Allowance for expected credit losses (Tables)

6 Months Ended

Jun. 30, 2024

Disclosure of allowance for expected credit losses [Abstract]

Disclosure of impairment allowances

The table below analyses total ECL allowance by portfolio, separately identifying the amounts that have been modelled,

those that have been individually assessed and those arising through the application of judgemental adjustments.

					Judgemental adjustments due to:
At 30 June 2024	Modelled ECL £m	Individually assessed £m		Inflationary and interest rate risk £m		Other £m		Total ECL £m
UK mortgages	806		–		23		142	971
Credit cards	679		–		6		15	700
Other Retail	878		–		6		58	942
Commercial Banking	992		322		–		(315)	999
Other	18		–		–		–	18
Total	3,373		322		35		(100)	3,630
At 31 December 2023
UK mortgages	991		–		61		63	1,115
Credit cards	703		–		92		15	810
Other Retail	866		–		33		46	945
Commercial Banking	1,124		340		–		(282)	1,182
Other	32		–		–		–	32
Total	3,716		340		186		(158)	4,084

Disclosure of generation of multiple economic assumptions by quarter and by year

At 30 June 2024	2024 %	2025 %	2026 %	2027 %	2028 %	2024 to 2028 average %
Upside
Gross domestic product growth	1.1	2.3	1.7	1.5	1.4	1.6
Unemployment rate	4.1	3.2	3.0	2.9	2.9	3.2
House price growth	2.2	5.0	7.3	6.0	5.2	5.1
Commercial real estate price growth	2.2	8.7	2.4	2.8	1.2	3.4
UK Bank Rate	5.17	5.30	5.17	5.33	5.55	5.31
CPI inflation	2.5	2.5	2.4	2.7	2.9	2.6
Base case
Gross domestic product growth	0.8	1.2	1.6	1.6	1.6	1.3
Unemployment rate	4.5	4.8	4.8	4.6	4.6	4.7
House price growth	1.2	1.4	1.0	1.4	2.4	1.5
Commercial real estate price growth	(1.6)	1.2	0.0	1.9	1.0	0.5
UK Bank Rate	5.06	4.19	3.63	3.50	3.50	3.98
CPI inflation	2.5	2.5	2.1	2.1	2.2	2.3
Downside
Gross domestic product growth	0.6	(0.5)	0.8	1.5	1.6	0.8
Unemployment rate	4.9	6.9	7.5	7.4	7.2	6.7
House price growth	0.6	(1.8)	(6.5)	(5.4)	(2.3)	(3.1)
Commercial real estate price growth	(4.7)	(6.7)	(4.1)	(0.8)	(1.3)	(3.5)
UK Bank Rate	4.97	2.77	1.38	0.89	0.63	2.13
CPI inflation	2.5	2.4	1.8	1.4	1.2	1.9
Severe downside
Gross domestic product growth	0.1	(2.2)	0.4	1.2	1.5	0.2
Unemployment rate	5.5	9.4	10.2	10.1	9.8	9.0
House price growth	(0.7)	(4.8)	(13.9)	(11.8)	(7.6)	(7.9)
Commercial real estate price growth	(9.1)	(15.1)	(8.6)	(5.3)	(4.7)	(8.6)
UK Bank Rate – modelled	4.81	1.12	0.16	0.05	0.02	1.23
UK Bank Rate – adjusted1	5.09	3.22	2.33	2.02	1.79	2.89
CPI inflation – modelled	2.6	2.4	1.3	0.5	0.1	1.4
CPI inflation – adjusted1	2.9	3.2	1.6	0.9	1.0	1.9
Probability-weighted
Gross domestic product growth	0.8	0.7	1.3	1.5	1.5	1.2
Unemployment rate	4.6	5.4	5.6	5.5	5.4	5.3
House price growth	1.1	0.9	(0.9)	(0.6)	0.8	0.3
Commercial real estate price growth	(2.1)	(0.5)	(1.3)	0.6	(0.2)	(0.7)
UK Bank Rate – modelled	5.04	3.79	3.07	2.92	2.90	3.55
UK Bank Rate – adjusted1	5.07	4.00	3.29	3.12	3.08	3.71
CPI inflation – modelled	2.5	2.5	2.1	1.9	1.9	2.2
CPI inflation – adjusted1	2.6	2.6	2.1	1.9	2.0	2.2

1The adjustment to UK Bank Rate and CPI inflation in the severe downside is considered to better reflect the risks to the Group’s base

case view in an economic environment where the risks of supply and demand shocks are seen as more balanced.

At 31 December 2023	2023 %	2024 %	2025 %	2026 %	2027 %	2023 to 2027 average %
Upside
Gross domestic product growth	0.3	1.5	1.7	1.7	1.9	1.4
Unemployment rate	4.0	3.3	3.1	3.1	3.1	3.3
House price growth	1.9	0.8	6.9	7.2	6.8	4.7
Commercial real estate price growth	(3.9)	9.0	3.8	1.3	1.3	2.2
UK Bank Rate	4.94	5.72	5.61	5.38	5.18	5.37
CPI inflation	7.3	2.7	3.1	3.2	3.1	3.9
Base case
Gross domestic product growth	0.3	0.5	1.2	1.7	1.9	1.1
Unemployment rate	4.2	4.9	5.2	5.2	5.0	4.9
House price growth	1.4	(2.2)	0.5	1.6	3.5	1.0
Commercial real estate price growth	(5.1)	(0.2)	0.1	0.0	0.8	(0.9)
UK Bank Rate	4.94	4.88	4.00	3.50	3.06	4.08
CPI inflation	7.3	2.7	2.9	2.5	2.2	3.5
Downside
Gross domestic product growth	0.2	(1.0)	(0.1)	1.5	2.0	0.5
Unemployment rate	4.3	6.5	7.8	7.9	7.6	6.8
House price growth	1.3	(4.5)	(6.0)	(5.6)	(1.7)	(3.4)
Commercial real estate price growth	(6.0)	(8.7)	(4.0)	(2.1)	(1.2)	(4.4)
UK Bank Rate	4.94	3.95	1.96	1.13	0.55	2.51
CPI inflation	7.3	2.8	2.7	1.8	1.1	3.2
Severe downside
Gross domestic product growth	0.1	(2.3)	(0.5)	1.3	1.8	0.1
Unemployment rate	4.5	8.7	10.4	10.5	10.1	8.8
House price growth	0.6	(7.6)	(13.3)	(12.7)	(7.5)	(8.2)
Commercial real estate price growth	(7.7)	(19.5)	(10.6)	(7.7)	(5.2)	(10.3)
UK Bank Rate – modelled	4.94	2.75	0.49	0.13	0.03	1.67
UK Bank Rate – adjusted1	4.94	6.56	4.56	3.63	3.13	4.56
CPI inflation – modelled	7.3	2.7	2.2	0.9	(0.2)	2.6
CPI inflation – adjusted1	7.6	7.5	3.5	1.3	1.0	4.2
Probability-weighted
Gross domestic product growth	0.3	0.1	0.8	1.6	1.9	0.9
Unemployment rate	4.2	5.3	5.9	5.9	5.7	5.4
House price growth	1.4	(2.5)	(0.9)	(0.3)	1.8	(0.1)
Commercial real estate price growth	(5.3)	(1.9)	(1.1)	(1.0)	(0.2)	(1.9)
UK Bank Rate – modelled	4.94	4.64	3.52	3.02	2.64	3.75
UK Bank Rate – adjusted1	4.94	5.02	3.93	3.37	2.95	4.04
CPI inflation – modelled	7.3	2.7	2.8	2.3	1.9	3.4
CPI inflation – adjusted1	7.4	3.2	3.0	2.4	2.0	3.6

1The adjustment to UK Bank Rate and CPI inflation in the severe downside was considered to better reflect the risks to the Group’s

base case view in an economic environment where supply shocks were the principal concern.

At 30 June 2024	First quarter 2024 %	Second quarter 2024 %	Third quarter 2024 %	Fourth quarter 2024 %	First quarter 2025 %	Second quarter 2025 %	Third quarter 2025 %	Fourth quarter 2025 %
Gross domestic product growth	0.6	0.4	0.3	0.2	0.3	0.3	0.4	0.4
Unemployment rate	4.3	4.5	4.6	4.7	4.8	4.9	4.9	4.8
House price growth	0.4	1.0	3.8	1.2	0.9	1.3	1.3	1.4
Commercial real estate price growth	(5.3)	(5.3)	(3.5)	(1.6)	(0.9)	0.2	(0.2)	1.2
UK Bank Rate	5.25	5.25	5.00	4.75	4.50	4.25	4.00	4.00
CPI inflation	3.5	2.1	2.0	2.5	2.2	2.7	2.6	2.4

At 31 December 2023	First quarter 2023 %	Second quarter 2023 %	Third quarter 2023 %	Fourth quarter 2023 %	First quarter 2024 %	Second quarter 2024 %	Third quarter 2024 %	Fourth quarter 2024 %
Gross domestic product growth	0.3	0.0	(0.1)	0.0	0.1	0.2	0.3	0.3
Unemployment rate	3.9	4.2	4.2	4.3	4.5	4.8	5.0	5.2
House price growth	1.6	(2.6)	(4.5)	1.4	(1.1)	(1.5)	0.5	(2.2)
Commercial real estate price growth	(18.8)	(21.2)	(18.2)	(5.1)	(4.1)	(3.8)	(2.2)	(0.2)
UK Bank Rate	4.25	5.00	5.25	5.25	5.25	5.00	4.75	4.50
CPI inflation	10.2	8.4	6.7	4.0	3.8	2.1	2.3	2.8

Disclosure of ECL sensitivity to economic assumptions

The table below shows the Group’s ECL for the probability-weighted, upside, base case, downside and severe downside

scenarios, with the severe downside scenario incorporating adjustments made to CPI inflation and UK Bank Rate paths.

The stage allocation for an asset is based on the overall scenario probability-weighted PD and hence the staging of

assets is constant across all the scenarios. In each economic scenario the ECL for individual assessments is held

constant reflecting the basis on which they are evaluated. Judgemental adjustments applied through changes to model

inputs or parameters, or more qualitative post model adjustments, are apportioned across the scenarios in proportion to

modelled ECL where this better reflects the sensitivity of these adjustments to each scenario. The probability-weighted

view shows the extent to which a higher ECL allowance has been recognised to take account of multiple economic

scenarios relative to the base case; the uplift being £468 million compared to £678 million at 31 December 2023.

At 30 June 2024	Probability- weighted £m		Upside £m	Base case £m	Downside £m	Severe downside £m
UK mortgages		971	387	658	1,190	3,004
Credit cards		700	583	676	772	903
Other Retail		942	855	915	990	1,139
Commercial Banking		999	746	895	1,143	1,641
Other		18	16	18	19	21
ECL allowance		3,630	2,587	3,162	4,114	6,708
At 31 December 2023
UK mortgages		1,115	395	670	1,155	4,485
Credit cards		810	600	771	918	1,235
Other Retail		945	850	920	981	1,200
Commercial Banking		1,182	793	1,013	1,383	2,250
Other		32	32	32	32	32
ECL allowance		4,084	2,670	3,406	4,469	9,202

The table below shows the impact on the Group’s ECL resulting from a 1 percentage point (pp) increase or decrease in

the UK unemployment rate. The increase or decrease is presented based on the adjustment phased evenly over the first

10 quarters of the base case scenario. A more immediate increase or decrease would drive a more material ECL impact

as it would be fully reflected in both 12-month and lifetime probability of defaults.

	At 30 June 2024			At 31 December 2023
1pp increase in unemployment £m		1pp decrease in unemployment £m		1pp increase in unemployment £m	1pp decrease in unemployment £m
UK mortgages	22		(17)	33	(32)
Credit cards	34		(34)	38	(38)
Other Retail	16		(16)	19	(19)
Commercial Banking	73		(67)	88	(83)
ECL impact	145		(134)	178	(172)

The table below shows the impact on the Group’s ECL in respect of UK mortgages resulting from an increase or

decrease in loss given default for a 10 percentage point (pp) increase or decrease in the UK HPI. The increase or

decrease is presented based on the adjustment phased evenly over the first 10 quarters of the base case scenario.

	At 30 June 2024		At 31 December 2023
	10pp increase in HPI £m	10pp decrease in HPI £m	10pp increase in HPI £m	10pp decrease in HPI £m
ECL impact	(164)	245	(201)	305