Annual Financial Report - 29 of 56

RNS Number : 6307S

HSBC Holdings PLC

18 March 2016

 

Notional contract amounts and fair values of derivatives by product type

		2015						2014
		Notional		Fair value				Notional		Fair value
		amount		Assets		Liabilities		amount		Assets		Liabilities
		$m		$m		$m		$m		$m		$m
Foreign exchange		5,690,354		96,341		95,598		5,573,415		97,312		95,759
- exchange traded		195,612		167		76		81,785		229		369
- central counterparty cleared OTC		29,263		406		443		18,567		321		349
- non-central counterparty cleared OTC		5,465,479		95,768		95,079		5,473,063		96,762		95,041
Interest rate		14,675,036		279,154		271,367		22,328,518		473,243		468,152
- exchange traded		1,259,888		49		8		1,432,333		112		161
- central counterparty cleared OTC		8,774,674		117,877		117,695		15,039,001		261,880		264,509
- non-central counterparty cleared OTC		4,640,474		161,228		153,664		5,857,184		211,251		203,482
Equity		501,834		8,732		10,383		568,932		11,694		13,654
- exchange traded		265,129		1,888		2,601		289,140		2,318		3,201
- non-central counterparty cleared OTC		236,705		6,844		7,782		279,792		9,376		10,453
Credit		463,344		6,961		6,884		550,197		9,340		10,061
- central counterparty cleared OTC		90,863		1,779		2,069		126,115		1,999		2,111
- non-central counterparty cleared OTC		372,481		5,182		4,815		424,082		7,341		7,950
Commodity and other		51,683		3,148		2,699		77,565		3,884		3,508
- exchange traded		8,136		38		-		7,015		80		23
- non-central counterparty cleared OTC		43,547		3,110		2,699		70,550		3,804		3,485
Total OTC derivatives		19,653,486		392,194		384,246		27,288,354		592,735		587,379
- total OTC derivatives cleared by central counterparties		8,894,800		120,062		120,207		15,183,683		264,200		266,968
- total OTC derivatives not cleared by central counterparties		10,758,686		272,132		264,039		12,104,671		328,535		320,411
Total exchange traded derivatives		1,728,765		2,142		2,685		1,810,273		2,739		3,755
Gross		21,382,251		394,336		386,931		29,098,627		595,473		591,134
Offset				(105,860)		(105,860)				(250,465)		(250,465)
Total at 31 December				288,476		281,071				345,008		340,669

The purposes for which HSBC uses derivatives are described in Note 16 on the Financial Statements.

The International Swaps and Derivatives Association ('ISDA') Master Agreement is our preferred agreement for documenting derivatives activity. It provides the contractual framework within which dealing activity across a full range of OTC products is conducted, and contractually binds both parties to apply close-out netting across all outstanding transactions covered by an agreement if either party defaults or another pre-agreed termination event occurs. It is common, and our preferred practice, for the parties to execute a Credit Support Annex ('CSA') in conjunction with the ISDA Master Agreement. Under a CSA, collateral is passed between the parties to mitigate the counterparty risk inherent in outstanding positions.

We manage the counterparty exposure arising from market risk on our OTC derivative contracts by using collateral agreements with counterparties and netting agreements. Currently, we do not actively manage our general OTC derivative counterparty exposure in the credit markets, although we may manage individual exposures in certain circumstances.

We place strict policy restrictions on collateral types and as a consequence the types of collateral received and pledged are, by value, highly liquid and of a strong quality, being predominantly cash.

Where a collateral type is required to be approved outside the collateral policy (which includes collateral that includes wrong way risks), a submission to one of three regional Documentation Approval Committees ('DAC's) for approval is required. These DACs require the participation and sign-off of senior representatives from regional Markets Chief Operating Officers, Legal and Risk.

The majority of our CSAs are with financial institutional clients.

As a consequence of our policy, the type of agreement we enter into is predominately ISDA CSAs, the majority of which are written under English law. The table below provides a breakdown of OTC collateral agreements by agreement type:

OTC collateral agreements by type

		Number of        agreements
ISDA CSA (English law)		2,670
ISDA CSA (New York law)		1,702
ISDA CSA (Japanese law)		17
French Master Agreement and CSA equivalent14		223
German Master Agreement and CSA equivalent15		93
Others		395
At 31 December 2015		5,100

For footnotes, see page 191.

See page 122 and Note 32 on the Financial Statements for details regarding legally enforceable right of offset in the event of counterparty default and collateral received in respect of derivatives.

Reverse repos - non-trading by geographical region

The amount of non-trading reverse repos include transactions with customers and banks and is set out below.

Reverse repos - non-trading by geographical region

(Audited)

		Europe		Asia		MENA		North              America		Latin              America		Total
		$m		$m		$m		$m		$m		$m
With customers		28,366		5,650		-		40,316		-		74,332
With banks		15,824		21,804		779		32,034		1,482		71,923
At 31 December 2015		44,190		27,454		779		72,350		1,482		146,255
With customers		25,841		5,409		-		35,060		-		66,310
With banks		34,748		22,813		19		29,008		8,815		95,403
At 31 December 2014		60,589		28,222		19		64,068		8,815		161,713

Personal lending

We provide a broad range of secured and unsecured personal lending products to meet customer needs. Personal lending includes advances to customers for asset purchases such as residential property where the
loans are secured by the assets being acquired. We also offer loans secured on existing assets, such as first liens on residential property, and unsecured lending products such as overdrafts, credit cards and payroll loans.

Total personal lending

		Europe		Asia		MENA		North            America		Latin            America		Total
		$m		$m		$m		$m		$m		$m
First lien residential mortgages (A)		125,544		94,606		2,258		50,117		1,986		274,511
Of which:
- interest only (including offset)		40,906		936		-		180		-		42,022
- affordability including ARMs		356		3,966		-		17,041		-		21,363
Other personal lending (B)		44,982		38,101		4,447		8,069		3,972		99,571
- other		32,862		27,682		3,147		3,284		1,816		68,791
- credit cards		12,115		10,189		929		996		1,780		26,009
- second lien residential mortgages		-		33		2		3,762		-		3,797
- motor vehicle finance		5		197		369		27		376		974
Total gross loans at 31 December 2015 (C)		170,526		132,707		6,705		58,186		5,958		374,082
Impairment allowances on personal lending
First lien residential mortgages (a)		278		29		24		991		22		1,344
Other personal lending (b)		667		227		214		241		186		1,535
- other		401		104		180		31		80		796
- credit cards		265		122		29		30		102		548
- second lien residential mortgages		-		-		-		180		-		180
- motor vehicle finance		1		1		5		-		4		11
Total impairment allowances at 31 December 2015 (c)		945		256		238		1,232		208		2,879
		%		%		%		%		%		%
(a) as a percentage of A		0.2		0.0		1.1		2.0		1.1		0.5
(b) as a percentage of B		1.5		0.6		4.8		3.0		4.7		1.5
(c) as a percentage of C		0.6		0.2		3.5		2.1		3.5		0.8

Total personal lending (continued)

		Europe		Asia		MENA		North            America		Latin            America		Total
		$m		$m		$m		$m		$m		$m
First lien residential mortgages (D)		131,000		93,147		2,647		55,577		4,153		286,524
Of which:
- interest only (including offset)		44,163		956		-		276		-		45,395
- affordability including ARMs		337		5,248		-		16,452		-		22,037
Other personal lending (E)		47,531		36,368		3,924		9,823		9,384		107,030
- other		34,567		25,695		2,633		4,328		4,846		72,069
- credit cards		12,959		10,289		897		1,050		3,322		28,517
- second lien residential mortgages		-		56		2		4,433		-		4,491
- motor vehicle finance		5		328		392		12		1,216		1,953
Total gross loans at 31 December 2014 (F)		178,531		129,515		6,571		65,400		13,537		393,554
Impairment allowances on personal lending
First lien residential mortgages (d)		306		46		97		1,644		36		2,129
Other personal lending (e)		786		208		97		350		1,030		2,471
- other		438		87		59		43		672		1,299
- credit cards		347		119		33		36		298		833
- second lien residential mortgages		-		-		-		271		-		271
- motor vehicle finance		1		2		5		-		60		68
Total impairment allowances at 31 December 2014 (f)		1,092		254		194		1,994		1,066		4,600
		%		%		%		%		%		%
(d) as a percentage of D		0.2		-		3.7		3.0		0.9		0.7
(e) as a percentage of E		1.7		0.6		2.5		3.6		11.0		2.3
(f) as a percentage of F		0.6		0.2		3.0		3.0		7.9		1.2

On a reported basis, total personal lending was $374bn at 31 December 2015, down from $394bn at the end of 2014. The reduction of $20bn was mainly due to adverse foreign exchange movements of $19bn, the reclassification of $7.6bn of assets of our Brazilian operations as 'Assets held for sale' and the run-off of our CML portfolio in North America of $5bn during the year. Excluding these factors, personal lending balances grew by $12bn in 2015. This was primarily driven by increased mortgage and other lending in Asia.

Loan impairment allowances reduced by $1.7bn on a reported basis, mainly due to the Brazilian reclassification ($0.8bn) and the run-off of the US CML portfolio ($0.7bn).

Personal lending loan impairment charges were largely unchanged at $1.8bn on a reported basis. On a constant currency basis, they were $0.3bn higher than in 2014, reflecting increased write-offs in the UAE following a review of the quality and value of residential mortgage collateral and the effects of adverse macroeconomic conditions in Brazil.

Mortgage lending

We offer a wide range of mortgage products designed to meet customer needs, including capital repayment, interest-only, affordability and offset mortgages.

Group credit policy prescribes the range of acceptable residential property LTV thresholds with the maximum upper limit for new loans set at between 75% and 95%.

Specific LTV thresholds and debt-to-income ratios are managed at regional and country levels and, although the parameters must comply with Group policy, strategy and risk appetite, they differ in the various locations in which we operate to reflect the local economic and housing market conditions, regulations, portfolio performance, pricing and other product features.

Reported gross mortgage lending balances declined by $12bn. Adverse foreign exchange differences and the Brazilian reclassification reduced the gross mortgage lending balances by further $13bn and $2.1bn respectively.

The commentary that follows is on a constant currency basis, while tables are presented on a reported basis.

Excluding the effect of the Brazilian reclassification and the US CML run-off portfolio, mortgage lending balances increased by $7.7bn during the year.

Mortgage lending in Asia, excluding the reclassification to other personal lending discussed on page 145, grew by $6.4bn. The increases were primarily attributable to continued growth in Hong Kong ($4.2bn), mainland China ($1.7bn) and Australia ($1.1bn) as a result of strong demand and our competitive customer offerings. During the year, mortgage lending in Singapore fell by $1.1bn due to a business decision to constrain the level of our mortgage portfolio, coupled with the effect of a range of personal lending regulations. The quality of our Asian mortgage book remained high with negligible defaults and impairment allowances. The average LTV ratio on new mortgage lending in Hong Kong was 43% compared with an estimated 29% for the overall portfolio.

In North America, the US CML portfolio, including second lien mortgages, declined by $5.2bn in 2015 as we continued to run it off. The US Premier mortgage portfolio increased by $1.1bn during 2015 as we focused on growth in our core portfolios of higher quality mortgages. Our Canadian mortgage lending balances also grew by $0.8bn during the year. Collectively assessed impairment allowances reduced during the year due to continued improvements in the credit quality of the mortgage portfolio and continued loan sales.

In Europe, UK mortgage balances were unchanged and our products remained competitive in the prolonged low interest rate market environment. In the UK, the credit quality of our mortgage portfolio remained high, the LTV ratio on new lending was 57.8% compared with an average of 42.6% for the overall portfolio.

Exposure to UK interest-only mortgage loans

Interest-only mortgage products made up $40bn of total UK mortgage lending, including $16bn of offset mortgages in First Direct and $1.7bn of endowment mortgages.

The following information is presented for HSBC Bank plc's UK interest-only mortgage loans with balances of $18bn at the end of 2015. $0.2bn of interest-only mortgages matured during 2015. Of these, 2,636 loans with total balances of $0.1bn were repaid in full, 164 loans with balances of $0.03bn have agreed future repayment plans and 550 loans with balances of $0.1bn are subject to ongoing individual assessments.

The profile of expiring UK interest-only loans was as follows:

UK interest-only mortgage loans

		$m
2015 expired interest-only mortgage loans		266
Interest-only mortgage loans by maturity
- 2016		314
- 2017		384
- 2018		723
- 2019		801
- 2020		805
- 2021-2025		3,997
- Post 2025		10,390
Total at 31 December 2015		17,680

Other personal lending

Reported other personal lending balances declined by $7.5bn during the year, mainly due to adverse foreign exchange movements of $5.8bn and the Brazilian reclassification of $5.5bn. The reduction was offset by the growth in other personal lending in Hong Kong.

The commentary that follows is on a constant currency basis, while tables are presented on a reported basis.

Excluding the Brazilian reclassification, other personal lending increased by $4bn in 2015. This was driven by strong growth in personal loans and overdrafts in Hong Kong ($1.5bn), other unsecured personal lending portfolio in UK ($0.7bn) and other personal lending in France ($0.6bn). In Mexico, other unsecured personal lending grew by $0.6bn mainly in payroll and personal loans as a result of various sales and credit initiatives. In addition, we reclassified a total of $1.8bn of loans in Malaysia and India, and $0.4bn in the UAE, from residential mortgages to other personal lending following a review of the supporting collateral.

HSBC Finance

HSBC Finance US Consumer and Mortgage Lending - residential mortgages¹⁶

		2015		2014
		$m		$m
Residential mortgages:
- first lien		17,157		21,915
Other personal lending:
- second lien		2,089		2,509
Total (A) at 31 December		19,246		24,424
Impairment allowances		986		1,679
- as a percentage of A		5.1%		6.9%

For footnote, see page 191.

Mortgage lending balances in HSBC Finance declined by $5.2bn or 21% during 2015. In addition to the continued loan sales in the CML portfolio, we transferred a further
$2.4bn to 'Assets held for sale' during the year, and these loans were sold in May, August and November 2015.

There was a decrease in impairment allowances reflecting reduced levels of delinquency, and lower levels of both new impaired loans and loan balances outstanding as a result of continued liquidation of the portfolio.

Among the first and second lien residential mortgages in our CML portfolio, two months and over delinquent balances halved to $1.2bn during 2015.

At 31 December 2015, renegotiated real estate secured accounts in HSBC Finance represented 91% (2014: 93%) of North America's total renegotiated loans. $5.1bn of renegotiated real estate secured loans was classified as impaired (2014: $7.6bn).

HSBC Bank USA

In HSBC Bank USA, mortgage balances grew by $1.1bn to $18bn at 31 December 2015 as we continued to implement our strategy to grow the HSBC Premier and Advance customer base. We continued to sell all agency-eligible new originations in the secondary market.

Trends in two months and over contractual delinquency in the US

		2015		2014
		$m		$m
In personal lending in the US
First lien residential mortgages		1,954		3,271
- Consumer and Mortgage Lending		1,049		2,210
- other mortgage lending		905		1,061
Second lien residential mortgages		161		216
- Consumer and Mortgage Lending		106		154
- other mortgage lending		55		62
Credit card		16		17
Personal non-credit card		3		7
Total at 31 December		2,134		3,511
		%		%
As a percentage of the equivalent loans and receivables balances
First lien residential mortgages		5.7		8.6
Second lien residential mortgages		4.4		5.0
Credit card		2.3		2.4
Personal non-credit card		0.7		1.4
Total at 31 December		5.4		8.1

Gross loan portfolio of HSBC Finance real estate secured balances

		Re-aged 17		Modified and re-aged		Modified		Total renegotiated loans	Total non- renegotiated loans			Total gross loans		Total impairment allowances		Impairment allowances/ gross loans
		$m		$m		$m		$m		$m		$m		$m		%
At 31 December 2015		4,858		5,257		519		10,634		8,612		19,246		986		5.1
At 31 December 2014		6,637		6,581		587		13,805		10,619		24,424		1,679		6.9

For footnote, see page 191.

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

		Number of renegotiated loans (000s)								Total number of loans (000s)
		Re-aged		Modified and re-aged		Modified		Total
At 31 December 2015		66		54		6		126		240
At 31 December 2014		85		64		6		155		297

HSBC Finance loan modifications and re-age programmes

HSBC Finance maintains loan modification and re‑age ('loan renegotiation') programmes in order to manage customer relationships, improve collection opportunities and, if possible, avoid foreclosure.

Qualifying criteria

For an account to qualify for renegotiation it must meet certain criteria, and HSBC Finance retains the right to decline a renegotiation.

Renegotiated real estate secured loans are not eligible for a subsequent renegotiation for six or 12 months depending upon the action, with a maximum of five renegotiations permitted within a five-year period. Borrowers must be approved for a modification and, to activate it, must generally make two minimum qualifying monthly payments within 60 days. In certain circumstances where the debt has been restructured in bankruptcy proceedings, fewer or no payments may be required. Real estate secured loans involving a bankruptcy and accounts whose borrowers are subject to a Chapter 13 plan filed with a bankruptcy court generally may be considered current upon receipt of one qualifying payment, while accounts whose borrowers have filed for Chapter 7 bankruptcy protection may be re-aged upon receipt of a signed reaffirmation agreement. In addition, any account may be re-aged without receipt of a payment in certain special circumstances (for example, in the event of a natural disaster or a hardship programme).

Within the constraints of our Group credit policy, we allow for multiple renegotiations under certain circumstances. Consequently, a significant proportion of loans included in the table above have undergone multiple re-ages or modifications. In this regard, multiple modifications have remained consistent at 70% to 75% of total modifications.

The accounts that received second or subsequent renegotiations during the year do not appear in the statistics presented. These statistics treat a loan as an addition to the volume of renegotiated loans on its first renegotiation only.

Types of loan renegotiation programmes in HSBC Finance ·   A temporary modification is a change to the contractual terms of a loan that results in HSBC Finance giving up a right to contractual cash flows over a pre-defined period, typically two years. With a temporary modification the loan is expected to revert back to the original contractual terms, including the interest rate charged, after the modification period. An example is reduced interest payments. A substantial number of HSBC Finance modifications involve interest rate reductions, which lower the amount of interest income HSBC Finance is contractually entitled to receive in future periods. Historically, modifications were granted for terms as low as six months, although more recent modifications have a minimum term of two years. ·   A permanent modification is a change to the contractual terms of a loan that results in HSBC Finance giving up a right to contractual cash flows over the life of the loan. An example is a permanent reduction in the interest rate charged.

HSBC Finance also offers a 're-age' renegotiation programme, which results in the resetting of an account's contractual delinquency status to current (non-delinquent) upon fulfilment of certain requirements and without additional concessions. The overdue principal and/or interest is deferred and paid at a later date. Loan re-ageing enables customers who have been unable to make a small number of payments to have their loan delinquency status reset to current so that their credit score is not affected by the overdue balances. Re-aging may be offered to customers either without any modification of original loan terms, or as part of a loan modification transaction. All renegotiation transactions described above with the exception of first time re-ages on accounts that are less than 60 days past due are classified as impaired. These remain classified as impaired until they have demonstrated a history of payment performance against their original contracted terms for at least 12 months, with the exception of permanent modifications. All modified loans with terms over two years are considered to be permanently impaired.

Collateral and other credit enhancements held

(Audited)

The tables below provide a quantification of the value of fixed charges we hold over specific assets where we have a history of enforcing, and are able to enforce, collateral in satisfying a debt in the event of the borrower failing to meet its contractual obligations, and where
the collateral is cash or can be realised by sale in an established market. The collateral valuation excludes any adjustments for obtaining and selling the collateral and, in particular, loans shown as not collateralised or partially collateralised may also benefit from other forms of credit mitigants. UK and Hong Kong are shown, both within regional figures and separately, due to the size of their portfolios.

Residential mortgage loans including loan commitments by level of collateral

(Audited)

		Europe		Asia		MENA		North America		Latin America		Total		UK		Hong Kong
		$m		$m		$m		$m		$m		$m		$m		$m
Non-impaired loans and advances
Fully collateralised		128,113		100,102		2,144		41,567		1,869		273,795		122,221		61,784
LTV ratio:
- less than 50%		70,851		59,212		595		12,369		710		143,737		68,362		42,589
- 51% to 75%		47,933		33,237		985		22,071		903		105,129		45,762		15,961
- 76% to 90%		8,322		6,522		535		5,502		222		21,103		7,584		2,254
- 91% to 100%		1,007		1,131		29		1,625		34		3,826		513		980
Partially collateralised:
- greater than 100% LTV (A)		540		168		46		1,208		13		1,975		321		97
- collateral value on A		434		155		37		1,147		11		1,784		221		95
		128,653		100,270		2,190		42,775		1,882		275,770		122,542		61,881
Impaired loans and advances
Fully collateralised		1,407		222		44		6,713		109		8,495		1,191		46
LTV ratio:
- less than 50%		518		105		18		1,247		90		1,978		469		42
- 51% to 75%		619		76		13		2,819		14		3,541		540		3
- 76% to 90%		183		34		8		1,811		4		2,040		133		1
- 91% to 100%		87		7		5		836		1		936		49		-
Partially collateralised:
- greater than 100% LTV (B)		178		8		18		628		1		833		49		-
- collateral value on B		160		6		13		547		-		726		36		-
		1,585		230		62		7,341		110		9,328		1,240		46
At 31 December 2015		130,238		100,500		2,252		50,116		1,992		285,098		123,782		61,927

Residential mortgage loans including loan commitments by level of collateral (continued)

		Europe		Asia		MENA		North America		Latin America		Total		UK		Hong Kong
		$m		$m		$m		$m		$m		$m		$m		$m
Non-impaired loans and advances
Fully collateralised		135,875		99,257		2,431		43,317		3,759		284,639		130,333		57,703
LTV ratio:
- less than 50%		66,075		60,315		1,324		14,003		1,454		143,171		63,533		42,894
- 51% to 75%		56,178		31,142		856		20,872		1,777		110,825		54,095		12,135
- 76% to 90%		11,856		6,906		212		5,994		480		25,448		11,141		2,298
- 91% to 100%		1,766		894		39		2,448		48		5,195		1,564		376
Partially collateralised:
- greater than 100% LTV (C)		537		99		60		2,209		167		3,072		388		-
- collateral value on C		532		81		44		1,999		24		2,680		415		-
		136,412		99,356		2,491		45,526		3,926		287,711		130,721		57,703
Impaired loans and advances
Fully collateralised		906		256		122		8,618		154		10,056		781		48
LTV ratio:
- less than 50%		232		130		53		1,291		103		1,809		197		45
- 51% to 75%		417		90		29		3,462		35		4,033		376		3
- 76% to 90%		163		32		19		2,471		10		2,695		131		-
- 91% to 100%		94		4		21		1,394		6		1,519		77		-
Partially collateralised:
- greater than 100% LTV (D)		55		7		31		1,395		2		1,490		44		-
- collateral value on D		40		5		23		1,181		1		1,250		30		-
		961		263		153		10,013		156		11,546		825		48
At 31 December 2014		137,373		99,619		2,644		55,539		4,082		299,257		131,546		57,751

Supplementary information

Gross loans and advances by industry sector over five years

		2015		Currency   translation adjustment18		Movement		2014		2013		2012		2011
		$m		$m		$m		$m		$m		$m		$m
Personal		374,082		(20,232)		760		393,554		410,728		415,093		393,625
- first lien residential mortgages		274,511		(13,697)		1,684		286,524		299,875		301,862		278,963
- other personal3		99,571		(6,535)		(924)		107,030		110,853		113,231		114,662
Corporate and commercial		499,513		(30,496)		(12,616)		542,625		545,981		517,120		478,064
- manufacturing		95,858		(8,043)		(3,085)		106,986		113,850		112,149		96,054
- international trade and services		159,019		(10,148)		(11,624)		180,791		184,668		169,389		152,709
- commercial real estate		67,926		(3,483)		(1,884)		73,293		74,846		76,760		73,941
- other property-related		53,464		(1,256)		2,333		52,387		44,832		40,532		39,539
- government		7,455		(354)		1,666		6,143		7,277		10,785		11,079
- other commercial4		115,791		(7,212)		(22)		123,025		120,508		107,505		104,742
Financial		150,833		(9,577)		(2,606)		163,016		170,627		164,013		184,035
- non-bank financial institutions		60,414		(2,210)		11,806		50,818		50,523		46,871		44,832
- banks		90,419		(7,367)		(14,412)		112,198		120,104		117,142		139,203
Total gross loans and advances		1,024,428		(60,305)		(14,462)		1,099,195		1,127,336		1,096,226		1,055,724
		23,758
Impaired loans and advances to customers		23,758		(1,868)		(3,657)		29,283		36,428		38,671		41,584
Impairment allowances on loans and advances to customers		9,555		(1,189)		(1,593)		12,337		15,143		16,112		17,511
Loan impairment charge		3,592		(682)		219		4,055		6,048		8,160		11,505
- new allowances net of allowance releases		4,400		(821)		211		5,010		7,344		9,306		12,931
- recoveries		(808)		139		8		(955)		(1,296)		(1,146)		(1,426)

For footnotes, see page 191.

The personal lending currency effect on gross loans and advances of $20bn was made up as follows: Europe $10bn, Asia $4.2bn, Latin America $2.5bn and North America $3.3bn. The wholesale lending currency effect on gross loans and advances of $40bn was made up as follows: Europe $17bn, Asia $8.7bn, Latin America $11bn, North America $2.7bn and Middle East and North Africa $0.7bn.

In the following two tables, negative percentage numbers are favourable, positive numbers are unfavourable.

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

		31 December                   2014      as reported		Currency translation adjustment18		31 December              2014 at 31 December                  2015         exchange                  rates		Movement        - constant            currency                   basis		31 December                  2015     as reported		Reported              change		Constant           currency              change
		$m		$m		$m		$m		$m		%		%
Impaired loans
Europe		10,242		(748)		9,494		183		9,677		(5.5)		1.9
Asia		2,048		(118)		1,930		445		2,375		16.0		23.1
Middle East and North Africa		1,981		(19)		1,962		(196)		1,766		(10.9)		(10.0)
North America		11,694		(71)		11,623		(2,693)		8,930		(23.6)		(23.2)
Latin America		3,365		(913)		2,452		(1,422)		1,030		(69.4)		(58.0)
		29,330		(1,869)		27,461		(3,683)		23,778		(18.9)		(13.4)
Impairment allowances
Europe		4,455		(364)		4,091		(222)		3,869		(13.2)		(5.4)
Asia		1,356		(64)		1,292		233		1,525		12.5		18.0
Middle East and North Africa		1,406		(11)		1,395		23		1,418		0.9		1.6
North America		2,640		(51)		2,589		(548)		2,041		(22.7)		(21.2)
Latin America		2,529		(702)		1,827		(1,107)		720		(71.5)		(60.6)
		12,386		(1,192)		11,194		(1,621)		9,573		(22.7)		(14.5)
Loan impairment charge
Europe		1,079		(134)		945		(236)		709		(34.3)		(25.0)
Asia		644		(27)		617		64		681		5.7		10.4
Middle East and North Africa		(1)		(1)		(2)		301		299		-		-
North America		300		(10)		290		179		469		56.3		61.7
Latin America		2,033		(510)		1,523		(89)		1,434		(29.5)		(5.8)
		4,055		(682)		3,373		219		3,592		(11.4)		6.5

For footnote, see page 191.

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

		31 December                  2014      as reported		Currency      translation     adjustment18		31 December              2014 at 31 December                   2015          exchange                  rates		Movement        - constant            currency                   basis		31 December                   2015     as reported		Reported              change		Constant           currency              change
		$m		$m		$m		$m		$m		%		%
Loan impairment charge
Europe		1,079		(134)		945		(236)		709		(34.3)		(25.0)
- new allowances		2,445		(303)		2,142		(97)		2,045		(16.4)		(4.5)
- releases		(1,062)		140		(922)		(26)		(948)		(10.7)		2.8
- recoveries		(304)		29		(275)		(113)		(388)		27.6		41.1
Asia		644		(27)		617		64		681		5.7		10.4
- new allowances		1,115		(61)		1,054		224		1,278		14.6		21.3
- releases		(318)		21		(297)		(135)		(432)		35.8		45.5
- recoveries		(153)		13		(140)		(25)		(165)		7.8		17.9
Middle East and North Africa		(1)		(1)		(2)		301		299		-		-
- new allowances		355		(7)		348		144		492		38.6		41.4
- releases		(314)		6		(308)		148		(160)		(49.0)		(48.1)
- recoveries		(42)		-		(42)		9		(33)		(21.4)		(21.4)
North America		300		(10)		290		179		469		56.3		61.7
- new allowances		908		(20)		888		(157)		731		(19.5)		(17.7)
- releases		(493)		8		(485)		299		(186)		(62.3)		(61.6)
- recoveries		(115)		2		(113)		37		(76)		(33.9)		(32.7)
Latin America		2,033		(510)		1,523		(89)		1,434		(29.5)		(5.8)
- new allowances		2,707		(674)		2,033		(239)		1,794		(33.7)		(11.8)
- releases		(333)		69		(264)		50		(214)		(35.7)		(18.9)
- recoveries		(341)		95		(246)		100		(146)		(57.2)		(40.7)
Total		4,055		(682)		3,373		219		3,592		(11.4)		6.5
- new allowances		7,530		(1,065)		6,465		(125)		6,340		(15.8)		(1.9)
- releases		(2,520)		244		(2,276)		336		(1,940)		(23.0)		(14.8)
- recoveries		(955)		139		(816)		8		(808)		(15.4)		(1.0)

For footnote, see page 191.

Loan impairment charges by industry sector over five years

		2015		2014		2013		2012		2011
		$m		$m		$m		$m		$m
Loan impairment charge/(release)
Personal		1,834		1,803		3,196		5,362		9,318
Corporate and commercial		1,769		2,256		2,974		2,802		2,114
Financial		(11)		(4)		(122)		(4)		73
Year ended 31 December		3,592		4,055		6,048		8,160		11,505

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

		2015		2014		2013		2012		2011
		%		%		%		%		%
New allowances net of allowance releases		0.48		0.53		0.81		1.00		1.34
Recoveries		(0.09)		(0.10)		(0.14)		(0.12)		(0.15)
Total charge for impairment losses		0.39		0.43		0.67		0.88		1.19
Amount written off net of recoveries		0.37		0.58		0.59		0.93		1.14

Movement in impairment allowances over five years

		2015		2014		2013		2012		2011
		$m		$m		$m		$m		$m
Impairment allowances at 1 January		12,386		15,201		16,169		17,636		20,241
Amounts written off		(4,194)		(6,379)		(6,655)		(9,812)		(12,480)
- personal		(2,707)		(3,733)		(4,367)		(6,905)		(10,431)
- corporate and commercial		(1,473)		(2,425)		(2,229)		(2,677)		(2,009)
- financial		(14)		(221)		(59)		(230)		(40)
Recoveries of amounts written off in previous years		808		955		1,296		1,146		1,426
- personal		681		818		1,097		966		1,175
- corporate and commercial		124		128		198		172		242
- financial		3		9		1		8		9
Loan impairment charge		3,592		4,055		6,048		8,160		11,505
Exchange and other movements11		(3,019)		(1,446)		(1,657)		(961)		(3,056)
Impairment allowances at 31 December		9,573		12,386		15,201		16,169		17,636
Impairment allowances
- individually assessed		5,420		6,244		7,130		6,629		6,662
- collectively assessed		4,153		6,142		8,071		9,540		10,974
Impairment allowances at 31 December		9,573		12,386		15,201		16,169		17,636
		%		%		%		%		%
Amount written off net of recoveries as a percentage of average gross loans and advances to customers		0.4		0.6		0.6		1.0		1.2

For footnote, see page 191.

Gross loans and advances to customers by country

		First lien residential mortgages $m		Other                   personal3                              $m		Property-                      related                              $m		Commercial,           international     trade and other                              $m		Total                             $m
Europe		125,544		44,982		33,579		191,807		395,912
UK		117,346		20,797		25,700		149,327		313,170
France		3,606		12,130		6,070		20,380		42,186
Germany		4		203		347		7,941		8,495
Switzerland		511		8,045		224		834		9,614
Other		4,077		3,807		1,238		13,325		22,447
Asia		94,606		38,101		67,577		157,616		357,900
Hong Kong		60,943		24,389		50,825		80,609		216,766
Australia		9,297		726		1,592		6,448		18,063
India		1,248		431		637		5,728		8,044
Indonesia		56		346		71		4,965		5,438
Mainland China		5,716		1,645		6,185		23,703		37,249
Malaysia		2,792		3,113		1,993		4,947		12,845
Singapore		7,743		5,392		3,334		11,021		27,490
Taiwan		3,866		629		126		5,291		9,912
Other		2,945		1,430		2,814		14,904		22,093
Middle East and North Africa (excluding Saudi Arabia)		2,258		4,447		2,598		21,991		31,294
Egypt		1		549		104		2,097		2,751
UAE		1,854		2,286		1,833		14,199		20,172
Other		403		1,612		661		5,695		8,371
North America		50,117		8,069		16,014		56,690		130,890
US		34,382		4,813		11,435		42,439		93,069
Canada		14,418		3,029		4,315		13,490		35,252
Other		1,317		227		264		761		2,569
Latin America		1,986		3,972		1,622		10,433		18,013
Mexico		1,881		2,828		1,498		7,844		14,051
Other		105		1,144		124		2,589		3,962
At 31 December 2015		274,511		99,571		121,390		438,537		934,009
Europe		131,000		47,531		35,313		200,313		414,157
UK		123,239		21,023		25,927		156,577		326,766
France		2,914		12,820		7,341		21,834		44,909
Germany		6		212		304		7,275		7,797
Switzerland		298		8,149		225		614		9,286
Other		4,543		5,327		1,516		14,013		25,399
Asia		93,147		36,368		70,057		164,739		364,311
Hong Kong		56,656		22,891		52,208		82,362		214,117
Australia		9,154		815		2,130		6,360		18,459
India		1,235		285		613		5,099		7,232
Indonesia		64		469		202		5,476		6,211
Mainland China		4,238		1,981		6,606		24,875		37,700
Malaysia		5,201		1,750		1,988		5,217		14,156
Singapore		9,521		5,878		4,210		11,951		31,560
Taiwan		3,920		626		118		7,057		11,721
Other		3,158		1,673		1,982		16,342		23,155
Middle East and North Africa (excluding Saudi Arabia)		2,647		3,924		2,246		21,633		30,450
Egypt		1		510		98		2,272		2,881
UAE		2,263		1,782		1,545		13,814		19,404
Other		383		1,632		603		5,547		8,165
North America		55,577		9,823		15,492		51,535		132,427
US		37,937		5,482		11,461		38,632		93,512
Canada		16,236		4,085		3,708		11,825		35,854
Other		1,404		256		323		1,078		3,061
Latin America		4,153		9,384		2,572		29,543		45,652
Mexico		1,967		2,642		1,336		9,503		15,448
Other		2,186		6,742		1,236		20,040		30,204
Included in Other: Brazil		2,067		5,531		1,077		16,814		25,489
At 31 December 2014		286,524		107,030		125,680		467,763		986,997

For footnote, see page 191.

 

END

 

 

ACSUWAVRNKAOAAR