Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 586

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 586
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 (within the last five years ) actual growth, and reflects the impact of recent macroeconomic, policy and industry factors in mainland China. As a result of management‘s intent to continue to retain its investment for the long term, earnings beyond the short to medium term are extrapolated into perpetuity using a long-term growth rate to derive a terminal value, which comprises the majority of the VIU. The second component is the capital maintenance charge (‘CMC’), which is management’s forecast of the earnings that need to be withheld in order for BoCom to meet capital requirements over the forecast period, meaning that CMC is deducted when arriving at management’s estimate of future earnings available to ordinary shareholders. The CMC reflects the revised capital requirements arising from revisions of the ratio of risk-weighted assets to total assets assumption. The principal inputs to the CMC calculation include estimates of asset growth, the ratio of risk-weighted assets to total assets and the expected capital requirements. An increase in the CMC as a result of a change to these principal inputs would reduce VIU. Additionally, management considers other qualitative factors, to ensure that the inputs to the VIU calculation remain appropriate.

| HSBC Holdings plcAnnual Report on Form 20-F | 425 |

Key assumptions in value in use calculation We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36: – Long-term profit growth rate: 3.00% (2023: 3.00% ) for periods after 2028, which does not exceed forecast GDP growth in mainland China and is similar to forecasts by external analysts. – Long-term asset growth rate: 3.25% (2023: 3.00% ) for periods after 2028, which is the rate that assets are expected to grow to achieve long-term profit growth of 3.00% . The increase of long-term asset growth rate was supported by historical data, which is expected to continue. – Discount rate: 8.53 % (2023: 9.00% ), which is based on a capital asset pricing model (‘CAPM’), using market data. The discount rate used is within the range of 7.1% to 8.8% (2023: 7.9% to 9.7% ) indicated by the CAPM, and decreased as a consequence of a market-driven reduction in the risk-free rate. – Expected credit losses (‘ECL’) as a percentage of loans