Hang Seng Bank : 2023 Interim Results (1 August 2023)

1 August 2023

HANG SENG BANK LIMITED

2023 INTERIM RESULTS - HIGHLIGHTS

• Profit attributable to shareholders up 79% to HK$9,827m (HK$5,505m for the first half of 2022 ('1H 2022')).
• Profit before tax up 71% to HK$10,961m (HK$6,397m for 1H 2022).
• Operating profit up 67% to HK$10,858m (HK$6,491m for 1H 2022).
• Net operating income before change in expected credit losses and other credit impairment charges up 29% to HK$19,940m (HK$15,409m for 1H 2022).
• Return on average ordinary shareholders' equity of 12.8% (7.1% for 1H 2022).
• Earnings per share up 83% to HK$4.99 per share (HK$2.73 per share for 1H 2022).
• Second interim dividend of HK$1.10 per share; total dividends of HK$2.20 per share for 1H 2023 (HK$1.40 per share for 1H 2022).
• Common equity tier 1 ('CET1') capital ratio of 16.8%, tier 1 ('T1') capital ratio of
  18.5% and total capital ratio of 20.0% at 30 June 2023 (CET1 capital ratio of 15.2%, T1 capital ratio of 16.8% and total capital ratio of 18.1% at 31 December 2022).
• Cost efficiency ratio of 35.9% (44.2% for 1H 2022).

From 1 January 2023, the Group has adopted Hong Kong Financial Reporting Standard ('HKFRS') 17 'Insurance Contracts' which replaced HKFRS 4 'Insurance Contracts'. Comparative figures have been restated accordingly.

Within this document, the Hong Kong Special Administrative Region of the People's Republic of China has been referred to as 'Hong Kong'. The abbreviations 'HK$m' and 'HK$bn' represent millions and billions of Hong Kong dollars respectively.

HANG SENG BANK LIMITED

Contents

The financial information in this press release is based on the unaudited Condensed Consolidated Financial Statements of Hang Seng Bank Limited ('the Bank') and its subsidiaries ('the Group') for the six months ended 30 June 2023.

1. Highlights of Results
2. Contents

4 Chairman's Comment

1. Chief Executive's Review

1. Results Summary

1. Segmental Analysis

1. Condensed Consolidated Income Statement
2. Condensed Consolidated Statement of Comprehensive Income
3. Condensed Consolidated Balance Sheet
4. Condensed Consolidated Statement of Changes in Equity

1. Financial Review
   27 Net interest income
   27 Net fee income
   28 Net income/(loss) from financial instruments measured at fair value through profit or loss
   28 Other operating income
   29 Analysis of income from wealth management business
   30 Change in expected credit losses and other credit impairment charges
   30 Operating expenses
   31 Tax expense
   31 Earnings per share - basic and diluted
   31 Dividends/Distributions
   32 Segmental analysis
   34 Trading assets
   34 Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
   34 Loans and advances to customers
   35 Reconciliation of changes in gross carrying/nominal amount and allowances for placings with and advances to banks and loans and advances to customers, including loan commitments and financial guarantees
   36 Overdue loans and advances to customers
   36 Rescheduled loans and advances to customers
   37 Gross loans and advances to customers by industry sector
   38 Financial investments
   38 Intangible assets
   38 Other assets
   39 Current, savings and other deposit accounts
   39 Trading liabilities
   39 Financial liabilities designated at fair value
   40 Other liabilities
   40 Shareholders' equity
   41 Capital management
   44 Liquidity information
   44 Contingent liabilities, contractual commitments and guarantees

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HANG SENG BANK LIMITED	Contents
	(continued)

45 Additional Information

45 Statutory financial statements and accounting policies

51 Ultimate holding company

52 Register of Shareholders

52 Corporate governance principles and practices

52 Board of Directors

52 Press release and Interim Report

53 Other financial information

53 Cautionary statement regarding forward-looking statements

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HANG SENG BANK LIMITED

Chairman's Comment

Comment by Irene Lee, Chairman

We are already seeing renewed energy in the market with the lifting of COVID restrictions.

Emerging opportunities for growth include new-economy sectors, green technologies and innovation. The Greater Bay Area ('GBA') is at the forefront of this structural transformation and new policies are strengthening integration among key cities. Some of the investments and support are significant. For example, the Guangdong government will provide RMB4 trillion in new credit this year to support economic development.

Hong Kong is an integral part of the GBA. With the increase in travel, trade and capital flows, we will benefit from the greater economic growth. The Central Government has reiterated Hong Kong's value as an international financial centre. I am pleased to say that Hang Seng is strongly positioned to make a major contribution as we move into this new era.

Driving Innovation

In line with new expectations and advanced technology, which are reshaping the financial services landscape, we have established ourselves as an innovator with a clear vision for Future Banking. Committed efforts in applying digital tools, analytics and upskilling our people have enabled us to become a data-driven organisation with a strong customer focus.

Additionally, through collaborative partnerships, we have focused on creating a GBA innovation ecosystem that encourages entrepreneurship and nurtures new economy start-ups. We are leveraging this network to help advance fintech development in Hong Kong. Our role as an innovation facilitator has been recognised with an 'Excellence in Collaboration and Partnership Special Award' at the HKMA/HKT Global Innovation Awards 2022/23 organised by The Hong Kong Management Association.

The Hong Kong Monetary Authority selected three of our e-HKD proposed applications to assess the potential take up and use of e-HKD in its Pilot Programme. This is a strong endorsement of our credentials as advocate of Central Bank Digital Currencies, which will play a major role in the trend towards digital payments and a cashless society. We will launch two real-life simulations in the third quarter this year.

Building Wealth

The region's rapidly expanding middle class is also driving demand for wealth management services. Of the 86 million residents in the GBA, about 20% currently expect to cross the boundary to or from Hong Kong for work or retirement in the future. We anticipate this number will increase.

As new government initiatives expand cross-boundary mutual market access to enable customers to invest, new Connect schemes are being launched. We are on the forefront of developing solutions that support this vision. As an example, we are Hong Kong's number-one exchange- traded fund ('ETF') manager, and we manage three of the six approved ETF funds available for southbound trading under the ETF Connect scheme.

We are amongst the first 24 companies to launch an RMB counter under the Stock Exchange of Hong Kong's new HKD-RMB Dual Counter Model. In addition to increasing investor choice, this supports the further internationalisation of the RMB and Hong Kong's position as the leading offshore RMB finance hub.

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HANG SENG BANK LIMITED	Chairman's Comment
	(continued)
Comment by Irene Lee, Chairman (continued)
Improving Sustainability

Urgent collective actions are required by businesses in all industries to address climate change. We aim to achieve net zero in our operations by 2030. We are pleased to report that our Headquarters is the first bank building in Hong Kong to be Gold-certified by the International WELL Building Institute, which sets benchmarks for transformative and people-centric spaces.

We are also working closely with our customers on their transition. To reach our goals, sustainable finance solutions have been launched to help customers move towards low-carbon operations. Additionally, Hang Seng Indexes Company Limited is launching indexes with new themes such as hydrogen energy, low carbon emission intensity China A-share companies and Central State-owned Enterprises with good ESG performance to underline the importance of the paradigm shift.

Working with clients to extend this ethos into the community, we offered our first social loan to fund construction projects in Hong Kong that will improve access to education for children with special needs and support greater housing affordability.

Our sustainability initiatives have been recognised by S&P Global with a Top 1% S&P Global ESG Score (China).

Looking Ahead

Hang Seng turned 90 in March this year. Our celebrations showcased our deep connections with Hong Kong and showed how constant innovation has been used to drive sustainable growth and prosperity.

We are very positive about the future and the growth potential presented by the GBA. Hang Seng will continue to remain focused on helping Hong Kong, the community and our customers.

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