At a glance
We have a strong platform for growth with the opportunities that exist in our two home markets and across our international businesses.
Highlights:
- Profit before tax up 78% vs FY22: the increase primarily reflects revenue growth, driven by the strength of our balance sheet in a higher interest-rate environment
- We approved a fourth interim dividend of $0.31 per share, which contributed to our highest full-year dividend ($0.61) since 2008
- We announced share buybacks totalling $7bn in 2023 and intend to initiate a further share buyback of up to $2bn, which we expect to complete by our 1Q24 results announcement
- Revenue increased by 30% vs FY22
- Expected credit losses and other credit impairment charges (ECL) were $3.4bn, a reduction of $0.1bn vs FY22
- Operating expenses fell by $0.6bn to $32.1bn vs FY22. On our target basis, our operating expenses rose by 6%
- Our common equity tier 1 (CET1) capital ratio was 14.8%, as of 31 December 2023
- Our return on average tangible equity (RoTE) was 14.6%, or 15.6% excluding strategic transactions and an impairment of our investment in Bank of Communications Co., Limited (‘BoCom’)
Group Chief Executive
The power of our international network
Our strength in international connectivity remains one of our key differentiators.
In Commercial Banking, we help businesses grow because we’re a core enabler of how they connect internationally and participate in the biggest and fastest-growing trade corridors.
In Global Banking and Markets, we connect clients in the West to the East, and are the preferred sub-custodian for institutional investors in multiple markets.
We facilitated more than $850bn of trade last year and have been ranked first in trade revenue since 2018. We ranked second globally by revenue in our payments business and we processed about $500tn of electronic payments. We’ve also been number three globally by revenue in foreign exchange since 2021.
We’re doing more with our Wealth and Personal Banking (WPB) customers, too. We attracted net new invested assets of $84bn last year, compared with $80bn in 2022 and $64bn in 2021.
In 2023, we launched a new, strengthened international proposition and, overall, grew revenue from WPB international customers by 41%, from $7.2bn in 2022 to $10.2bn. And we recorded a 43% jump in new-to-bank international WPB customers.
Outlook
We continue to target a RoTE in the mid-teens for 2024, excluding the impact of notable items (FY23: 14.6%, or 15.6% excluding strategic transactions and the BoCom impairment).
Given continued uncertainty in the forward economic outlook, we expect ECL charges as a percentage of average gross loans to be around 40bps in 2024, including customer lending balances transferred to held for sale (FY23: 33bps). We continue to expect our ECL charges to normalise towards a range of 30bps to 40bps of average loans over the medium to long term.
We retain a Group-wide focus on cost discipline. We’re targeting cost growth of approximately 5% for 2024 compared with 2023, on a target basis. This target reflects our current business plan for 2024, and includes an increase in staff compensation, higher technology spend and investment for growth and efficiency, in part mitigated by cost savings from actions taken during 2023.
Our cost target basis for 2024 excludes the impact of the disposal of our retail banking business in France and the planned sale of our banking business in Canada. It is measured on a constant currency basis and excludes notable items and the impact of retranslating the prior year results of hyperinflationary economies at constant currency.
We intend to manage the CET1 capital ratio within our medium-term target range of 14% to 14.5% (31 Dec 23: 14.8%).
Our dividend payout ratio target remains at 50% for 2024, excluding material notable items and related impacts. We have announced a further share buyback of up to $2bn. Further buybacks remain subject to appropriate capital levels.
Context behind the numbers
From 1 January 2023, we adopted the IFRS 17 ‘Insurance Contracts’ accounting standard, which replaced IFRS 4. All prior periods have been restated to allow for comparison.
We no longer report adjusted performance with significant items excluded.
The net ECL charge in 2023 primarily comprised stage 3 charges, notably related to mainland China commercial real estate sector exposures. It also reflected continued economic uncertainty, rising interest rates and inflationary pressures.
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