[19]. - The company plans to launch the first ESG exchange-traded fund based on the Hang Seng Index, responding to the growing demand for ESG investment products[27]. Digital Transformation and Innovation - The company continues to invest in digital technology, launching 415 digital innovation services and features for personal banking last year[28]. - The number of users for the award-winning mobile wealth management app increased by 12%, with login frequency growing by 26% and online transaction volume surging by 44%[28]. - The bank launched a remote account opening service with electronic signature functionality, allowing customers to open a "Virtual+" business account in as little as 3 working days[48]. - The bank successfully launched over 415 digital innovation services and features, enhancing customer-centric banking solutions[84]. Risk Management and Compliance - The company actively manages both financial and non-financial risks to maximize shareholder value and profitability[105]. - The risk management framework includes a three-line defense model to support effective risk management across the organization[108]. - The company conducts regular risk assessments to ensure the retention of key personnel and maintain operational safety[108]. - The group conducts extensive stress testing as part of its risk management and capital planning, assessing the impact of adverse events on financial stability[117]. - The company faces geopolitical and macroeconomic risks related to US-China tensions and the COVID-19 pandemic, which may disrupt operations and threaten employee safety[122]. Credit Risk and Expected Credit Losses - The expected credit loss provisions increased by HKD 690 million, or 3%, to HKD 2.807 billion[65]. - The ratio of expected credit losses to total customer loans was 0.69% as of December 31, 2021, up from 0.55% in 2020[69]. - The expected credit loss estimation remains highly uncertain despite the economic recovery in 2021, with management exercising caution in selecting economic scenarios and their weights[173]. - The management has identified significant uncertainty in estimating expected credit losses due to the ongoing economic impact of the COVID-19 pandemic[185]. Economic Outlook and Projections - The central scenario predicts a GDP growth rate of 3.1% for Hong Kong and 5.3% for mainland China in 2022, with a five-year average growth rate of 2.7% and 5.1% respectively from 2022 to 2026[178]. - The unemployment rate is expected to average 4.1% in Hong Kong and 3.8% in mainland China for 2022, with a five-year average of 3.6% and 3.8% respectively[178]. - The economic outlook is influenced by risks related to the pandemic's progression, vaccine rollout, and geopolitical tensions, particularly between the US and China[175]. - The management considers the probability of the central scenario for mainland China to be 80%, with a combined probability of 15% for the two downside scenarios[184].

Financial Performance - Net operating income before expected credit losses decreased from HKD 19,187 million in 2020 to HKD 17,326 million in 2021, a decline of 9.7%[5] - Profit attributable to shareholders decreased by 4% to HKD 8,767 million, with earnings per share at HKD 4.44[7] - The average return on ordinary shareholders' equity was 9.9%, down from 10.7% in the previous year[5] - Operating profit declined by 8% to HKD 10.223 billion, while it increased by 14% compared to the second half of 2020[13] - Pre-tax profit decreased by 3% to HKD 10.298 billion, with net profit attributable to shareholders down by 4% to HKD 8.767 billion[19] - The net profit for the six months ending June 30, 2021, was HKD 8,761 million, a decrease of 4.1% from HKD 9,135 million in the same period of 2020[150] - Total comprehensive income for the period was HKD 8,314 million, compared to HKD 7,203 million in the previous year, reflecting an increase of 15.4%[150] Asset and Liability Management - Total assets increased to HKD 1,800,215 million from HKD 1,759,787 million, reflecting a growth of 2.3%[6] - Total liabilities amounted to HKD 1,616,448 million, compared to HKD 1,576,592 million, reflecting an increase of 2.5%[151] - Customer loans (net of expected credit loss provisions) rose by HKD 69 billion, or 7%, to HKD 1,013.46 billion[44] - Financial investments decreased by HKD 55 billion, or 10%, to HKD 499 billion, reflecting a reallocation of surplus funds to support loan growth[42] - The total maximum credit risk exposure was 2,274,019 million as of June 30, 2021, compared to 2,222,648 million at the end of 2020, showing an increase of 2.3%[61] Income Sources - Non-interest income increased by 24% year-on-year, reflecting successful measures taken by the company[10] - Net service fee income rose by 17% to HKD 3.709 billion, driven by strong growth in retail investment funds and securities brokerage services[12] - Wealth management income increased by 44%, driven by higher revenues from securities brokerage and retail investment fund sales[20] - The company reported a net service fee income of HKD 3,175 million, with securities brokerage and related services contributing HKD 978 million[185] - Total operating income for the first half of 2021 was HKD 25.63 billion, with net interest income of HKD 11.88 billion and net service fee income of HKD 3.71 billion[181] Credit Risk and Provisions - Expected credit loss provisions decreased by HKD 1.421 billion, or 81%, to HKD 339 million, reflecting a stable overall expected credit loss balance[13] - Total impaired loans increased by HKD 12.87 billion, or 22%, to HKD 70.11 billion, with the impaired loan ratio rising to 0.69% from 0.32% a year earlier[29] - The expected credit loss provision for customer loans was 5,132 million as of June 30, 2021, slightly down from 5,180 million at the end of 2020[63] - The expected credit loss (ECL) estimation reflects a range of possible economic outcomes based on probability-weighted scenarios[71] - Significant uncertainty remains in estimating expected credit losses due to the economic impact of the COVID-19 pandemic[83] Dividends and Shareholder Returns - The company announced an interim dividend of HKD 1.10 per share, totaling HKD 2.20 per share for the first half of 2021, compared to HKD 1.90 in the same period of 2020[7] - The board declared a second interim dividend of HKD 1.10 per share, totaling HKD 21.03 billion, to be paid on September 2, 2021[177] - The company declared dividends totaling HKD 7,456 million, which includes HKD 5,353 million from the fourth interim dividend and HKD 2,103 million from the first interim dividend[153] Market and Economic Outlook - The economic outlook for Hong Kong anticipates a growth of approximately 7.3% for the full year 2021[8] - The central scenario predicts Hong Kong's GDP growth of 5.2% in 2021, with an average growth rate of 2.6% from Q3 2021 to Q2 2026[74] - The unemployment rate in Hong Kong is projected to average 6.2% in 2021, decreasing to 4.6% in 2022[75] - The company is closely monitoring geopolitical developments and managing credit portfolios through thematic reviews and internal stress tests[50] Digital Transformation and Innovation - The company continues to invest in digital services and technology to enhance customer banking solutions, particularly during the pandemic[7] - The company launched over 270 new digital features or services in the first half of the year to enhance customer experience[10] - The company introduced the "SimplyFund" investment service, which has received recognition for its user-friendly interface and low investment threshold[11] - The bank's digital cash management solutions, including QR code payment services, led to a 68% increase in average current and savings deposits, resulting in robust growth in interest income[40] Risk Management - The bank's risk management policies remain consistent, focusing on credit risk, liquidity risk, and market risk among others[45] - The company is focused on minimizing operational risks to ensure continuous service delivery to clients and stakeholders[140] - The bank established a dedicated climate risk team to support climate change strategies and manage related risks[46] Regulatory and Compliance - The company is preparing to implement the new Hong Kong Financial Reporting Standard No. 17 for insurance contracts, effective January 1, 2023, which may impact future profit recognition[161] - The company has adopted a business continuity plan to ensure critical client services remain unaffected during the pandemic[52]

Financial Performance - Net operating income before expected credit losses decreased to HKD 17,326 million, down 9% from HKD 19,187 million in 2020[3] - Profit attributable to shareholders fell by 4% to HKD 8,767 million, compared to HKD 9,143 million in the previous year[5] - Average return on ordinary shareholders' equity was 9.9%, down from 10.7% in 2020[3] - Operating profit decreased by 8% to HKD 10.223 billion, while it increased by 14% compared to the second half of 2020[16] - Total operating income for the first half of 2021 was HKD 25.63 billion, a decrease of 6% from HKD 27.26 billion in the first half of 2020[22] - The group's net profit attributable to shareholders for the first half of 2021 was HKD 8.77 billion, a decrease of 4% compared to the same period in 2020[21] - Total comprehensive income for the period amounted to HKD 8,320 million, compared to HKD 7,211 million in the previous year, reflecting an increase of 15.4%[141] Asset and Liability Management - Total assets increased to HKD 1,800,215 million, up from HKD 1,759,787 million at the end of 2020[4] - Total liabilities amounted to HKD 1,616,448 million, compared to HKD 1,576,592 million, reflecting an increase of 2.5%[142] - Customer loans (net of expected credit loss provisions) amounted to HKD 1,013.463 billion, an increase of HKD 69 billion or 7% compared to the end of 2020[40] - The loan-to-deposit ratio increased to 77.6% as of June 30, 2021, up from 72.4% at the end of 2020[41] - The bank's total assets as of June 30, 2021, were not explicitly stated but can be inferred from the capital and risk-weighted assets data provided[134][135] Income Sources - Non-interest income increased by 24% compared to the same period last year, reflecting the success of the company's measures[9] - The company's net interest income decreased by 4% year-on-year, amounting to HKD 8.767 billion, due to declining interest rates and market challenges[9] - Net service fee income rose by 17% to HKD 3.709 billion, driven by strong growth in retail investment funds and securities services[14] - Wealth management business revenue increased by 44%, primarily driven by higher income from securities brokerage and retail investment fund sales[21] - The net interest income for the first half of 2021 was HKD 11,883 million, a decrease of 19.3% from HKD 14,792 million in the same period of 2020[139] Credit Risk and Provisions - Expected credit loss provisions decreased by HKD 1.421 billion, or 81%, to HKD 339 million, indicating a stable overall expected credit loss balance[16] - The expected credit losses and other credit impairment charges for the first half of 2021 were HKD 339 million, significantly lower than HKD 1,760 million in the same period of 2020, indicating a decrease of 80.7%[139] - The total expected credit loss provision reflects a range of possible economic outcomes based on probability-weighted scenarios, indicating significant judgment and estimation involved in the measurement[69] - The expected credit loss (ECL) coverage ratio for Stage 1 loans is 0.16%, Stage 2 is 1.40%, and Stage 3 is 35.72%[67] Economic Outlook - The outlook for Hong Kong's economy is projected to grow by approximately 7.3% for the full year 2021[6] - The overall economic recovery is observed, but uncertainties remain due to new COVID-19 variants and geopolitical tensions[19] - The consensus central scenario predicts Hong Kong's GDP growth rate to be 5.2% in 2021, with an average growth rate of 2.6% from Q3 2021 to Q2 2026[73] - The average unemployment rate in Hong Kong is expected to be 6.2% in 2021, decreasing to 4.0% over the next five years[75] Dividends and Shareholder Returns - The bank declared an interim dividend of HKD 1.10 per share, totaling HKD 2.20 per share for the first half of 2021, compared to HKD 1.90 in the same period last year[5] - The total dividend declared for the first half of 2021 was HKD 4,206 million, an increase from HKD 3,632 million in the same period of 2020, marking a growth of 15.8%[167] Technology and Digital Services - The bank continues to invest in digital services and technology to enhance customer banking solutions, especially during the pandemic[5] - The number of active mobile banking service users increased to 75%, with login frequency for mobile banking applications rising by 45% compared to the previous year[10] - The company launched over 270 new digital features or service enhancements in the first six months of the year to improve customer experience[10] Risk Management - The company continues to enhance risk management practices, particularly in non-financial risk and financial crime monitoring[44] - The company has established a dedicated climate risk team to support climate change strategies and manage related risks[44] - The company actively supports customers during the ongoing challenges posed by the COVID-19 pandemic, adjusting operational processes as necessary[43] Market Conditions - The transition from LIBOR is ongoing, with the UK Financial Conduct Authority announcing that 24 of the 35 major LIBOR benchmarks will cease publication by the end of 2021[51] - The company is monitoring the market activity of alternative rates such as SOFR and TONA, which are developing slowly in the Asia-Pacific region[52] - The credit spread benchmarks for investment-grade and high-yield bonds approached pre-pandemic levels, supporting major stock markets reaching historical highs in June 2021[119]

Financial Performance - The bank reported a profit attributable to shareholders of HKD 16,687 million, down from HKD 24,840 million in 2019, representing a decrease of approximately 32.8%[14]. - The bank's pre-tax profit was HKD 19,414 million, compared to HKD 28,813 million in 2019, reflecting a decline of about 32.5%[14]. - The bank's operating profit was HKD 20,125 million, down from HKD 28,610 million in 2019, indicating a decrease of approximately 29.5%[14]. - The average return on ordinary shareholders' equity was 9.6%, down from 15.2% in 2019[14]. - Operating income decreased by 20% to HKD 33.33 billion[26]. - Total operating income for 2020 was HKD 54,322 million, a decrease of 14.2% from HKD 63,341 million in 2019[69]. - Profit attributable to shareholders was HKD 16,687 million, a decline of 32.8% compared to HKD 24,840 million in 2019[69]. - Earnings per share decreased to HKD 8.36 from HKD 12.77 in 2019[69]. Asset and Liability Management - The bank's total assets increased to HKD 1,759,787 million, up from HKD 1,676,991 million in 2019, representing a growth of about 4.9%[14]. - The bank's total liabilities rose to HKD 1,576.6 billion in 2020, compared to HKD 1,498.1 billion in 2019[15]. - Customer deposits rose by 4% to HKD 1,304 billion, supported by the issuance of certificates of deposit in Hong Kong and mainland China[48]. - The loan-to-deposit ratio improved to 72.4% as of December 31, 2020, down from 75.4% at the end of 2019[106]. - Shareholders' equity rose by HKD 4 billion, or 2%, to HKD 183 billion as of December 31, 2020, compared to HKD 178.81 billion at the end of 2019[109]. Credit Risk and Provisions - Expected credit losses increased by 49% compared to the previous year, totaling HKD 2.738 billion, although the second half of the year saw a 44% reduction in provisions[24]. - The expected credit loss provision for retail unsecured revolving loans, such as overdrafts and credit cards, is recognized unless the total expected credit loss exceeds the total carrying amount of the financial asset[157]. - The total expected credit loss for financial instruments under the application of HKFRS 9 was $(5,548) million as of December 31, 2020[157]. - The expected credit loss coverage ratio for Stage 2, where credit risk has significantly increased, includes lifetime expected credit losses[158]. - The total expected credit loss for the year ended December 31, 2020, was (2,639) million, reflecting a significant adjustment in provisions[197]. Digital Transformation and Innovation - Digital banking services transactions increased by 124% year-on-year, reflecting a significant shift towards online banking during the pandemic[9]. - The bank launched approximately 475 digital innovation services in 2020, more than three times the number launched in 2019[25]. - The company launched approximately 350 new digital service offerings in 2020, enhancing customer engagement and convenience[52]. - The bank's digital financial services received multiple industry awards, including "Best API Project" and "Best Payment Bank in Hong Kong" at the Wholesale Banking Awards 2020[58]. - The bank launched a digital account opening service for commercial clients, allowing them to open accounts anytime and anywhere[55]. Community Support and Corporate Responsibility - The bank donated HKD 10 million to support underprivileged families during the pandemic, highlighting its commitment to community support[11]. - The bank has established an Environmental, Social, and Governance (ESG) Steering Committee to address community issues and global ecological challenges[22]. - The bank actively supported SMEs during the pandemic by launching an online application platform for the SME Financing Guarantee Scheme[62]. Risk Management - The bank emphasizes a robust risk management culture to support sustainable growth and protect stakeholders[114]. - The risk management framework includes a "three lines of defense" model to clarify roles and responsibilities in risk management[117]. - The group conducts extensive stress testing as part of its risk management and capital planning, assessing the impact of adverse events[121]. - The company has identified geopolitical and macroeconomic risks, including the impact of the COVID-19 pandemic, as primary emerging risks[124]. - The company continues to invest in advanced analytics and artificial intelligence as key elements in combating financial crime[125]. Economic Outlook - The short-term economic outlook remains uncertain, dependent on the global control of the COVID-19 pandemic[20]. - The anticipated economic growth for mainland China in 2021 is projected to be between 6% and 8%[22]. - The management acknowledges significant risks including geopolitical tensions and the impact of COVID-19 on economic recovery[176]. - The consensus central scenario predicts a GDP growth rate of -6.4% for Hong Kong in 2020, followed by a recovery to 4.3% in 2021[173]. - The company anticipates that economic activities will gradually recover in 2021, contingent on effective pandemic control and the willingness of households and businesses to return to pre-crisis consumption levels[133].