Page 113 - 86395_CCB - 2024 Annual Report (web)

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Scenario weightings for REF and AF: Bank base rate

Scenario Weighting Applied Weighting Applied Year end 2025 2026 2027 2028 2029
2024 2023 forecast (%)

Base Case 50% 50% Base Case 4.00 3.50 2.75 2.75 2.75
Downside 40% 40% Downside 2.00 2.50 2.75 2.75 2.75
Severe 5% 5% Upside 3.50 3.00 2.75 2.75 2.75
Downside
Severe 6.25 5.25 4.25 3.00 2.75
Upside 5% 5% Downside

Macroeconomic variable forecasts: Commercial property price changes

The Bank uses the following macro‑economic Year end 2025 2026 2027 2028 2029
forecasts in its Real Estate Finance forecast (%)
scenario modelling.
Base Case 1.5 4.5 5.5 4.7 4.5
Unemployment *
Downside ‑6.9 ‑1.4 5.9 6.0 5.5
Year end 2025 2026 2027 2028 2029
forecast (%) Upside 7.7 6.7 7.2 5.9 5.0
Severe ‑18.1 ‑6.4 6.9 8.5 7.3
Base Case 4.3 4.1 4.1 4.1 4.1
Downside
Downside 5.6 5.8 5.0 4.7 4.5

Upside 3.9 3.8 3.8 3.8 3.8 Residential property prices changes
Severe 6.6 8.0 7.1 6.3 5.7 Year end 2025 2026 2027 2028 2029
Downside
forecast (%)
* The Bank’s ECL model uses a ‘hazard rate’ metric. The hazard rate is driven
by the unemployment rate forecast presented and this is considered a more Base Case 0.0 0.5 1.3 2.6 3.0
meaningful metric for the reader. The hazard rate is defined as the proportion
of the population moving from employment to unemployment. Downside ‑5.6 ‑7.3 3.4 3.6 3.9
Upside 5.6 4.0 4.1 3.5 3.1
Mortgage interest gearing – variable rate
Severe ‑8.1 ‑12.3 1.8 4.2 4.2
Downside
Year end 2025 2026 2027 2028 2029
forecast (%)
Sensitivities
Base Case 5.4 4.9 4.4 4.3 4.4
The expected credit loss provision is sensitive
Downside 4.0 4.0 4.4 4.4 4.4
to judgement and estimations made with
Upside 4.8 4.3 4.1 4.1 4.1 regards to the selection and weighting of
multiple macroeconomic scenarios. As a result,
Severe 7.0 6.5 5.6 4.6 4.3 Management has assessed and considered the
Downside
sensitivity of the provision as follows:
1 The tables below show the Real Estate and
Undrawn housing equity
Asset Finance ECL assuming each scenario
has been 100% weighted to show the impact
Year end 2025 2026 2027 2028 2029 of alternative scenarios.
forecast (%)
Real Estate
Base Case 76.6 76.2 75.8 75.5 75.2
Downside 76.0 73.5 73.3 73.2 73.1 Current
weighted 100%
Upside 78.0 78.3 78.6 78.7 78.7
Scenario weighting
Severe 75.3 71.2 70.5 70.4 70.4 Scenario ECL £000 ECL £000
Downside
Base Case 17,478
Downside 19,779
18,668
Severe Downside 24,054

Upside 16,312