Annual Financial Report - 27 of 56

RNS Number : 6295S
HSBC Holdings PLC
18 March 2016
 

Credit risk








Credit risk

120


195


Summary of credit risk

120






Gross loans to customers and banks over five years

121






Loan impairment charge over five years

121






Loan impairment charges by geographical region

121






Loan impairment charges by industry

121






Loan impairment allowances over five years

121

Credit risk management



195











Assets held for sale

121




Loans and advances to customers and banks measured at amortised cost

121






Gross loans and impairment allowances on loans and advances to customers and banks reported in 'Assets held for sale'

122






Loan impairment charges and other credit risk provisions

122








Credit exposure

122






Maximum exposure to credit risk

122






Other credit risk mitigants

122




Maximum exposure to credit risk

123






Loan and other credit-related commitments

123








Concentration of exposure

123


196




Financial investments

123






Trading assets

124






Derivatives

124






Loans and advances

124




Gross loans and advances by industry sector and by geographical region

124








Credit quality of financial instruments

125


196




Credit quality classification



196


Distribution of financial instruments by credit quality

125

Past due but not impaired gross financial instruments

127




Past due but not impaired gross financial instruments by geographical region

127






Ageing analysis of days for past due but not impaired
gross financial instruments

127








Impaired loans

128




Movement in impaired loans by geographical region

128

Renegotiated loans and forbearance

129


197


Renegotiated loans and advances to customers by
geographical region

130






Movement in renegotiated loans and advances to customers by geographical region

131






Renegotiated loans by arrangement type:
corporate and commercial and financial

132






Renegotiated loans by arrangement type:
personal lending

132

Impairment of loans and advances

132




Loan impairment charge to the income statement by industry sector

132






Loan impairment charge to the income statement by assessment type

132






Charge for impairment losses as a percentage of
average gross loans and advances to customers
by geographical region

133






Movement in impairment allowances by industry sector and geographical region

134






Movement in impairment allowances on loans and advances to customers and banks

135

Impairment assessment



201











Wholesale lending

135




Total wholesale lending

136

Commercial real estate

137




Commercial real estate lending

137






Commercial real estate loans and advances maturity analysis

138






Commercial real estate loans and advances including loan commitments by level of collateral

139






Other corporate, commercial and non-bank financial institutions loans and advances including loan commitments by level of collateral rated CRR/EL8 to 10 only

140


 

Other credit risk exposures

141






Derivatives

141




Notional contract amounts and fair values of derivatives by product type

142






OTC collateral agreements by type

142

Reverse repos - non-trading by geographical region

143




Reverse repos - non-trading by geographical region

143

Loan Management Unit



202











Personal lending

143




Total personal lending

143

Mortgage lending

144




UK interest-only mortgage loans

145

Other personal lending

145




HSBC Finance US Consumer and Mortgage Lending residential mortgages

145






Trends in two months and over contractual delinquency in the US

146






Gross loan portfolio of HSBC Finance real estate secured balances

146






Number of renegotiated real estate secured accounts remaining in HSBC Finance's portfolio

146

HSBC Finance loan modifications and re-age programmes

146






Collateral and other credit enhancements held

147




Residential mortgage loans including loan commitments by level of collateral

147








Supplementary information

148




Gross loans and advances by industry sector over 5 years

148






Reconciliation of reported and constant currency impaired loans, allowances and charges by geographical region

149






Reconciliation of reported and constant currency loan impairment charges to the income statement

149






Loan impairment charges by industry sector over 5 years

150






Charge for impairment losses as a percentage of average gross loans and advances to customers

150






Movement in impairment allowances over 5 years

150






Gross loans and advances to customers by country

151

Refinance risk



203











HSBC Holdings

152




HSBC Holdings - maximum exposure to credit risk

152








Securitisation exposures and other structured products

152


203


Carrying amount of HSBC's consolidated holdings of ABSs

153






Definitions and classifications of ABSs and CDOs

203









 






1   Appendix to Risk - risk policies and practices.














 


Credit risk

Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises principally from direct lending, trade finance and leasing business, but also from other products such as guarantees and credit derivatives and from holding assets in the form of debt securities.

There have been no material changes to the policies and practices for the management of credit risk in 2015.

A summary of our current policies and practices regarding credit risk is provided in the Appendix to Risk on page 193.

Our maximum exposure to credit risk is presented on page 122 and credit quality on page 125. While credit risk arises across most of our balance sheet, losses have typically been incurred on loans and advances and securitisation exposures and other structured products. As a result, our disclosures focus primarily on these two areas.

Our exposures to mainland China and the effects of the decline in 'metals and mining' and 'oil and gas' prices are provided in 'Areas of special interest' on page 116.

In 2015, reported gross loans and advances declined by $75bn, mainly due to foreign exchange effects reducing balances by $51bn and the reclassification of Brazilian assets as 'Assets held for sale' reducing balances by a further $31bn. Additional details relating to the Brazilian reclassification are provided on page 121. Excluding foreign exchange movements and the reclassification, both wholesale and personal lending grew.

Loan impairment charges reduced by $0.5bn or 11% compared with 2014 with notable decreases in Latin America from favourable foreign exchange effects.

Information on constant currency movements is provided on page 148. While tables are presented on a reported basis, the commentary that follows in this summary section excludes the effects of the Brazilian reclassification and is on a constant currency basis.

Summary of credit risk


2015


2014


Page



$bn


$bn



At year-end







Maximum exposure to credit risk







- total assets subject to
credit risk


2,234


2,434



- off-balance sheet
commitments subject
to credit risk2


713


699












2,947


3,133


123








Gross loans and advances







- personal lending


374


393


143

- wholesale lending


650


706


136










1,024


1,099


124








Impaired loans







- personal lending


12


15


128

- wholesale lending


12


14


128










24


29


128








Impaired loans as a % of
gross loans and advances







- personal lending


3.1%


              3.9%



- wholesale lending


1.9%


              2.0%



- total


2.3%


              2.7%












$bn


                $bn



Impairment allowances







- personal lending


2.9


4.6


135

- wholesale lending


6.7


7.8


136










9.6


12.4


134








Loans and advances net of
impairment allowances


1,015


1,087










For year ended 31 December







Loan impairment charge


3.6


                 4.1


133

- personal lending


1.8


                 1.8


132

- wholesale lending


1.8


                 2.3


132

Other credit risk provisions


0.1


                (0.2)












3.7


                 3.9



For footnote, see page 191.

In 2015, wholesale and personal gross loans and advances grew by $0.5bn and $7bn, respectively.

In wholesale lending, Asia balances decreased by $9.6bn and were partly offset by an increase of $7.5bn in North America and $3.2bn in Europe. Middle East and North Africa decreased $1.2bn and Latin America remained relatively unchanged.

In personal lending, Asia balances grew by $7.4bn across both its mortgage and other personal lending, and there was a $1.9bn increase in the Premier mortgage portfolio in the US and Canada. The increase was partly offset by a $5.0bn reduction in the US CML portfolio as a result of the ongoing run-off of the portfolio and continued loan sales.

Loan impairment charges increased by $0.2bn compared with 2014, notably in Middle East and North Africa and North America.


Gross loans to customers and banks over five years ($bn)


Loan impairment charge over five years ($bn)


Loan impairment charges by geographical region ($bn)


Loan impairment charges by industry ($bn)


Loan impairment allowances over five years



Assets held for sale

(Audited)

During 2015, gross loans and advances and related impairment allowances arising in our Brazilian operations were reclassified from 'Loans and advances to customers' and 'Loans and advances to banks' to 'Assets held for sale' in the balance sheet.

Disclosures relating to assets held for sale are provided in the following credit risk management tables, primarily where the disclosure is relevant to the measurement of these financial assets:

·   Maximum exposure to credit risk (page 122);

·   Distribution of financial instruments by credit quality (page 125);

·   Past due but not impaired gross financial instruments by geographical region (page 127); and

·   Ageing analysis of days past due but not impaired gross financial instruments (page 127).

Although there was a reclassification on the balance sheet, there was no separate income statement reclassification. As a result, charges for loan impairment losses shown in the credit risk disclosures include loan impairment charges relating to financial assets classified as 'Assets held for sale'.

Loans and advances to customers and banks measured at amortised cost

(Audited)


      Total gross          loans and          advances


Impairment

 allowances

on loans and

advances



                     $m


$m






As reported


1,024,428


(9,573)

Reported in 'Assets held for sale'


24,544


(1,454)






At 31 December 2015


1,048,972


(11,027)

 

At 31 December 2014, the gross loans and advances and related impairment allowances of our Brazilian operations were $31bn and $1.7bn, respectively. Gross loans and advances reduced by $8.5bn, mainly as a result of foreign exchange movements.

Lending balances held for sale continue to be measured at amortised cost less allowances for impairment; such carrying amounts may differ from fair value. Any difference between the carrying amount and the sales price, which is the fair value at the time of sale, would be recognised as a gain or loss at the time of sale.

See Note 23 on the Financial Statements for the carrying amount and the fair value at 31 December 2015 of loans and advances to banks and customers classified as held for sale.

 

Gross loans and impairment allowances on loans and advances to customers and banks reported in 'Assets held for sale'

(Audited)


Brazil


Other


Total



$m


$m


$m

Gross loans







Loans and advances to customers


18,103


2,042


20,145

- personal


5,571


40


5,611

- corporate and commercial


12,532


2,002


14,534








Financial


4,399


-


4,399

- non-bank financial institutions


331


-


331

- banks


4,068


-


4,068















At 31 December 2015


22,502


2,042


24,544

24,543







Impairment allowances







Loans and advances to customers


(1,433)


(21)


(1,454)

- personal


(664)


-


(664)

- corporate and commercial


(769)


(21)


(790)








Financial


-


-


-

- non-bank financial institutions


-


-


-

- banks


-


-


-








     - banks







At 31 December 2015


(1,433)


(21)


(1,454)

 


The table below analyses the amount of LICs arising from assets held for sale. The held for sale assets primarily relate to the Brazilian operations.

Loan impairment charges and other credit risk provisions

(Audited)


2015



$m

LICs arising from:



- assets held for sale


965

- assets not held for sale


2,757




Year ended 31 December


3,722

 

Credit exposure

Maximum exposure to credit risk

(Audited)

The table on page 123 provides information on balance sheet items, offsets and loan and other credit-related commitments. Commentary on balance sheet movements is provided on page 62.

The offset in derivatives decreased in line with the decrease in maximum exposure amounts.

The offset on corporate and commercial loans to customers decreased by $15bn. This reduction was mainly related to corporate overdraft balances where a small number of clients benefited from the use of net interest arrangements across overdrafts and deposits. As a result, while net risk exposures are generally stable, gross balances can be volatile.

 

'Maximum exposure to credit risk' table (page 123)

The table presents our maximum exposure to credit risk from balance sheet and off-balance sheet financial instruments before taking account of any collateral held or other credit enhancements (unless such enhancements meet accounting offsetting requirements). For financial assets recognised on the balance sheet, the maximum exposure to credit risk equals their carrying amount; for financial guarantees and similar contracts granted, it is the maximum amount that we would have to pay if the guarantees were called upon. For loan commitments and other credit-related commitments, it is generally the full amount of the committed facilities.

The offset in the table relates to amounts where there is a legally enforceable right of offset in the event of counterparty default and where, as a result, there is a net exposure for credit risk purposes. However, as there is no intention to settle these balances on a net basis under normal circumstances, they do not qualify for net presentation for accounting purposes. No offset has been applied to off-balance sheet collateral. In the case of derivatives the offset column also includes collateral received in cash and other financial assets.

 

Other credit risk mitigants

While not disclosed as an offset in the 'Maximum exposure to credit risk' table, other arrangements are in place which reduce our maximum exposure to credit risk. These include a charge over collateral over borrowers' specific assets such as residential properties. Other credit risk mitigants include short positions in securities and financial assets held as part of linked insurance/investment contracts where the risk is predominantly borne by the policyholder. In addition, we hold collateral in the form of financial instruments that are not recognised on the balance sheet.

See Note 32 and from page 139 and page 147 respectively on the Financial Statements for further details on collateral in respect of certain loans and advances and derivatives.


Maximum exposure to credit risk

(Audited)


2015


2014



Maximum
exposure


Offset


Net


Maximum
exposure


Offset


Net



$m


$m


$m


$m


$m


$m














Cash and balances at central banks


98,934


-


98,934


129,957


-


129,957

Items in the course of collection from other banks


5,768


-


5,768


4,927


-


4,927

Hong Kong Government certificates of indebtedness


28,410


-


28,410


27,674


-


27,674














Trading assets


158,346


-


158,346


228,944


-


228,944

- Treasury and other eligible bills


7,829


-


7,829


16,170


-


16,170

- debt securities


99,038


-


99,038


141,532


-


141,532

- loans and advances to banks


22,303


-


22,303


27,581


-


27,581

- loans and advances to customers


29,176


-


29,176


43,661


-


43,661














Financial assets designated at fair value


4,857


-


4,857


9,031


-


9,031

- Treasury and other eligible bills


396


-


396


56


-


56

- debt securities


4,341


-


4,341


8,891


-


8,891

- loans and advances to banks


120


-


120


84


-


84

- loans and advances to customers


-


-


-


-


-


-














Derivatives


288,476


(258,755)


29,721


345,008


(313,300)


31,708














Loans and advances to customers held at amortised cost


924,454


(52,190)


872,264


974,660


(67,094)


907,566

- personal


371,203


(5,373)


365,830


388,954


(4,412)


384,542

- corporate and commercial


493,078


(44,260)


448,818


535,184


(59,197)


475,987

- non-bank financial institutions


60,173


(2,557)


57,616


50,522


(3,485)


47,037














Loans and advances to banks held at amortised cost


90,401


(53)


90,348


112,149


(258)


111,891














Reverse repurchase agreements - non-trading


146,255


(900)


145,355


161,713


(5,750)


155,963

Financial investments


423,120


-


423,120


404,773


-


404,773

- Treasury and other similar bills


104,551


-


104,551


81,517


-


81,517

- debt securities


318,569


-


318,569


323,256


-


323,256














Assets held for sale


40,078


-


40,078


1,375


-


1,375

- disposal groups


38,097


-


38,097


889


-


889

- non-current assets held for sale


1,981


-


1,981


486


-


486














Other assets


25,310


-


25,310


33,889


-


33,889

- endorsements and acceptances


9,149


-


9,149


10,775


-


10,775

- other


16,161


-


16,161


23,114


-


23,114



























Total balance sheet exposure to credit risk


2,234,409


(311,898)


1,922,511


2,434,100


(386,402)


2,047,698














Total off-balance sheet2


712,546


-


712,546


698,458


-


698,458

- financial guarantees and similar contracts


46,116


-


46,116


47,078


-


47,078

- loan and other credit-related commitments2


666,430


-


666,430


651,380


-


651,380



























At 31 December


2,946,955


(311,898)


2,635,057


3,132,558


(386,402)


2,746,156

For footnote, see page 191.

Loan and other credit-related commitments2


Europe


Asia


MENA


North

America


Latin

America


Total



$m


$m


$m


$m


$m


$m














Personal


70,013


103,153


3,092


14,510


12,175


202,943

Corporate and commercial


105,303


159,947


20,139


102,369


18,155


405,913

Financial


20,230


11,619


186


24,543


996


57,574














At 31 December 2015


195,546


274,719


23,417


141,422


31,326


666,430














Personal


86,247


96,497


2,995


15,636


11,679


213,054

Corporate and commercial


98,045


138,366


20,141


102,911


17,540


377,003

Financial


26,605


9,355


711


23,559


1,093


61,323














At 31 December 2014


210,897


244,218


23,847


142,106


30,312


651,380

For footnote, see page 191.


Concentration of exposure

The geographical diversification of our lending portfolio and our broad range of global businesses and products ensured that we did not overly depend on a few markets to generate growth in 2015. This diversification also supported our strategy for growth in faster-growing markets and those with international connectivity.

Financial investments

Our holdings of available-for-sale government and government agency debt securities, corporate debt securities, ABSs and other securities were spread across a wide range of issuers and geographical regions in 2015, with 14% invested in securities issued by banks and other financial institutions and 75% in government or government agency debt securities. We also held assets backing insurance and investment contracts.

For an analysis of financial investments, see Note 17 on the Financial Statements.

Trading assets

Trading securities remained the largest concentration within trading assets at 77% in 2015 and 2014. The largest concentration within the trading securities portfolio was in government and government agency debt securities. We had significant exposures to US Treasury and government agency debt securities ($15bn) and UK ($10bn) and Hong Kong ($6.5bn) government debt securities.

For an analysis of debt and equity securities held for trading, see Note 12 on the Financial Statements.

Derivatives

Derivative assets were $288bn at 31 December 2015 (2014: $345bn). Details of derivative amounts cleared through an exchange, central counterparty and non-central counterparty are shown on page 142.

For an analysis of derivatives, see page 141 and Note 16 on the Financial Statements.

Loans and advances

The following tables analyse loans by industry sector and by the location of the principal operations of the lending subsidiary or, in the case of the operations of The Hongkong and Shanghai Banking Corporation, HSBC Bank, HSBC Bank Middle East Limited and HSBC Bank USA, by the location of the lending branch. Excluding the effect of the classification of Brazilian assets as 'Assets held for sale', the distribution of loans across geographical regions and industries remained similar to last year.

For an analysis of loans and advances by country see page 151.


 

Gross loans and advances by industry sector and by geographical region

(Audited)


                 Asia


            MENA



















Personal


170,526


132,707


6,705


58,186


5,958


374,082


36.5


125,544


94,606


2,258


50,117


1,986


274,511


26.8


44,982


38,101


4,447


8,069


3,972


99,571


9.7
















Wholesale















Corporate and commercial


191,765


211,224


22,268


62,882


11,374


499,513


48.8


39,003


34,272


2,504


17,507


2,572


95,858


9.4


62,667


72,199


9,552


11,505


3,096


159,019


15.5


26,256


32,371


690


7,032


1,577


67,926


6.7


7,323


35,206


1,908


8,982


45


53,464


5.2


3,653


1,132


1,695


203


772


7,455


0.7


52,863


36,044


5,919


17,653


3,312


115,791


11.3
















Financial


51,969


68,321


10,239


16,308


3,996


150,833


14.7


33,621


13,969


2,321


9,822


681


60,414


5.9


18,348


54,352


7,918


6,486


3,315


90,419


8.8

















243,734


279,545


32,507


79,190


15,370


650,346


63.5















Total gross loans and advances
at 31 December 2015


414,260


412,252


39,212


137,376


21,328


1,024,428


100.0
















Percentage of total gross loans and advances

40.4%


40.3%


3.8%


13.4%


2.1%


100.0%


















Personal


178,531


129,515


6,571


65,400


13,537


393,554


                 35.8


131,000


93,147


2,647


55,577


4,153


286,524


                 26.0


47,531


36,368


3,924


9,823


9,384


107,030


                   9.8
















Wholesale















Corporate and commercial


212,523


220,799


20,588


57,993


30,722


542,625


                 49.4


39,456


37,767


2,413


15,299


12,051


106,986


                   9.7


76,629


72,814


9,675


13,484


8,189


180,791


                 16.4


28,187


35,678


579


6,558


2,291


73,293


                   6.7


7,126


34,379


1,667


8,934


281


52,387


                   4.8


2,264


1,195


1,552


164


968


6,143


                   0.6


58,861


38,966


4,702


13,554


6,942


123,025


                 11.2
















Financial


45,081


76,957


13,786


16,439


10,753


163,016


14.8


23,103


13,997


3,291


9,034


1,393


50,818


4.6


21,978


62,960


10,495


7,405


9,360


112,198


10.2
















257,604


297,756


34,374


74,432


41,475


705,641


64.2















Total gross loans and advances
at 31 December 2014


436,135


427,271


40,945


139,832


55,012


1,099,195


              100.0
















Percentage of total gross loans and advances




For footnotes, see page 191.

Credit quality of financial instruments

(Audited)

We assess credit quality on all financial instruments which are subject to credit risk. Additional credit quality information in respect of our consolidated holdings of ABSs is provided on page 153.
For the purpose of the following disclosure, retail loans which are past due up to 90 days and are not otherwise classified as impaired in accordance with our disclosure convention are not disclosed within the expected loss grade to which they relate, but are separately classified as past due but not impaired.


 

Distribution of financial instruments by credit quality

(Audited)


Neither past due nor impaired


   Past due

      but not

  impaired

                   

  Impaired


          Total

         gross

     amount




          Total



       Strong


          Good

Satisfactory


           Sub-

  standard


Impairment

   allowances5

 

 




              $m

 

              $m

 

              $m

 

              $m


              $m

 

              $m

 

              $m

 

                   $m

 

              $m




















Cash and balances at central banks


97,365


583


939


47


-


-


98,934




98,934

Items in the course of collection from other banks


5,318


32


416


2


-


-


5,768




5,768

Hong Kong Government certificates of indebtedness


28,410


-


-


-


-


-


28,410




28,410




















Trading assets6


116,633


21,243


19,894


576






158,346




158,346

- treasury and other eligible bills


6,749


790


190


100






7,829




7,829

- debt securities


77,088


10,995


10,656


299






99,038




99,038

- loans and advances:



















to banks


14,546


4,391


3,239


127






22,303




22,303

to customers


18,250


5,067


5,809


50






29,176




29,176




















Financial assets designated at fair value6


3,037


701


736


383






4,857




4,857

- treasury and other eligible bills


139


193


-


64






396




396

- debt securities


2,898


508


616


319






4,341




4,341

- loans and advances:



















to banks


-


-


120


-






120




120

to customers


-


-


-


-






-




-




















Derivatives6


248,101


32,056


7,209


1,110






288,476




288,476




















Loans and advances to customers held at amortised cost7


472,691


214,152


194,393


16,836


12,179


23,758


934,009


(9,555)


924,454

- personal


309,720


29,322


15,021


944


7,568


11,507


374,082


(2,879)


371,203

- corporate and commercial


127,673


168,772


171,466


15,379


4,274


11,949


499,513


(6,435)


493,078

- non-bank financial institutions


35,298


16,058


7,906


513


337


302


60,414


(241)


60,173




















Loans and advances to banks held
at amortised cost


73,226


11,929


4,836


407


1


20


90,419


(18)


90,401

Reverse repurchase agreements
- non-trading


108,238


16,552


20,931


46


-


488


146,255


-


146,255




















Financial investments


382,328


18,600


16,341


4,525


-


1,326


423,120




423,120

- treasury and other similar bills


93,562


3,963


4,756


2,270


-


-


104,551




104,551

- debt securities


288,766


14,637


11,585


2,255


-


1,326


318,569




318,569




















Assets held for sale


10,177


9,605


17,279


1,635


703


2,133


41,532


(1,454)


40,078

- disposal groups


10,149


8,815


16,213


1,567


701


2,085


39,530


(1,433)


38,097

- non-current assets held for sale


28


790


1,066


68


2


48


2,002


(21)


1,981




















Other assets


8,306


5,688


10,204


632


147


333


25,310


-


25,310

- endorsements and acceptances


1,084


3,850


3,798


343


22


52


9,149




9,149

- accrued income and other


7,222


1,838


6,406


289


125


281


16,161




16,161







































At 31 December 2015


1,553,830


331,141


293,178


26,199


13,030


28,058


2,245,436


(11,027)


2,234,409






















%


%


%


%


%


%


%
























Percentage of total gross amount


69.2


14.7


13.1


1.2


0.6


1.2


100.0





 

 

Distribution of financial instruments by credit quality (continued)


Neither past due nor impaired


   Past due

      but not

   impaired

                   

  Impaired


          Total

          gross

     amount




          Total



       Strong


          Good

Satisfactory


           Sub-

   standard


Impairment

   allowances5






              $m


              $m


              $m


              $m


              $m


              $m


              $m


                   $m


              $m




















Cash and balances at central banks


127,971


1,438


195


353






129,957




129,957

Items in the course of collection from other banks


4,515


46


365


1






4,927




4,927

Hong Kong Government certificates of indebtedness


27,674


-


-


-






27,674




27,674




















Trading assets6


168,521


35,042


24,740


641






228,944




228,944

- treasury and other eligible bills


13,938


1,641


559


32






16,170




16,170

- debt securities


111,138


17,786


12,305


303






141,532




141,532

- loans and advances:



















to banks


17,492


4,961


5,016


112






27,581




27,581

to customers


25,953


10,654


6,860


194






43,661




43,661




















Financial assets designated at fair value6


3,017


4,476


1,207


331






9,031




9,031

- treasury and other eligible bills


5


-


-


51






56




56

- debt securities


3,011


4,476


1,124


280






8,891




8,891

- loans and advances:



















to banks


1


-


83


-






84




84

to customers


-


-


-


-






-




-




















Derivatives6


269,490


58,596


15,962


960






345,008




345,008




















Loans and advances to customers held at amortised cost7


487,734


239,136


196,685


20,802


13,357


29,283


986,997


(12,337)


974,660

- personal


320,678


32,601


15,109


1,130


8,876


15,160


393,554


(4,600)


388,954

- corporate and commercial


141,375


192,799


171,748


18,986


3,922


13,795


542,625


(7,441)


535,184

- non-bank financial institutions


25,681


13,736


9,828


686


559


328


50,818


(296)


50,522




















Loans and advances to banks held
at amortised cost


83,766


19,525


7,945


914


1


47


112,198


(49)


112,149

Reverse repurchase agreements
- non-trading


98,470


28,367


33,283


1,593


-


-


161,713


-


161,713




















Financial investments


347,218


27,373


22,600


5,304


-


2,278


404,773




404,773

- treasury and other similar bills


68,966


6,294


4,431


1,826


-


-


81,517




81,517

- debt securities


278,252


21,079


18,169


3,478


-


2,278


323,256




323,256




















Assets held for sale


802


43


79


-


2


465


1,391


(16)


1,375

- disposal groups


768


43


79


-


-


-


890


-


890

- non-current assets held for sale


34


-


-


-


2


465


501


(16)


485




















Other assets


12,213


7,521


12,897


631


208


419


33,889




33,889

- endorsements and acceptances


1,507


4,644


4,281


298


34


11


10,775




10,775

- accrued income and other


10,706


2,877


8,616


333


174


408


23,114




23,114







































At 31 December 2014


1,631,391


421,563


315,958


31,530


13,568


32,492


2,446,502


(12,402)


2,434,100






















%


%


%


%


%


%


%
























Percentage of total gross amount


66.7


17.2


12.9


1.3


0.6


1.3


100.0





For footnotes, see page 191.


Past due but not impaired gross financial instruments

(Audited)

Past due but not impaired gross financial instruments are those loans where, although customers have failed to make payments in accordance with the contractual terms of their
facilities, they have not met the impaired loan criteria described on page 128.

In personal lending, past due but not impaired balances decreased, mainly due to the Brazilian reclassification and the continued run-off and loan sales in the CML portfolio.


Past due but not impaired gross financial instruments by geographical region

(Audited)


Loans and advances to customers held at amortised cost


1,928


3,405


909


5,392


545


12,179


1,152


2,573


180


3,287


376


7,568


762


790


710


1,843


169


4,274


14


42


19


262


-


337













Assets held for sale


-


-


-


2


701


703


-


-


-


-


701


701


-


-


-


2


-


2














10


39


15


80


4


148














1,938


3,444


924


5,474


1,250


13,030













Loans and advances to customers held at amortised cost


2,409


4,260


704


4,634


1,350


13,357


1,159


2,880


182


3,759


896


8,876


1,244


1,102


508


623


445


3,922


6


278


14


252


9


559













Assets held for sale


-


-


-


2


-


2


-


-


-


-


-


-


-


-


-


2


-


2














6


52


31


95


25


209














2,415


4,312


735


4,731


1,375


13,568

Ageing analysis of days for past due but not impaired gross financial instruments

(Audited)


Up to 29 days


30-59
days


60-89
days


90-179
 days


180 days

and over


Total



$m


$m


$m


$m


$m


$m














Loans and advances to customers held at amortised cost


9,403


1,917


727


111


21


12,179

- personal


5,665


1,401


502


-


-


7,568

- corporate and commercial


3,432


505


225


93


19


4,274

- non-bank financial institutions


306


11


-


18


2


337














Assets held for sale


476


137


90


-


-


703

- disposal group


476


136


89


-


-


701

- non-current assets held for sale


-


1


1


-


-


2














Other financial instruments


80


35


14


10


9


148














At 31 December 2015


9,959


2,089


831


121


30


13,030














Loans and advances to customers held at amortised cost


10,427


2,057


801


54


18


13,357

- personal


6,477


1,717


676


5


1


8,876

- corporate and commercial


3,417


328


114


48


15


3,922

- non-bank financial institutions


533


12


11


1


2


559














Assets held for sale


-


-


-


1


1


2

- disposal group


-


-


-


-


-


-

- non-current assets held for sale


-


-


-


1


1


2














Other financial instruments


130


33


18


11


17


209














At 31 December 2014


10,557


2,090


819


66


36


13,568

 


Impaired loans

(Audited)

Impaired loans and advances are those that meet any of the following criteria:

·   wholesale loans and advances classified as Customer Risk Rating ('CRR') 9 or CRR 10. These grades are assigned when the bank considers that either the customer is unlikely to pay their credit obligations in full without recourse to security, or when the customer is more than 90 days past due on any material credit obligation to HSBC.

·   retail loans and advances classified as Expected Loss ('EL') 9 or EL 10. These grades are typically assigned to retail loans and advances more than 90 days past due
unless individually they have been assessed as not impaired.

·   renegotiated loans and advances that have been subject to a change in contractual cash flows as a result of a concession which the lender would not otherwise consider, and where it is probable that without the concession the borrower would be unable to meet the contractual payment obligations in full, unless the concession is insignificant and there are no other indicators of impairment. Renegotiated loans remain classified as impaired until there is sufficient evidence to demonstrate a significant reduction in the risk of non-payment of future cash flows, and there are no other indicators of impairment.



At 31 December 2014, our Brazilian impaired loans were $1.4bn in corporate and commercial and $0.8bn in personal.

Excluding the Brazilian reclassification to 'Assets held for sale', corporate and commercial impaired loans decreased $0.4bn including the favourable effects of a $0.8bn foreign exchange reduction. In personal, the continued run-off of the US CML portfolio reduced collectively assessed impaired loan balances by a further $2.7bn. 'Net repayments and other' included $2.1bn of CML portfolio assets that were reclassified as held for sale or sold during the year. Whilst there was a reduction in total personal impaired loans, there was a marginal increase in the UK resulting from improved identification of impaired  residential mortgages.

Renegotiated loans and forbearance

The contractual terms of a loan may be modified for a number of reasons, including changes in market conditions, customer retention and other factors not related to the current or potential credit deterioration of a customer. 'Forbearance' describes concessions made on the contractual terms of a loan in response to an obligor's financial difficulties. We classify and report loans on which concessions have been granted under conditions of credit distress as 'renegotiated loans' when their contractual payment terms have been modified because we have significant concerns about the borrowers' ability to meet contractual payments when due. On renegotiation, where the existing agreement is cancelled and a new agreement is made on substantially different terms, or if the terms of an existing agreement are modified such that the renegotiated loan is substantially a different financial instrument, the loan would be derecognised and recognised as a new loan for accounting purposes. However, the newly recognised financial asset will retain the renegotiated loan classification. Concessions on loans made to customers which do not affect the payment structure or basis of repayment, such as waivers of financial or security covenants, do not directly provide concessionary relief to customers in terms of their ability to service obligations as they fall due and are therefore not included in this classification.

The most significant portfolio of renegotiated loans remained in North America, substantially all of which were retail loans held by HSBC Finance Corporation ('HSBC Finance').

The following tables show the gross carrying amounts of the Group's holdings of renegotiated loans and advances to customers by industry sector, geography, credit quality classification and by arrangement type.

 

Renegotiated loans and advances to customers by geographical region


$m


$m


$m


$m


$m


$m














First lien residential mortgages


1,461


68


36


10,680


37


12,282

- neither past due nor impaired


512


47


11


3,376


27


3,973


174


5


4


1,567


3


1,753


775


16


21


5,737


7


6,556














Other personal lending3


298


272


33


1,054


35


1,692

- neither past due nor impaired


131


141


24


410


10


716


51


16


2


173


1


243


116


115


7


471


24


733














Corporate and commercial


5,215


599


1,411


638


506


8,369

- neither past due nor impaired


1,467


119


343


93


130


2,152


109


-


14


-


-


123


3,639


480


1,054


545


376


6,094














Non-bank financial institutions


340


4


272


-


-


616

- neither past due nor impaired


143


-


248


-


-


391


-


-


24


-


-


24


197


4


-


-


-


201




























7,314


943


1,752


12,372


578


22,959

- neither past due nor impaired


2,253


307


626


3,879


167


7,232


334


21


44


1,740


4


2,143


4,727


615


1,082


6,753


407


13,584


























1,402


193


575


1,014


155


3,339




First lien residential mortgages


1,605


94


58


13,540


60


15,357

- neither past due nor impaired


529


63


19


3,695


32


4,338


221


8


1


1,894


5


2,129


855


23


38


7,951


23


8,890














Other personal lending3


324


292


27


1,267


326


2,236

- neither past due nor impaired


184


173


16


453


14


840


40


22


5


214


1


282


100


97


6


600


311


1,114














Corporate and commercial


5,469


501


1,439


427


1,324


9,160

- neither past due nor impaired


1,383


102


483


36


303


2,307


68


-


31


1


1


101


4,018


399


925


390


1,020


6,752














Non-bank financial institutions


413


4


323


1


1


742

- neither past due nor impaired


219


-


305


-


-


524


-


-


-


-


-


-


194


4


18


1


1


218




























7,811


891


1,847


15,235


1,711


27,495

- neither past due nor impaired


2,315


338


823


4,184


349


8,009


329


30


37


2,109


7


2,512


5,167


523


987


8,942


1,355


16,974




























1,458


170


458


1,499


704


4,289



For footnote, see page 191.


The following table shows movements in renegotiated loans during the year. Renegotiated loans decreased by $4.5bn to $23bn in 2015, partly due to the Brazilian reclassification of $1bn. Renegotiated loans in personal lending reduced by $3.6bn. Included within 'other' movements is $2.1bn of CML portfolio assets that were transferred to 'Assets held for sale'. Write-offs reduced as a result of improvements in US economic conditions and housing market.

 

Movement in renegotiated loans and advances to customers by geographical region















Renegotiated loans at 1 January 2015


7,811


891


1,847


15,235


1,711


27,495


1,929


386


85


14,807


386


17,593


5,469


501


1,439


427


1,324


9,160


413


4


323


1


1


742














Loans renegotiated in the year without derecognition


1,970


421


115


999


553


4,058


471


87


7


625


250


1,440


1,494


334


89


374


303


2,594


5


-


19


-


-


24














Loans renegotiated in the year resulting in recognition of a new loan


222


16


196


(1)


175


608


57


-


-


(1)


18


74


156


16


4


-


157


333


9


-


192


-


-


201














Repayments


(1,675)


(351)


(276)


(1,304)


(467)


(4,073)


(574)


(88)


(32)


(1,166)


(185)


(2,045)


(1,054)


(263)


(159)


(138)


(282)


(1,896)


(47)


-


(85)


-


-


(132)














Amounts written off


(294)


(52)


(11)


(254)


(290)


(901)


(45)


(24)


(5)


(241)


(139)


(454)


(249)


(28)


(6)


(12)


(150)


(445)


-


-


-


(1)


(1)


(2)














Other


(720)


18


(119)


(2,303)


(1,104)


(4,228)


(79)


(21)


14


(2,290)


(258)


(2,634)


(601)


39


44


(13)


(846)


(1,377)


(40)


-


(177)


-


-


(217)



























At 31 December 2015


7,314


943


1,752


12,372


578


22,959


1,759


340


69


11,734


72


13,974


5,215


599


1,411


638


506


8,369


340


4


272


-


-


616














Renegotiated loans at 1 January 2014


9,756


767


2,094


18,789


2,769


34,175


2,251


435


149


18,130


607


21,572


7,270


330


1,583


658


2,161


12,002


235


2


362


1


1


601














Loans renegotiated in the year without derecognition


1,543


371


296


862


725


3,797


433


83


10


774


310


1,610


939


288


286


78


415


2,006


171


-


-


10


-


181














Loans renegotiated in the year resulting in recognition of a new loan


500


5


79


-


92


676


69


2


-


-


28


99


381


-


61


-


64


506


50


3


18


-


-


71














Repayments


(2,416)


(246)


(562)


(1,518)


(1,036)


(5,778)


(635)


(96)


(47)


(1,319)


(288)


(2,385)


(1,757)


(149)


(445)


(189)


(747)


(3,287)


(24)


(1)


(70)


(10)


(1)


(106)














Amounts written off


(828)


(42)


(23)


(640)


(510)


(2,043)


(88)


(28)


(7)


(568)


(223)


(914)


(740)


(14)


(16)


(72)


(286)


(1,128)


-


-


-


-


(1)


(1)














Other


(744)


36


(37)


(2,258)


(329)


(3,332)


(101)


(10)


(20)


(2,210)


(48)


(2,389)


(624)


46


(30)


(48)


(283)


(939)


(19)


-


13


-


2


(4)



























At 31 December 2014


7,811


891


1,847


15,235


1,711


27,495


1,929


386


85


14,807


386


17,593


5,469


501


1,439


427


1,324


9,160


413


4


323


1


1


742













 


A range of forbearance strategies are employed in order to improve the management of customer relationships, maximise collection opportunities and, if possible, avoid default, foreclosure or repossession.

The table below shows the arrangement type as a percentage of the total value of arrangements offered. Corporate renegotiated loans often require the granting of more than one arrangement type as part of an effective strategy. The

percentages reported in the table below includes the effect of loans being reported in more than one arrangement type.

Renegotiated loans by arrangement type: corporate and commercial and financial

R

%




Maturity term extensions


42.4

Reductions in margin, principal forgiveness, debt equity swaps and interest, fees or penalty payment forgiveness


19.6

Other changes to repayment profile


14.1

Interest only conversion


13.9

Other


10.0




At 31 December 2015


100.0

 

In personal lending, renegotiated loans have been allocated to the single most dominant arrangement type.

Renegotiated loans by arrangement type: personal lending


%

Personal



- interest rate and terms modifications


11.4

- payment concessions


6.0

- collection re-age8


35.0

- modification re-age9


42.9

- other


4.7




At 31 December 2015


100.0

For footnotes, see page 191.

Impairment of loans and advances

(Audited)

For an analysis of loan impairment charges and other credit risk provisions by global business, see page 65.

The tables below analyse the loan impairment charges for the year by industry sector, for impaired loans and advances that are either individually or collectively assessed, and collective impairment allowances on loans and advances that are classified as not impaired.

 


Loan impairment charge to the income statement by industry sector

Asia














Personal


263


309


122


157


983


1,834

- first lien residential mortgages


(7)


(1)


49


70


41


152

- other personal3


270


310


73


87


942


1,682














Corporate and commercial


432


372


195


319


451


1,769

- manufacturing and international trade and services


158


250


107


26


305


846

- commercial real estate and other property-related


33


18


49


24


47


171

- other commercial4


241


104


39


269


99


752














Financial


14


-


(18)


(7)


-


(11)














Total loan impairment charge for the year ended 31 December 2015


709


681


299


469


1,434


3,592

Personal


245


321


25


117


1,095


1,803

- first lien residential mortgages


(75)


6


(24)


26


15


(52)

- other personal3


320


315


49


91


1,080


1,855














Corporate and commercial


790


327


6


196


937


2,256

- manufacturing and international trade and services


520


197


36


116


382


1,251

- commercial real estate and other property-related


78


29


(28)


27


176


282

- other commercial4


192


101


(2)


53


379


723














Financial


44


(4)


(32)


(13)


1


(4)














Total loan impairment charge for the year ended
31 December 2014


1,079


644


(1)


300


2,033


4,055

For footnotes, see page 191.


Loan impairment charge to the income statement by assessment type

Asia

 













Individually assessed impairment allowances


495


300


161


227


322


1,505

- new allowances


991


518


216


290


401


2,416

- release of allowances no longer required


(455)


(179)


(52)


(46)


(93)


(825)

- recoveries of amounts previously written off


(41)


(39)


(3)


(17)


14


(86)














Collectively assessed impairment allowances10


214


381


138


242


1,112


2,087

- new allowances net of allowance releases


561


507


168


301


1,272


2,809

- recoveries of amounts previously written off


(347)


(126)


(30)


(59)


(160)


(722)



























Total loan impairment charge for the year ended 31 December 2015


709


681


299


469


1,434


3,592

For footnote, see page 191.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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