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Operator
Welcome, and thank you for standing by. (Operator Instructions) Today's conference is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the conference over to George Elhedery. Thank you. You may begin.
Georges Bahjat Elhedery - Group CFO, Member of the Group Management Board & Executive Director
Thank you, operator. Hello, everyone, and thank you for joining us. I'm George Elhedery, I'm Group CFO, and I'm joined on this call by Fais Yousaf, our new Group Treasurer; Richard O'Connor, our Global Head of Investor Relations; and Gregory Case, Head of Debt Investor Relations.
I'll speak about a couple of items relevant to this audience, and then Fais will give you an update on the balance sheet, after which we will go straight into Q&A. And I'll keep the opening remarks relatively brief, as I'm sure you've had a chance to digest the results since we published them in early August. And I won't be referencing any slides as we go through this, but there is a fixed income investor deck on the IR website.
So we've announced a good set of second quarter results. The annualized return on tangible equity for the first half stood at 22.4% or 18.5% if we exclude the provisional gain on SVB U.K. and the reversal of the impairment of the sale of the French retail business. Revenue was up 38%, and we've seen growth in all 3 lines of business. Despite the inflationary environment, cost growth in the quarter was restricted to 1% compared to last year's second quarter. And based on our cost target basis, we remain on track to meet our 2023 cost target.
The ECL charge was $0.9 billion, 35 basis points of gross loans. This includes circa $0.3 billion for our Mainland China commercial real estate exposure that is booked in Hong Kong. And finally, our CET1 ratio remains strong at 14.7%, which allowed us also to announce a dividend of $0.10 per share -- interim dividend of $0.10 per share and a second share buyback of up to $2 billion to be executed in around 3 months.
So with that, I'll hand over to Fais. Fais, over to you.
Faisal Yousaf
Thank you, George. Hi, everyone. I'm Fais Yousaf, Group Treasurer. I'm excited to be here today and looking forward to engaging you all over the coming weeks and months.
Firstly, before I move on to the 2Q update, I wanted to give you a bit about my background. So I've been at HSBC for over 22 years. In that time, spanning many roles across finance and risk. Most recently, as Global Head of Traded and Treasury Risk. I'm excited by the new challenge, and I'm looking forward to further shaping and delivering the ambitious treasury agenda that we have here at HSBC.
Coming back to the second quarter, our financial resources remain in solid shape. As George mentioned, our CET1 ratio was 14.7%, flat from the quarter with a 3.8 percentage points above our MDA level. Attribute to full profit added 0.8 percentage points to the ratio, but were fully offset by the dividend accrual for the second quarter and the first quarter buyback. Our CET1 ratio remains above our planned operating range, which to remind you, is 14% to 14.5%. Albeit the current buyback is expected to lower the ratio by about 25 basis points. And additionally, we expect the re-recognition of the impairment of our French retail business will further reduce the ratio by approximately 25 basis points. We expect to recognize this loss in the second half.
With respect to liquidity, remember that we primarily manage liquidity at individual legal entity level. So our liquidity story is more complicated than the Group's LCR. We show the LCRs of our major entities on [Slide 14] of our fixed income investor deck. And I'll urge you to note the strong ratios, all of which are above the Group ratio of 132% demonstrating our conservatism that's baked into our Group LCR calculation.
In high level terms, we have $796 billion of high-quality liquid assets on the balance sheet of which over $300 billion is in cash. Our funding position remains enviable with a loan-to-deposit ratio of 60%, giving us a very significant deposit surplus. Our MREL ratio was 31.2% of RWAs, which is 4.8 percentage points above our 26.4% requirement, and we expect to continue to maintain a prudent buffer over that requirement.
Our issuance, starting with HoldCo Senior, well, we've issued just under $16 billion so far this year after the $3 billion issuance in August. We have a plan of $17 billion to $20 billion for the year, and currently expect to be at the lower end of that range. As such, we have limited further needs and expect negative net issuance in the second half. Of course, I would not rule out prefinancing for next year in Q4, but this would be a decision taken closer to the time.
In terms of Tier 2, we've issued $3 billion in '23, and that's against a plan of $4 billion to $5 billion. And again, we currently expect to come in at the lower end of that range. Finally, we came into the year with relatively modest AT1 needs, only around $2 billion and covered the need in February. We've announced the call of our AT1 callables this year totaling $4 billion. And so we'll see another year of net negative issuance in this asset class.
Overall, in summary, our profitability, capital funding and liquidity position leave us well placed and our business model offers bondholders 1 of the most diversified banks in the world.
On that note, let's open the call up for Q&A. Operator?
Operator
(Operator Instructions) Our first question comes from Lee Street.
Lee Street - Head of IG CSS
I have 3 for you.
Operator
His line dropped. I apologize.
Richard O'Connor - Global Head of IR
Okay. Maybe we can get Lee back, operator. Can we get the next caller?
Operator
Yes. Our next question comes from Robert Smalley.
Robert Louis Smalley - MD, Head of Credit Desk Analyst Group and Strategist
I just wanted to ask about capital generation. And I know in your fixed income presentation, you put that first and foremost, I think it's -- thank you for that. I think it's an underappreciated credit metric. Could you talk about what you think the realistic running rate for capital generation would be over the next several quarters? Number one. Number two, do you think that we're kind of at peak levels there? Or do you see any kind of expansion in the capital generation rate?
And then three, if you could talk a bit about the experience in the U.K. You saw a bit of margin expansion, doing a little bit better than peers. Just what's going on in the general environment margin-wise? And then if you could address credit quality, I'd appreciate it.
Faisal Yousaf
Okay. So thank you very much, Bob. Let me start with the capital question. So we are in a position, as you would have seen, why we are very capital-generative. We guided to an NII for the full year of greater than $35 billion. That's updated on this half. We are not guiding to '24 at this stage, but all of the metrics from our perspective look very positive for the forthcoming years. And we are working to ensure that we have stable NII for the future. So there are various things that we're doing in that regard. And perhaps I'll call out just a few of those.
So first of all, we have, as you all know, been working on the program of structural interest rate hedging. That is progressing well. And you will have seen that our sensitivity over the half has come down from where it was at the end of '22 at around $4 billion for 100 basis points move down in rates. That has come down to $2.6 billion. There are various factors that drive that, but about 1/3 of that number is down to our structural interest rate hedging program, and we'll continue that program over the course of H2.
We're also working on diversifying our revenue base. So we are moving to -- through a number of initiatives to generate greater fee income and you will have seen that in the equity call and the full call at half year. So overall, I would say, from a capital generation perspective, a very positive outlook. Perhaps I will pass to George to talk about the U.K. and the U.K. market. If that's okay?
Georges Bahjat Elhedery - Group CFO, Member of the Group Management Board & Executive Director
Sure. Thanks, Fais. Thank you, Robert. I would also highlight in the capital generation kind of -- as an addendum to Fais's point, the intended sale of our Canadian business, and you may have seen very recently, Competition Bureau in Canada giving a go ahead, obviously, additional regulatory approval and the statutory approval are required. But that sale should provide us with increased capital, which we've initially -- well, we've already indicated we would use $4 billion of which -- so of an amount of $9 billion to $10 billion, we will use $4 billion, of which as a priority use for a special dividend of $0.21 per share, and then the rest would just become excess capital available for share buybacks or other capital actions.
On the -- specific on the U.K. margin expansion, the first thing I want to highlight, Robert, it's very important that we are passing through to customers the majority of the rate increases that we have seen of late. In particular, we've passed to our retail saving accounts -- instant access retail saving accounts, more than 70% of the most recent increases we've seen in the U.K., so in GDP. So therefore, it's very important to position this. The overall pass-through on some of these and saving accounts now is close to 50% on a cumulative basis.
So the reason why our NIM has performed compared to other peers. And I'm only going to give you some elements. Obviously, I cannot comment on other peers. The first element is we have a materially smaller fixed rate consumer lending book, which in the market had suffered some reduction due to customers repaying some of these consumer loans. We did not have this dynamic manifest in our books. The second 1 is that we remain -- we continue to have a very strong franchise in deposits and has, therefore, kind of helped us not have to pay up for some of the [proprietary] deposits. And as a reference, our term deposits remain a small single-digit percentage of our overall portfolio.
And the third thing to call out is also the fact that large mortgage book with a growing market share in mortgages, our new business market share is just shy of 10% against the back book market share of -- in the middle of mid-7% is giving us additionally impetus, if you want, on the NII given where mortgages have been struck. So these are some of the metrics that have allowed our NIM to perform, as you've seen in Q2. And a word of caution, though, we do believe that at these levels, we're probably going to see more stable NIM than any additional expected increases in this space.
Richard O'Connor - Global Head of IR
Robert, (inaudible) you had 2 other questions there. Credit quality in U.K. which I'll take. You saw in Q2, U.K. credit quality like normal when you look at the basis point charge. And so it's actually been better than some (inaudible) would say. (inaudible) we're watchful. The middle market segment early on (inaudible) cases on areas like mortgages or cars. But generally, U.K. credit quality is bearing up pretty well in a tough economic environment, but I would say the charge very much Q2 was at a pretty normalized level.
Two other pinpoints of capital generation, Robert, look you're clearly be aware the building blocks, the guidance to mid-teens RoTE. We were above that in the first half. That excludes which on Canada gain and also our guidance for short term, we are pretty cautious on loan growth versus our medium-term, mid-teen -- sorry, mid-single-digit growth for obvious reasons, pretty rigid loan demand in Hong Kong and U.K. at the moment.
We're not [bearish] longer term, but certainly near term that will be the case. We've got the contenders on the website, and that's up to date. So you've got all the building blocks there. The 1 thing I would say is, clearly, the associate income doesn't flow through [automotive] capital obviously, the dividend from the associates, which are public and you can get them on Bloomberg in 5 seconds do flow into capital.
So you just need to make that adjustment along with other adjustments as you do with capital model, okay?
Operator
Our next question comes from Lee Street.
Lee Street - Head of IG CSS
I'll try again. Three for me, please. Any area -- I mean, there's been a lot of changes in the group structure and since you've sold [a lot over] the last year. Just any areas at a broad level where you think the group structure can be improved as you look out from here.
Secondly, welcome to the new Treasurer. As incoming new Treasurer, any areas where you think expect for optimization within the HSBC liability structure? And then a more detailed 1 to finish. Just why run such a large MREL headroom you have 480 basis points? Is that sort of a mix of how it works across the individual resolution entities or just why is that so large? That would be my 3 questions.
Faisal Yousaf
Okay. Thank you very much, Lee. I think I'll probably start with the treasurer question and then go into Group's structure and then the MREL. So I officially moved into a role on the 1st of July. I'd start by saying, look, I'm very familiar with HSBC having been here some 22 years, as I said earlier. The strategy that I will adopt as Group Treasurer will be consistent with that of my predecessors. So there's no radical change there, you'd expect to see certainly in the short term. And our strategy is entirely aligned to the overall group strategy.
From my perspective, probably I've got 4 high-level priorities that I would call out. The first is really protecting and safeguarding what is a very strong capital liquidity deposit base and an overall balance sheet, and that's working with our global businesses and global functions in order to do that. The second is really around optimize and enhance. So what I want to do is apply a commercial lens to optimize where we use our financial resources across the organization to benefit shareholders, investors and the like.
The third area, which is ever present, I think, is regulation, and we've got a substantial program of regulatory change that we need to deliver on and that's a priority. And I suspect we'll touch on it a little bit through the course of the call, but we've obviously got our commitments in terms of resolvability and recovery and the legacy stack is 1 area that I'll be very focused on as I move through the role. We've got [neither] cessation as well, which is another area of regulatory change and the overall Basel 3.1 framework as well.
The fourth and final bit that I would call out is technology and analytics. So that's going to be an area of focus for me. I will be looking at optimization, digitization and making the best use of technology and advanced analytics within our treasury capabilities at HSBC.
So to go on to your specific question about the liability structure and whether there's scope for optimization of the liability structure. It's something we'd always look at, and I have looked at it over a period of time. There's nothing that I would call out, obviously, at this point in time, but we'll continue to look at that as we go ahead.
Equally, in terms of the group structure, as you alluded to your question, we've made a lot of changes over the past 2 years with the disposal of the French retail business and of our business within Canada. Add to that, the restructuring in Oman and the completing of the disposal of the Greek business as well and the announcement that we will be winding down our operations in Russia. So there's a lot of things that we've been doing in a very short space of time. We'll continue to look for opportunities, but we'll obviously announce those as and when we go along.
Finally, in terms of our MREL and the MREL structure, there are various drivers for that. At the moment, the overall buffer that we run is around 3.8 or 4.8 is CET1. Sorry -- so Lee, yes, so I think it's fair to highlight, we have 4.8 percentage point buffer right now. But important to note that 3.8 of that is CET1. So that's effectively the buffer the (inaudible) in CET1. And right now, as well, you'll note we're operating at 14.7%, so we are operating kind of about 50 basis points above the midpoint of our range. So naturally, that buffer will likely come down modestly over time and it will be primarily still CET1 and we'll run a small buffer in other MREL instruments.
Operator
Our next question comes from Daniel David.
Daniel David
I have 3 as well. The first 1 was just kind of following on from what you're saying about optimal levels of capital. So I guess you've been shrinking that Tier 1 stack with [of course lighter] than you refinanced. I guess I'm just interested, is this level now of Tier 1 kind of where you see yourself longer term? Or could we maybe expect you to increase it back to kind of more historical levels when double leverage was kind of a bigger factor?
Secondly, I guess, on the legacy, It would be remising not to bring it up. You've done an awful lot, and that's been acknowledged. I guess the 1 part of the stack that I think you kind of haven't touched yet is the make of bonds, so the 10.176% and the 5.844%. I guess my assumption is these bonds have to go eventually. Is there something you're waiting for? Is there something we should be watching out for, I guess, is it right to presume, is there anything else that we should be looking at? I'm just interested to hear your thoughts with regard to that.
And then finally, just on LIBOR, I guess you've got a number of AT1s with [full backs], which you defined. I'm just interested to hear how you're thinking about those, specifically the New York law AT1s, which have got problems with the reference to mid-swaps in the short-term, would be appreciated?
Richard O'Connor - Global Head of IR
Okay. Thank you. Thank you very much. So perhaps start with the Tier 1 or AT1 stack. Our funding time for this year in Senior HoldCo was $17 billion to $20 billion as I said. And in Tier AT1 was $2 billion and in Tier 2 was around $4 billion to $5 billion. Now we're very close to meeting those levels. And as I said why at the beginning, we'll be pitching for the lower end of those ranges.
On a go-forward basis, I think that's broadly where we will be looking to issue. That's, I'd expect a fairly stable funding plan over the period. Now if we focus in and zoom in onto the AT1, we would be net negative in terms of issuance this year and indeed for the last couple of years. So this year, we've issued $2 billion, but called or redeemed around $4 billion.
On a go-forward basis, I think we will be, by and large, with all things being equal, RWAs and the like, net flat in terms of our issuance for AT1. So that's probably the best guidance I can give you at this stage.
On to legacy and the make-whole piece, I mean, overall, it has been a considerable focus for us. And we've reduced the legacy stack by around $6 billion over the past couple of years, albeit we have still approximately $8 billion to go. We would like just for that make-whole -- legacy Tier 1 make-whole, just like the rest of the legacy stack, we'd want to redeem them if we can, but at a reasonable cost. The economics are extremely important for us, and we have a duty to our shareholders and any actions that we take would obviously need to be fully justified. As we've said on prior fixed income calls, the economics here aren't really ideal. And as such, we continue to look at the options.
I think you can probably conclude given that we've had -- that these have been available to call for a little period of time that the economics on the make-whole [withholds] that we have are not economic at this point in time. So we'll continue to look at it. But there's nothing more really I can add at this point in time.
Finally, on LIBOR it's another area of focus for us. We've made some progress there, as you will have seen from the announcement in June. We want to work together with our investors to reach a solution that's mutually agreeable and in line with the regulatory requirements. However, in some cases, this is not entirely possible.
In the case of the New York instruments, consent solicitation isn't an option for us because under New York law, we would require 100% of bondholders to agree to any change. So then that makes the -- those swap reset instruments, a little harder to deal with. We'll look at options. We'll continue to focus on it. But that's where we are at the moment. As you will know, in '21, we undertook consent solicitation on some of our sterling and Sing English law securities. It was very pleasing because we were we were able to remediate the sterling ones. We've got that passed.
The Sing ones weren't able to pass, but we've since redeemed those. So there are multiple actions we can take with this, and we'll look at all of them for all of the LIBOR-based instruments.
Daniel David
Really clear. Can I just 1 point on the make-whole, I guess you referred to the economics and other issuers, talk about economics in the [range]. Are you just referring to the day 1 impact of buying these back, I guess? Or is it kind of an NPV of the future cash flows less the cost on day 1? Is there something else to it?
Richard O'Connor - Global Head of IR
Yes. So we typically consider that the transaction as a whole where we were looking to either exercise the make-whole or repurchase the bond. In any case, we'd always look at the NPV, taking into account all the cash flows and comping that against what we think are our long-term cost of capital is. As Fais mentioned, though, what I would say is, of course, is we're not absolutely clinical on that point. We are willing to take a loss. I think that's part of the broader conversation. It just has to be proportionate and that's what we'll assess over time.
Operator
(Operator Instructions) Our next question comes from Paul Fenner.
Paul Jon Fenner-Leitao - Head of Financials
I just got -- 1 of my questions have been answered. I just want an update. It's been a while since the end of the first half, what's going on in terms of China and Hong Kong real estate, what trends you're seeing there? Are things getting significantly worse? Just any color that you can provide there. Second, you've provided an ECL charge outlook for the full year of about 40 basis points. Have you -- is there a guide that you can give us for where -- what you think that's going to look like in 2024? I don't know if you provided that. And then lastly, you mentioned the sale of France. I just wanted a quick update on that, where we are, what the timing now looks like and what the risk to that is.
Faisal Yousaf
Okay. So I'll pass over to George for this.
Georges Bahjat Elhedery - Group CFO, Member of the Group Management Board & Executive Director
Yes, sure. Thanks, Paul. So on the China commercial real estate, look, as we indicated at the interim results, the piece that remain of a concern -- of a more material concern to us is the is the offshore piece, the piece that's booked in Hong Kong and the portion of which is unsecured. So that is the 1 that remains the cause for concern. We had, at the year-end, if you recall, I mentioned the plausible downside scenario of $1 billion additional ECL. By the end of H1, we had taken in aggregate about $300 million against that portfolio towards that plausible downside. But then when we look at the events that took place in August, I would point really to 2 indicators.
The first 1 is we continue to see policy measures being constructive and supportive of that sector. And we're seeing these policy measures practically every week a series of measures that are meant to structurally and more sustainably kind of support the sector going forward, which is a positive outcome, but we equally continue to see deterioration of the financials of some of the borrowers. And that deterioration is unfortunately, for some happening faster then the benefits of some of these policy measures may come in.
So as a net, if you want, of these 2, we're looking at it more cautiously now than we were early August. And I would say the plausible downside we indicated at this stage, we believe, remains valid. We believe in terms of quantum, we believe though that the probability of the plausible downside has increased following the events of August. And we continue watching this space, and we do expect indeed to give you additional guidance the Q3 results in a couple of months.
On your ECL, so we indeed maintain 40 basis points for this year. We did factor in some of the possible -- some of the possible adverse events that could take place in Hong Kong and the U.K. We indeed are seeing those events in Hong Kong materialized related to this China offshore real estate portfolio -- commercial real estate portfolio, whereas we do see things more resilient, as Richard mentioned earlier, more resilient in the U.K. and the indicator is holding up quite well. And this is kind of why we were comfortable. We remain comfortable with the 40 basis points. We haven't given any guidance for 2024. I can only point you to our mid- to or through-the-cycle guidance on ECLs of 30 to 40 basis points that change as a through-the-cycle. We would be giving any further 2024 guidance when we get more granular guidance to '24.
At this stage, we're only committing to a new middle -- mid-teens return on tangible equity for '24 as the only guidance, that's very specific to '24 on our results.
On the sale of France, so look, so I mentioned that we continue to expect that we will have to reinstate the 25 basis point impairment or $2.2 billion impairment of that sale sometime in H2. We have initially communicated an ambition to execute it on the 1st of January. Obviously, the risks around that timing are there, but even if -- kind of the main risks to call out is the process of regulatory approval, the transaction is more complex, number one, we signed originally. It has more parameters to it and therefore, requires more evaluation of the times. But as you would expect, the moment we see this to become a highly likely transaction, we will reinstate the impairment and probably give more guidance at that stage as to your exact time lines.
Paul Jon Fenner-Leitao - Head of Financials
Sorry, so just to be clear, you expect to potentially if things stand as they are, you expect to take that charge in Q3. Is that right?
Georges Bahjat Elhedery - Group CFO, Member of the Group Management Board & Executive Director
Look, the expectations we can share is H2. It is probably premature to call Q3 versus Q4, but H2 remains a reasonable expectation.
Paul Jon Fenner-Leitao - Head of Financials
Okay. And with new completion now, what in H2 '24? Is it -- does it take that long or quicker?
Georges Bahjat Elhedery - Group CFO, Member of the Group Management Board & Executive Director
No -- the initially ambition date for completion remains at the stage 1st of January 2024. But obviously, that date is at the risk of a delay due to the delays with regard to (inaudible) approval. We haven't given a new date, if you want, at this stage. We'll probably gathering our thoughts now -- assessing where we stand in September after the August holiday week, particularly also some of our regulators were -- get reviews and we will be giving you more guidance on that at our Q2 results. We can now more reasonably expect a delay. I wouldn't be able to comment as to whether it's in H2 '24 or whether it remains an H1 '24 transaction. It's too early at this stage to make this description.
Operator
Our last question comes from Ivan Zubo.
Unidentified Analyst
I just had a quick follow-up question on the legacies. And basically, thank you very much for mentioning the economics being the key criteria. But there's a very different economic 10.176% dollar legacy Tier 1, where the make-whole price is $1.30 and the sterling, you have at 5.844% where it's $1.06. So should we look at this decision as a package? Or could you potentially make a different decision on those different bonds?
Richard O'Connor - Global Head of IR
Yes. We wouldn't -- would never rule anything out at this stage, Ivan. I think the economics, it's important to come back to that point that I mentioned to Dan earlier that the economics isn't just about the upfront hit. It's about funding the -- funding it as well. So we'll take into account the upfront cost. And then, of course, as you get either the bleed or the benefit through the P&L over the periods of the -- effectively the par call date around 2030. So we'll bake it all in when we consider the economics.
So thank you. Thank you very much, everyone. I hope this call was useful for you. If you do have any further questions, please [pick up] with Greg and the IR team. Thank you.
Georges Bahjat Elhedery - Group CFO, Member of the Group Management Board & Executive Director
Thank you, everyone.
Faisal Yousaf
Thank you. Bye-bye.
Operator
Thank you for your participation, participants. You may disconnect at this time.