Dubai and the UAE
In November 2009, Dubai World, a Dubai government-owned firm, requested a creditor standstill on its debt repayments and those of some of its subsidiaries. The announcement prompted a significant sell-off in markets across the world. Abu Dhabi announced that it would offer additional assistance to Dubai, providing liquidity and a platform for the debt restructuring process to continue.
HSBC, as the longest-established bank in the region, has a longstanding relationship with the government of Dubai and its related entities. HSBC has contributed from the earliest days to the development of Dubai as an emerging economy and continues to maintain supportive relationships with all parts of the UAE. HSBC will continue to offer its support to the government of Dubai in achieving a workable resolution of its current liquidity problems.
HSBC's exposure within Dubai is acceptably spread and is primarily to operating companies within the emirate. HSBC is playing a prominent role in restructuring indebtedness in order to help restore confidence in the region.
In the UAE, gross customer loans and advances fell from US$18 billion at 31 December 2008 to US$15 billion at 31 December 2009. Although the Middle East represents 2 per cent of the Group's balance sheet, it remains a region to which HSBC is strongly committed.
Sovereign counterparties
The overall quality of the Group's sovereign risk exposure remained satisfactory during 2009, with the large majority of both in-country and cross-border limits extended to countries with strong internal credit risk ratings. There was no significant downward shift in the quality of the exposure although, given the higher debt and weaker fiscal positions of many Western governments, there is increased potential for deterioration in sovereign risk profiles before budgetary re-balancing is achieved. In order to manage this, the Group regularly updates its assessments of higher-risk countries and adjusts its risk appetite to reflect such changes.
Leveraged financing
The Group operates a controlled approach towards leveraged finance origination with caps on underwriting and final hold levels in place. This puts a premium on successfully distributing risk in order to create capacity under the caps. Group exposure to leveraged finance transactions remained modest in relation to overall exposure.
(Unaudited)
HSBC provides a broad range of secured and unsecured personal lending products to meet customer needs. Given the diverse nature of the markets in which HSBC operates, the range is not standardised across all countries but is tailored to meet the demands of individual markets while using appropriate distribution channels and, wherever possible, standard global IT platforms.
Personal lending includes advances to customers for asset purchase, such as residential property and motor vehicles, where the loans are typically secured on the assets being acquired. HSBC also offers loans secured on existing assets, such as first and second liens on residential property; unsecured lending products such as overdrafts, credit cards and payroll loans; and debt consolidation loans which may be secured or unsecured.
In 2009, credit exposure in the personal lending portfolios continued to be affected by adverse global economic conditions, particularly increased unemployment levels and the restricted availability of refinancing which limited the ability of many customers to service financial obligations in line with contractual commitments. This led to delinquency levels and loan impairment charges remaining high, although management action in recent years to run off the US consumer finance exit portfolios and curtail originator activity helped reduce the overall impairment charge.
The commentary that follows is on an underlying basis.
At 31 December 2009, total personal lending was US$434 billion, a decline of 6 per cent from 31 December 2008, driven by run-off in the US consumer finance exit portfolios. Within Personal Financial Services total loan impairment charges and other credit risk provisions of US$19.9 billion were 3 per cent lower than in 2008 and were concentrated in North America (US$14.4 billion) and, to a lesser extent, Europe (US$2.0 billion) and Latin America (US$2.0 billion).
In early March 2009, HSBC Finance announced the discontinuation of new customer account originations for all products offered by its Consumer Lending business and closed approximately 800 Consumer Lending branch offices. In November 2009, it entered into an agreement to sell its vehicle loan servicing operations to Santander Consumer USA Inc. ('SC USA') as well as an aggregate US$1.0 billion of vehicle finance loans, both delinquent and non-delinquent. Under a separate agreement, SC USA will service the remainder of HSBC's US vehicle finance portfolio. The transaction is currently expected to close in the first quarter of 2010.
The Consumer Lending business historically provided real estate secured, vehicle finance and personal non-credit card loans. Loans were offered with both revolving and closed-end terms and with fixed or variable interest rates, and were originated through branches, direct mail and the internet. Prior to the first quarter of 2007, HSBC Finance's Mortgage Services business acquired loans from correspondent lenders and, before September 2007, also originated loans sourced through mortgage brokers. The vehicle finance business originated vehicle loans through its dealer and direct-to-consumer origination channels and through its 'autos-in-branches' programme in the Consumer Lending branch offices, until these originations were discontinued.
In December 2009, HSBC Finance revised the write-off period for its real estate secured and Consumer Lending unsecured portfolios in order to reflect changed customer behaviour. As a consequence of this, real estate secured balances are now written down to net realisable value generally no later than the end of the month in which the account becomes 180 days delinquent. Similarly, for Consumer Lending unsecured products, balances are now written off no later than the end of the month in which the account becomes 180 days delinquent. This change in write-off period was reflected in lower recoverable balances and lower impairment reserves at 31 December 2009.
Total US personal lending at 31 December 2009 stood at US$135 billion, a decline of 21 per cent compared with the end of 2008, as HSBC ran off certain portfolios in the consumer finance business and improved the credit quality of the Card and Retail Services portfolio through tightening underwriting criteria.
Residential mortgage lending balances in the US declined by 19 per cent to US$66 billion, driven by the decision to close all Consumer Lending branches and run off the legacy consumer finance portfolios. The decrease in balances included a US$2.0 billion reduction relating to the revised write-off period referred to above and the sale of US$4.5 billion of prime mortgage loans in HSBC Bank USA. US mortgage lending is discussed in greater detail on page 218.
Total personal lending fell by 6 per cent in 2009. In the US, personal lending was reduced by 21 per cent.
Other personal lending in the US fell by 23 per cent to US$69 billion, partly due to the run-off in the unsecured Consumer Lending portfolio. Credit card balances also declined, by 16 per cent to US$39 billion, due to lower consumer spending and steps taken by the Group to mitigate risk, including tightening initial credit lines and sales authorisation criteria, closing inactive accounts, decreasing credit lines, restricting underwriting criteria, limiting cash access, reducing marketing expenditure and, in the private label portfolio, ending certain third-party relationships. HSBC ceased originations in those segments of the cards portfolio most affected by the current housing and economic downturn. The decline in balances included US$1.3 billion relating to the revised write-off period for second lien mortgages and other unsecured personal lending.
The Cards business remains a continuing business in the US for HSBC, comprising both general and private label portfolios. The general Cards portfolio has approximately US$23 billion in loans. According to The Nilson Report, HSBC is the sixth largest issuer of MasterCard and Visa credit cards in the US, based on loan balances.
The Private Label Credit Card ('PLCC') business, with balances of US$15.6 billion, has approximately 14 million active customer accounts and 32 active merchant relationships. The Nilson Report lists HSBC's private label servicing portfolio as the third largest portfolio in the US. At 31 December 2009, PLCC loans were sourced from the following business lines: approximately 45 per cent in consumer electronics, 24 per cent in power sport vehicles, 16 per cent in department stores, and 7 per cent of loans in furniture stores. The private label financing products are generated through merchant retail locations, merchant catalogue and telephone sales, and direct mail and internet applications.
Motor vehicle finance balances in the US declined by 47 per cent to US$5.8 billion, reflecting the 2008 decision to run off the portfolio in HSBC Finance. As noted above, in November 2009, HSBC agreed to sell the vehicle finance loan servicing operation and US$1.0 billion of associated loans.
Total personal lending
(Unaudited)
|
UK |
|
Rest of Europe |
|
US9 |
|
Rest of North America |
|
Other regions10 |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages2 ................................. |
100,667 |
|
9,205 |
|
65,784 |
|
20,807 |
|
64,206 |
|
260,669 |
|
|
|
|
|
|
|
|
|
|
|
|
Other personal lending2 ............................... |
29,018 |
|
23,672 |
|
69,275 |
|
8,068 |
|
43,504 |
|
173,537 |
- motor vehicle finance ........................... |
- |
|
65 |
|
5,771 |
|
99 |
|
6,378 |
|
12,313 |
- credit cards ........................................... |
12,427 |
|
1,820 |
|
39,374 |
|
1,118 |
|
13,319 |
|
68,058 |
- second lien mortgages ........................... |
1,068 |
|
2 |
|
11,786 |
|
695 |
|
472 |
|
14,023 |
- other .................................................... |
15,523 |
|
21,785 |
|
12,344 |
|
6,156 |
|
23,335 |
|
79,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total personal lending2 ................................ |
129,685 |
|
32,877 |
|
135,059 |
|
28,875 |
|
107,710 |
|
434,206 |
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages2 ............................. |
(151) |
|
(41) |
|
(4,416) |
|
(7) |
|
(233) |
|
(4,848) |
|
|
|
|
|
|
|
|
|
|
|
|
Other personal lending2 ........................... |
(1,443) |
|
(552) |
|
(7,691) |
|
(206) |
|
(2,349) |
|
(12,241) |
- motor vehicle finance ....................... |
- |
|
(7) |
|
(211) |
|
(1) |
|
(351) |
|
(570) |
- credit cards ....................................... |
(524) |
|
(233) |
|
(3,895) |
|
(42) |
|
(854) |
|
(5,548) |
- second lien mortgages ....................... |
(79) |
|
- |
|
(1,608) |
|
(56) |
|
- |
|
(1,743) |
- other ................................................ |
(840) |
|
(312) |
|
(1,977) |
|
(107) |
|
(1,144) |
|
(4,380) |
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment allowances on personal |
(1,594) |
|
(593) |
|
(12,107) |
|
(213) |
|
(2,582) |
|
(17,089) |
|
|
|
|
|
|
|
|
|
|
|
|
- as a percentage of total personal lending |
1.2% |
|
1.8% |
|
9.0% |
|
0.7% |
|
2.4% |
|
3.9% |
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2008 |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages .................................. |
78,346 |
|
8,921 |
|
80,946 |
|
17,437 |
|
57,687 |
|
243,337 |
|
|
|
|
|
|
|
|
|
|
|
|
Other personal lending ................................ |
29,274 |
|
24,991 |
|
89,562 |
|
7,589 |
|
45,474 |
|
196,890 |
- motor vehicle finance ........................... |
- |
|
99 |
|
10,864 |
|
137 |
|
6,201 |
|
17,301 |
- credit cards ........................................... |
11,215 |
|
1,695 |
|
46,972 |
|
1,469 |
|
13,426 |
|
74,777 |
- second lien mortgages ........................... |
1,160 |
|
2 |
|
14,614 |
|
803 |
|
503 |
|
17,082 |
- other .................................................... |
16,899 |
|
23,195 |
|
17,112 |
|
5,180 |
|
25,344 |
|
87,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total personal lending ................................. |
107,620 |
|
33,912 |
|
170,508 |
|
25,026 |
|
103,161 |
|
440,227 |
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages .............................. |
(10) |
|
(22) |
|
(5,109) |
|
(4) |
|
(174) |
|
(5,319) |
|
|
|
|
|
|
|
|
|
|
|
|
Other personal lending ............................. |
(1,197) |
|
(441) |
|
(9,911) |
|
(192) |
|
(1,909) |
|
(13,650) |
- motor vehicle finance ....................... |
- |
|
(5) |
|
(426) |
|
(1) |
|
(175) |
|
(607) |
- credit cards ....................................... |
(385) |
|
(165) |
|
(4,255) |
|
(51) |
|
(805) |
|
(5,661) |
- second lien mortgages ....................... |
(50) |
|
- |
|
(2,397) |
|
(41) |
|
- |
|
(2,488) |
- other ................................................ |
(762) |
|
(271) |
|
(2,833) |
|
(99) |
|
(929) |
|
(4,894) |
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment allowances on personal |
(1,207) |
|
(463) |
|
(15,020) |
|
(196) |
|
(2,083) |
|
(18,969) |
|
|
|
|
|
|
|
|
|
|
|
|
- as a percentage of total personal lending |
1.1% |
|
1.4% |
|
8.8% |
|
0.8% |
|
2.0% |
|
4.3% |
For footnotes, see page 291.
Total personal lending in the UK increased by 8 per cent to US$130 billion, driven by growth in residential mortgage lending at HSBC Bank and First Direct as HSBC grew market share in UK mortgage lending (discussed in greater detail below). Other personal lending in the UK declined by 11 per cent to US$29 billion, primarily due to reduced customer demand for credit.
In Latin America, gross loans and advances to personal customers declined by 9 per cent to US$21 billion. Residential mortgage lending increased by 6 per cent, while other personal lending fell by 13 per cent. The reduction in other personal lending was largely in Mexico, where balances decreased by 30 per cent to US$2.7 billion following management action to mitigate risk and restrict originations in the credit cards portfolio to address the adverse credit experience which developed in 2008. Similarly, in Brazil, personal lending declined by 6 per cent to US$11 billion at 31 December 2009 as steps were taken to improve credit quality by tightening underwriting criteria.
For an analysis of loan impairment allowances and impaired loans, see page 230.
Mortgage lending
The Group offers a wide range of mortgage products designed to meet customer needs, including capital repayment mortgages subject to fixed or variable interest rates and products designed to meet demand for housing loans with more flexible payment structures. HSBC underwrites both first lien residential mortgages and loans secured on second lien mortgages.
Interest-only mortgages are those for which customers make regular payments of interest during the life of the loan and repay the principal from the sale of their home or alternative sources of funds. Introductory interest-only mortgages are typically where the interest-only element is for a fixed term at the start of the loan, after which principal repayments commence.
Affordability mortgages include all products where the customers' monthly payments are set at a low initial rate, either variable or fixed, before resetting to a higher rate once the introductory period is over. These include adjustable-rate mortgages ('ARM's) and loans on which the interest rate is periodically changed based on a reference price.
Offset mortgages are products linked to a current or savings account, where interest earned is used to repay mortgage debt.
US mortgage lending
US mortgage lending, comprising residential mortgage and second lien lending, made up 18 per cent of the Group's gross loans and advances to personal customers at 31 December 2009.
Balances declined by 19 per cent compared with 2008 to US$78 billion, including a reduction of US$2.3 billion attributed to the revision of the write-off period referred to above. The decrease was driven by the continued run-off of the Mortgage Services portfolio and actions taken since mid-2007 to reduce risk and discontinue, from the first quarter of 2009, new originations in the Consumer Lending business. In addition, HSBC Bank USA sold US$4.5 billion of prime mortgage loans in 2009 on top of normal sale activity. The overall rate of decline in real-estate secured balances continued to slow due to a reduction in loan prepayments, as the continuing weakness in the US economy limited the number of refinancing options available to customers.
Including the US$2.3 billion decline in balances due to the acceleration of write-offs, mortgage lending in HSBC Finance fell from US$74 billion at 31 December 2008 to US$61 billion at 31 December 2009 as set out in the table on page 221. Balances outstanding in the Consumer Lending business were US$40 billion at 31 December 2009, of which approximately 95 per cent were fixed rate loans and 88 per cent were first lien. The Mortgage Services business had US$22 billion in outstanding balances at 31 December 2009, of which approximately 62 per cent were fixed rate loans and 86 per cent were first lien.
Mortgage lending in the US fell by 19 per cent to US$78 billion and rose in the UK by 15 per cent to US$102 billion.
As a consequence of the turmoil in mortgage lending markets in the US, there was a significant amount of federal and state legislative and regulatory focus on this activity in 2009. Increased regulatory oversight over residential mortgage lenders occurred at both state and federal level. Several regulators, legislators and other governmental bodies promoted particular views of appropriate or 'model' loan modification programmes, loan products, and foreclosure and loss-mitigation practices. HSBC Finance has developed a modification programme that employs procedures which are believed to be responsive to customers' needs, and continues to enhance and refine these practices as other programmes are announced and the results of customer assistance efforts are evaluated. It continues to be active in various initiatives to help people keep their homes, and participates in local events sponsored by industry participants, regulators and consumer advocates.
The mortgage portfolios in both Consumer Lending and Mortgage Services are now expected to remain on the balance sheet for a longer period than was assumed when they were originated. Reduced mortgage prepayment rates and higher levels of loan modifications have had the effect of extending the projected average life of these loan portfolios. As a result, both net interest income and asset valuations have increasingly become exposed to rising interest rates as the average life of funding has declined while the average life of mortgage asset portfolios has grown.
In HSBC Bank USA, mortgage lending declined from US$22 billion at 31 December 2008 to US$16 billion at 31 December 2009 following initiatives taken to reduce risk. This included the ongoing sale of the majority of new residential loan originations to government-sponsored enterprises and private investors and, in 2009, additional sales of US$4.5 billion of prime adjustable and fixed rate residential mortgage loans. At the end of 2009, approximately 32 per cent of the HSBC Bank USA mortgage portfolio were fixed rate loans and 75 per cent were first lien.
Further discussion of credit trends in the US mortgage lending portfolio and the steps taken to mitigate risk is provided in 'US personal lending - credit quality' on page 221.
UK mortgage lending
Total mortgage lending in the UK increased by 15 per cent on a constant currency basis to US$102 billion at 31 December 2009, with HSBC increasing its market share of UK mortgage lending through the success of the RateMatcher promotion and other campaigns within the UK secured lending growth strategy.
HSBC was able both to grow market share and maintain high credit quality despite adverse UK market conditions because of the consistent application of conservative underwriting standards and constraints on some competitors in growing their lending exposure. Almost all new business originations are made through HSBC's own salesforce and mainly to existing customers holding a current or savings account relationship with the Group. HSBC does not accept self-certification of income and restricts lending to purchase residential property for rental.
UK mortgage impairments and delinquency balances deteriorated slightly but remained at relatively low levels despite higher unemployment. House prices recovered, and the portfolio remained well secured, reflecting the continuing benefit from management decisions taken in 2007 and 2008 to reduce market share when property prices were rising to unsustainably high levels. In the HSBC Bank Mortgage Portfolio, excluding First Direct, the percentage of loans that were 30 days or more delinquent declined from 1.8 per cent at 31 December 2008 to 1.6 per cent in 2009. The average loan-to-value ratio for new business in this portfolio in 2009 was 54.6 per cent, a decrease of 4.2 percentage points on the previous year.
Interest-only mortgage balances increased by 21 per cent to US$45 billion compared with 2008, driven by an increase in balances at First Direct following marketing initiatives, and competitive pricing. The majority of these mortgages were offset mortgages linked to a current account for which delinquency rates remained at very low levels.
Second lien balances, which were all held by HFC Bank Ltd ('HFC') in the UK, declined by 17 per cent to US$1.1 billion at 31 December 2009 as the portfolio was placed in run-off during the year. Within this portfolio, two months or more delinquency rates increased from 6 per cent at 31 December 2008 to 6.6 per cent at 31 December 2009, despite a decline in delinquencies in dollar terms as balances declined at a faster pace.
The following table shows the levels of mortgage lending products in the various portfolios in the US, the UK and the rest of the HSBC Group.
Mortgage lending products (Unaudited) |
|||||||||||
|
UK |
|
Rest of Europe |
|
US9 |
|
Rest of North America |
Other regions10 |
|
Total |
|
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages11 ....................................... |
100,667 |
|
9,205 |
|
65,784 |
|
20,807 |
|
64,206 |
|
260,669 |
Second lien mortgages11 ...................................... |
1,068 |
|
2 |
|
11,786 |
|
695 |
|
472 |
|
14,023 |
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage lending11 .................................... |
101,735 |
|
9,207 |
|
77,570 |
|
21,502 |
|
64,678 |
|
274,692 |
|
|
|
|
|
|
|
|
|
|
|
|
Second lien as a percentage of total mortgage lending ............................................................ |
1.0% |
|
- |
|
15.2% |
|
3.2% |
|
0.7% |
|
5.1% |
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages11 ................................... |
(151) |
|
(41) |
|
(4,416) |
|
(7) |
|
(233) |
|
(4,848) |
Second lien mortgages11 ................................... |
(79) |
|
- |
|
(1,608) |
|
(56) |
|
- |
|
(1,743) |
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment allowances on mortgage lending ........................................................ |
(230) |
|
(41) |
|
(6,024) |
|
(63) |
|
(233) |
|
(6,591) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-only (including endowment) mortgages .. |
45,471 |
|
- |
|
- |
|
1,154 |
|
1,127 |
|
47,752 |
Affordability mortgages, including ARMs ............ |
2,681 |
|
1,084 |
|
21,024 |
|
232 |
|
5,921 |
|
30,942 |
Other .................................................................. |
144 |
|
- |
|
- |
|
- |
|
147 |
|
291 |
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-only and affordability mortgages .. |
48,296 |
|
1,084 |
|
21,024 |
|
1,386 |
|
7,195 |
|
78,985 |
|
|
|
|
|
|
|
|
|
|
|
|
- as a percentage of total mortgage lending ..... |
47.5% |
|
11.8% |
|
27.1% |
|
6.4% |
|
11.1% |
|
28.8% |
|
|
|
|
|
|
|
|
|
|
|
|
Negative equity mortgages12 ................................ |
6,412 |
|
- |
|
20,229 |
|
163 |
|
488 |
|
27,292 |
Other loan-to-value ratios greater than 90 per cent13 .............................................................. |
10,522 |
|
- |
|
13,695 |
|
1,887 |
|
1,451 |
|
27,555 |
|
|
|
|
|
|
|
|
|
|
|
|
Total negative equity and other mortgages .......... |
16,934 |
|
- |
|
33,924 |
|
2,050 |
|
1,939 |
|
54,847 |
|
|
|
|
|
|
|
|
|
|
|
|
- as a percentage of total mortgage lending ..... |
16.6% |
|
- |
|
43.7% |
|
9.5% |
|
3.0% |
|
20.0% |
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2008 |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages .......................................... |
78,346 |
|
8,921 |
|
80,946 |
|
17,437 |
|
57,687 |
|
243,337 |
Second lien mortgages ......................................... |
1,160 |
|
2 |
|
14,614 |
|
803 |
|
503 |
|
17,082 |
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage lending ....................................... |
79,506 |
|
8,923 |
|
95,560 |
|
18,240 |
|
58,190 |
|
260,419 |
|
|
|
|
|
|
|
|
|
|
|
|
Second lien as a percentage of total mortgage lending ............................................................ |
1.5% |
|
- |
|
15.3% |
|
4.4% |
|
0.9% |
|
6.6% |
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages ...................................... |
(10) |
|
(22) |
|
(5,109) |
|
(4) |
|
(174) |
|
(5,319) |
Second lien mortgages ..................................... |
(50) |
|
- |
|
(2,397) |
|
(41) |
|
- |
|
(2,488) |
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment allowances on mortgage lending ........................................................ |
(60) |
|
(22) |
|
(7,506) |
|
(45) |
|
(174) |
|
(7,807) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-only (including endowment) mortgages .. |
33,782 |
|
553 |
|
- |
|
1,427 |
|
993 |
|
36,755 |
Affordability mortgages, including ARMs ............ |
4,740 |
|
824 |
|
28,571 |
|
311 |
|
4,166 |
|
38,612 |
Other .................................................................. |
153 |
|
- |
|
- |
|
- |
|
82 |
|
235 |
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-only and affordability mortgages .. |
38,675 |
|
1,377 |
|
28,571 |
|
1,738 |
|
5,241 |
|
75,602 |
|
|
|
|
|
|
|
|
|
|
|
|
- as a percentage of total mortgage lending ..... |
48.6% |
|
15.4% |
|
29.9% |
|
9.5% |
|
9.0% |
|
29.0% |
|
|
|
|
|
|
|
|
|
|
|
|
Negative equity mortgages12 ................................ |
3,268 |
|
- |
|
21,904 |
|
86 |
|
1,635 |
|
26,893 |
Other loan-to-value ratios greater than 90 per cent13 .............................................................. |
8,978 |
|
107 |
|
19,009 |
|
1,737 |
|
2,122 |
|
31,953 |
|
|
|
|
|
|
|
|
|
|
|
|
Total negative equity and other mortgages .......... |
12,246 |
|
107 |
|
40,913 |
|
1,823 |
|
3,757 |
|
58,846 |
|
|
|
|
|
|
|
|
|
|
|
|
- as a percentage of total mortgage lending ..... |
15.4% |
|
1.2% |
|
42.8% |
|
10.0% |
|
6.5% |
|
22.6% |
For footnotes, see page 291.
HSBC Finance held approximately US$61 billion of residential mortgage and second lien loans and advances to personal customers secured on real estate at 31 December 2009, 14 per cent of the Group's gross loans and advances to personal customers. A breakdown of these balances by portfolio was as follows:
HSBC Finance US mortgage lending14 (Unaudited) |
|
|
|
|||||||||||||
|
At 31 December 2009 |
|
At 31 December 2008 |
|
||||||||||||
|
Mortgage |
|
Consumer Lending |
|
Other mortgage lending |
|
Total |
|
Mortgage |
|
Consumer Lending |
|
Other mortgage lending |
|
Total |
|
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate15 .............. |
13,596 |
|
37,639 |
|
98 |
|
51,333 |
|
16,288 |
|
43,873 |
|
91 |
|
60,252 |
|
Other15 ..................... |
8,168 |
|
1,867 |
|
6 |
|
10,041 |
|
11,339 |
|
2,324 |
|
35 |
|
13,698 |
|
Adjustable-rate ...... |
7,070 |
|
1,867 |
|
- |
|
8,937 |
|
9,530 |
|
2,324 |
|
33 |
|
11,887 |
|
Interest-only ......... |
1,098 |
|
- |
|
6 |
|
1,104 |
|
1,809 |
|
- |
|
2 |
|
1,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,764 |
|
39,506 |
|
104 |
|
61,374 |
|
27,627 |
|
46,197 |
|
126 |
|
73,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First lien15 ................ |
18,710 |
|
34,913 |
|
77 |
|
53,700 |
|
23,188 |
|
40,334 |
|
93 |
|
63,615 |
|
Second lien15 ............. |
3,054 |
|
4,593 |
|
27 |
|
7,674 |
|
4,439 |
|
5,863 |
|
33 |
|
10,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,764 |
|
39,506 |
|
104 |
|
61,374 |
|
27,627 |
|
46,197 |
|
126 |
|
73,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stated income16 ........ |
3,905 |
|
- |
|
- |
|
3,905 |
|
5,667 |
|
- |
|
- |
|
5,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances ............. |
2,419 |
|
3,167 |
|
1 |
|
5,587 |
|
3,819 |
|
3,403 |
|
1 |
|
7,223 |
|
- as a percentage of total mortgage lending .................. |
11.1% |
|
8.0% |
|
1.0% |
|
9.1% |
|
13.8% |
|
7.4% |
|
0.8% |
|
9.8% |
|
For footnotes, see page 291.
(Unaudited)
During 2009, challenging economic conditions in the US continued, marked by further declines in the housing market, rising unemployment, tight credit conditions and reduced economic growth. Although the economic recession continued to deepen into the first half of 2009, signs of stabilisation and improvement began to appear in the second half of the year. While the ongoing financial market disruption continued to affect credit and liquidity throughout the year, an improvement in conditions which began in the second quarter and continued through the rest of the year, strengthened liquidity and narrowed credit spreads. The recovery in market confidence stemmed largely from various government actions taken to restore faith in the capital markets and stimulate consumer spending, and success in these initiatives is bolstering consumer and business sentiment. The pace of job losses eased in the second half of 2009, and this helped the housing market, though the first-time homebuyer tax credit and the low interest rates were the main forces driving up home sales and shrinking inventories of unsold properties. This resulted in some house price stabilisation in the latter half of 2009, particularly in the middle and lower price sector.
US unemployment rates, which have been a major factor in the deterioration of credit quality in the country, were 10 per cent in December 2009, an increase of 260 basis points since December 2008. Unemployment rates in 16 states were greater than the US national average and unemployment rates in 10 states were at or above 11 per cent, including California and Florida, with more than 5 per cent of HSBC Finance's total loan balances.
HSBC Finance: geographical concentration of US lending14,17
(Unaudited)
|
Mortgage lending |
|
Other personal lending |
|
|
||||
|
total lending |
|
total mortgage lending |
|
total lending |
|
total other personal lending |
|
percentage of total lending |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
|
|
|
|
|
|
|
|
California ................................................................. |
6 |
|
11 |
|
5 |
|
11 |
|
11 |
New York ................................................................... |
3 |
|
7 |
|
3 |
|
7 |
|
7 |
Florida ....................................................................... |
3 |
|
7 |
|
3 |
|
6 |
|
6 |
Texas .......................................................................... |
2 |
|
4 |
|
4 |
|
8 |
|
6 |
Pennsylvania ............................................................ |
3 |
|
6 |
|
2 |
|
5 |
|
5 |
Ohio ........................................................................... |
3 |
|
5 |
|
2 |
|
5 |
|
5 |
For footnotes, see page 291.
Mortgage lending
In line with its exit strategy for non-prime real estate secured mortgage lending, HSBC continued to reduce mortgage lending exposure in the US and balances declined from US$96 billion to US$78 billion as the portfolios ran off.
Although delinquency increased during 2009, credit quality deteriorated at a slower rate than in previous years as the effect of higher unemployment was not as severe as expected due to actions previously taken by HSBC to reduce risk in the loan portfolio.
Following the revision of the write-off period described on page 205, two months and over delinquent balances in the real estate secured portfolios of HSBC Finance decreased in dollar terms but, excluding the effects of the change, they rose. Delinquent balances also increased in HSBC Bank USA. Increased delinquency reflected portfolio seasoning in an environment of continuing weakness in the housing market and diminished availability of refinancing opportunities. In addition, delays to foreclosure caused by changes in some state government practices and backlogs in court proceedings resulted in balances that would otherwise have proceeded to foreclosure remaining reported as contractually delinquent.
Excluding the effects of revising the write-off period:
· delinquency in the Consumer Lending business increased, primarily in the 2006, 2007 and 2008 vintages of the first lien real estate secured portfolio. Two months or more delinquent balances rose from US$5.6 billion in 2008 to US$7.4 billion at 31 December 2009, and two months or more delinquency rates grew from 12.1 per cent to 18.2 per cent;
· two months or more delinquent balances in the Mortgage Services portfolio declined from US$4.7 billion in 2008 to US$4.5 billion at 31 December 2009 as the portfolio continued to season, and two months or more delinquency rates increased from 17 per cent in 2008 to 19.6 per cent at 31 December 2009 as balances declined at a faster pace than delinquencies.
At HSBC Bank USA, the level of dollar delinquency increased within the first lien prime residential mortgage and Home Equity mortgage loan portfolios, reflecting the weakened US economy, high unemployment and continued deterioration of the US housing market. Delinquency rates also rose, in part due to lower balances as mortgage portfolios were sold to third parties. In 2009, HSBC Bank USA sold US$4.5 billion of mortgage portfolios to third parties and it continued to sell the majority of new mortgage loan originations to government-sponsored enterprises and private investors. Two months or more delinquencies increased from 3.4 per cent to 7.5 per cent at 31 December 2009, as delinquency balances increased from US$0.7 billion to US$1.2 billion, while balances declined.
In HSBC Finance, loss rates on the sale of foreclosed properties were broadly stable throughout 2009 but were higher than those incurred in 2008 as house prices continued to fall. The number of properties foreclosed decreased, in part due to delays in foreclosure proceedings and the lengthening by certain states of the foreclosure process. HSBC continued to assist customers in restructuring their debts to avoid foreclosure, including by modifying their loans when it was decided that they could be serviced on revised terms. For further details, see 'HSBC Finance loan modifications and re-ageing' on page 224.
Second lien mortgage loans have a risk profile characterised by higher loan-to-value ratios because, in the majority of cases, the loans were taken out to complete the refinancing or purchase of properties. HSBC Finance has typically experienced loss on default for second lien loans approaching 100 per cent of the amount owing, as any equity in the property is initially applied to the first lien loan. Excluding the effects of the change to the write-off period, in the HSBC Finance Mortgage Services second lien portfolio, two months or more delinquency rates decreased to 17.3 per cent at 31 December 2009 as the portfolio continued to run off. In the Consumer Lending second lien portfolio, two months or more delinquency rates increased to 18.6 per cent at 31 December 2009. In HSBC Bank USA, second lien two months or more delinquency rates increased from 3.5 per cent at 31 December 2008 to 4 per cent at 31 December 2009.
Stated-income mortgage balances in HSBC Finance declined from US$5.7 billion to US$3.9 billion as the portfolio continued to run off. The decline included US$0.2 million as a result of the revised write-off period referred to on page 205. These mortgages were underwritten on the basis of borrowers' representations of annual income and were not verified by supporting documents and, as a result, represent a higher than average level of risk. Two months or more delinquency rates decreased to 22.7 per cent at 31 December 2009. In HSBC Bank USA, stated-income balances decreased from US$2.2 billion to US$2.1 billion and delinquency rates increased from 8.7 per cent at 31 December 2008 to 11.1 per cent at 31 December 2009.
Affordability mortgages are those in which the customer's monthly payments are set at a low initial rate, either fixed or variable, before resetting to a higher rate once the initial introductory period is over. At 31 December 2009, HSBC Finance had US$10 billion of affordability mortgages, compared with US$14 billion at 31 December 2008, as the portfolio continued to run off. Excluding the effects of revising the write-off period, in dollar terms, delinquencies in this portfolio declined during 2009 but, as balances declined at a faster rate, delinquency rates increased. At HSBC Bank USA, affordability mortgage balances of US$11 billion at 31 December 2009 compared with US$15 billion at 31 December 2008.
Credit cards
In the US credit card portfolio, two months or more delinquent balances declined from US$2.0 billion to US$1.8 billion, while in percentage terms they rose from 6.8 per cent at 31 December 2008 to 7.4 per cent at 31 December 2009 as loan balances declined at a faster pace than delinquencies. In the private label cards portfolio, two months and over delinquent balances declined from US$0.7 billion to US$0.6 billion while contractual delinquency increased from 4 per cent at 31 December 2008 to 4.1 per cent at 31 December 2009. The decline of balances in both portfolios was a result of actions taken to tighten underwriting criteria in order to reduce the risk profile of the portfolio, lower customer spending and, in the private label business, terminate certain unprofitable partner relationships. The decrease in delinquency balances in both portfolios also reflected higher levels of personal bankruptcy filings.
Motor vehicle finance
In the vehicle finance portfolio, two months or more delinquencies declined from 5.0 per cent at 31 December 2008 to 4.6 per cent at 31 December 2009, despite the reduction in loan balances, as delinquencies fell at a faster pace.
Other personal lending
In dollar terms, delinquencies in the Consumer Lending unsecured portfolio remained lower, despite the weakened economic conditions, due to a higher number of personal bankruptcy filings which resulted in accounts moving to write-off more quickly, portfolio seasoning as the portfolio ran off, and the actions taken previously to tighten underwriting criteria in order to reduce the risk profile of the portfolio.
US personal lending - loan delinquency
The table below sets out the trends in two months and over contractual delinquencies in the US:
Two months and over contractual delinquency
(Unaudited)
|
Quarter ended |
||||||||||||||||
|
As reported 31 Dec 2009 |
Ex. period change 31 Dec 2009 |
|
30 Sep 2009 |
|
30 Jun |
|
31 Mar 2009 |
|
31 Dec 2008 |
|
30 Sep 2008 |
|
30 Jun |
|
31 Mar 2008 |
|
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
In Personal Financial Services in the US |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages |
9,551 |
|
11,519 |
|
10,834 |
|
10,070 |
|
9,892 |
|
9,236 |
|
7,061 |
|
5,984 |
|
5,757 |
Second lien mortgage lending ................ |
1,194 |
|
1,628 |
|
1,631 |
|
1,676 |
|
1,772 |
|
1,790 |
|
1,616 |
|
1,585 |
|
1,638 |
Vehicle finance ....... |
267 |
|
267 |
|
295 |
|
310 |
|
269 |
|
541 |
|
512 |
|
445 |
|
370 |
Credit card .............. |
1,798 |
|
1,798 |
|
1,834 |
|
1,864 |
|
1,992 |
|
2,029 |
|
1,871 |
|
1,700 |
|
1,782 |
Private label ........... |
622 |
|
622 |
|
639 |
|
636 |
|
659 |
|
679 |
|
606 |
|
590 |
|
591 |
Personal non-credit |
1,548 |
|
2,619 |
|
2,680 |
|
2,709 |
|
2,855 |
|
3,020 |
|
2,763 |
|
2,606 |
|
2,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ...................... |
14,980 |
|
18,453 |
|
17,913 |
|
17,265 |
|
17,439 |
|
17,295 |
|
14,429 |
|
12,910 |
|
12,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages |
14.54 |
|
17.03 |
|
15.39 |
|
13.89 |
|
12.82 |
|
11.42 |
|
8.23 |
|
6.65 |
|
5.96 |
Second lien mortgage lending ................ |
10.14 |
|
13.35 |
|
12.71 |
|
12.35 |
|
12.59 |
|
12.26 |
|
10.59 |
|
9.83 |
|
9.76 |
Vehicle finance ....... |
4.63 |
|
4.63 |
|
4.61 |
|
3.97 |
|
2.79 |
|
4.98 |
|
4.27 |
|
3.48 |
|
2.83 |
Credit card .............. |
7.38 |
|
7.38 |
|
7.28 |
|
7.25 |
|
7.14 |
|
6.76 |
|
6.18 |
|
5.57 |
|
5.81 |
Private label ........... |
4.12 |
|
4.12 |
|
4.38 |
|
4.08 |
|
4.28 |
|
3.99 |
|
3.72 |
|
3.65 |
|
3.66 |
Personal non-credit |
12.55 |
|
19.77 |
|
18.73 |
|
18.02 |
|
18.30 |
|
17.83 |
|
15.41 |
|
14.00 |
|
13.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ...................... |
11.09 |
|
13.34 |
|
12.47 |
|
11.49 |
|
10.92 |
|
10.16 |
|
8.13 |
|
7.01 |
|
6.64 |
|
Quarter ended |
||||||||||||||||
|
As reported 31 Dec 2009 |
Ex. period change 31 Dec 2009 |
|
30 Sep 2009 |
|
30 Jun |
|
31 Mar 2009 |
|
31 Dec 2008 |
|
30 Sep 2008 |
|
30 Jun |
|
31 Mar 2008 |
|
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
In Mortgage Services and Consumer Lending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Services: .. |
3,477 |
|
4,456 |
|
4,250 |
|
4,257 |
|
4,535 |
|
4,699 |
|
4,227 |
|
4,260 |
|
4,484 |
- first lien ........... |
3,093 |
|
3,900 |
|
3,688 |
|
3,642 |
|
3,824 |
|
3,912 |
|
3,420 |
|
3,363 |
|
3,456 |
- second lien ....... |
384 |
|
556 |
|
562 |
|
615 |
|
711 |
|
787 |
|
807 |
|
897 |
|
1,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Lending: . |
6,022 |
|
7,445 |
|
7,131 |
|
6,514 |
|
6,203 |
|
5,577 |
|
3,866 |
|
2,777 |
|
2,484 |
- first lien ........... |
5,380 |
|
6,541 |
|
6,241 |
|
5,640 |
|
5,322 |
|
4,724 |
|
3,176 |
|
2,194 |
|
1,954 |
- second lien ....... |
642 |
|
904 |
|
890 |
|
874 |
|
881 |
|
853 |
|
690 |
|
583 |
|
530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
|
%18 |
Mortgage Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- first lien ........... |
16.53 |
|
20.00 |
|
18.09 |
|
17.13 |
|
17.24 |
|
16.87 |
|
14.16 |
|
12.91 |
|
12.41 |
- second lien ....... |
12.57 |
|
17.25 |
|
16.36 |
|
16.35 |
|
17.44 |
|
17.72 |
|
16.62 |
|
16.63 |
|
16.99 |
- total ................. |
15.98 |
|
19.61 |
|
17.84 |
|
17.01 |
|
17.27 |
|
17.01 |
|
14.57 |
|
13.55 |
|
13.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Lending: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- first lien ........... |
15.41 |
|
18.15 |
|
16.75 |
|
14.72 |
|
13.52 |
|
11.71 |
|
7.72 |
|
5.15 |
|
4.52 |
- second lien ....... |
13.98 |
|
18.64 |
|
17.49 |
|
16.17 |
|
15.43 |
|
14.54 |
|
11.27 |
|
9.04 |
|
7.96 |
- total ................. |
15.24 |
|
18.21 |
|
16.84 |
|
14.90 |
|
13.76 |
|
12.07 |
|
8.18 |
|
5.66 |
|
4.98 |
For footnote, see page 291.
Renegotiated loans
Restructuring activity is designed to manage customer relationships, maximise collection opportunities and, wherever possible, avoid foreclosure or repossession. Such activities include re-ageing, extended payment arrangements, approved external debt management plans, deferred foreclosure, modification, loan rewrites and/or deferral of payments in the event of a change in circumstances. Restructuring is most commonly applied to real estate loans within consumer finance portfolios. Following restructuring, an overdue consumer account is normally reset from delinquent to current status. Restructuring policies and practices are based on indicators or criteria which, in the judgement of local management, indicate that repayment is likely to continue. These policies are kept under continual review and their application varies according to the nature of the market, the product, and the availability of empirical data. Criteria vary between products, but typically include receipt of two or more qualifying payments within a certain period (or, in the case of HSBC Finance, one or more), a minimum lapse of time from origination before restructuring may occur, and restrictions on the number and/or frequency of successive restructurings. Renegotiated loans are segregated from other parts of the loan portfolio for collective impairment assessment, to reflect their risk profile. When empirical evidence indicates an increased propensity to default on restructured accounts, the use of roll rate methodology ensures this factor is taken into account when calculating impairment allowances. Interest is recorded on renegotiated loans taking into account the new contractual terms following renegotiation.
HSBC Finance loan modifications and re-ageing
(Unaudited)
HSBC Finance continued to offer a variety of account management policies and practices. Modification occurs when the terms of a loan are modified, either temporarily or permanently, including changes to the rate and/or the payment. Modification may also lead to a re-ageing of the account. In 2009, HSBC Finance modified over 104,000 loans in Consumer Lending and Mortgage Services through the Foreclosure Avoidance and Account Modification programmes, with an aggregate balance of US$14.6 billion.
The total outstanding balances of real estate secured accounts which have been either re-aged or modified was US$30.2 billion, compared with US$26.2 billion at the end of 2008. Two months and over contractual delinquencies on re-aged or modified loans was 26 per cent, broadly consistent with the end of 2008.
HSBC Finance also supports a variety of initiatives to help preserve home ownership and avoid foreclosure. A quarterly breakdown of foreclosure data is provided below:
HSBC Finance foreclosed properties in the US (Unaudited) |
|
|
|
|
|
||||||
|
|
|
|
|
Quarter ended |
||||||
|
2009 |
|
2008 |
|
31 Dec 2009 |
|
30 Sep 2009 |
|
30 Jun |
|
31 Mar |
|
|
|
|
|
|
|
|
|
|
|
|
Number of foreclosed properties at end of period ......... |
6,188 |
|
9,589 |
|
6,188 |
|
6,428 |
|
7,286 |
|
8,866 |
Number of properties added to foreclosed inventory |
14,845 |
|
20,051 |
|
3,496 |
|
3,546 |
|
3,550 |
|
4,253 |
Average loss on sale of foreclosed properties (US$000)19 ............................................................... |
12 |
|
14 |
|
5 |
|
8 |
|
13 |
|
18 |
Average total loss on foreclosed properties20 ............... |
51% |
|
42% |
|
50% |
|
52% |
|
53% |
|
52% |
Average time to sell foreclosed properties (days) ......... |
193 |
|
177 |
|
172 |
|
184 |
|
194 |
|
201 |
Credit quality of financial instruments
(Audited)
The five credit quality classifications set out and defined below describe the credit quality of HSBC's lending, debt securities portfolios and derivatives. Since 2008, the medium classification has been subdivided into 'medium-good' and 'medium-satisfactory' to provide further granularity. These five classifications each encompass a range of more granular, internal credit rating grades assigned to wholesale and retail lending business, as well as the external ratings attributed by external agencies to debt securities.
There is no direct correlation between the internal and external ratings at granular level, except to the extent each falls within a single quality classification.
Credit quality of HSBC's debt securities and other bills |
External credit rating |
|
|
Quality classification |
|
Strong ................................................................................................................................................... |
A- and above |
Medium-good ........................................................................................................................................ |
BBB+ to BBB- |
Medium-satisfactory ............................................................................................................................. |
BB+ to B+ and unrated |
Sub-standard .......................................................................................................................................... |
B and below |
Impaired ............................................................................................................................................... |
Impaired |
Credit quality of HSBC's wholesale lending and derivatives |
Internal credit rating |
|
Probability of default % |
|
|
|
|
Quality classification |
|
|
|
Strong .......................................................................................................................... |
CRR1 to CRR2 |
|
0 - 0.169 |
Medium-good ............................................................................................................... |
CRR3 |
|
0.170 - 0.740 |
Medium-satisfactory .................................................................................................... |
CRR4 to CRR5 |
|
0.741 - 4.914 |
Sub-standard ................................................................................................................. |
CRR6 to CRR8 |
|
4.915 - 99.999 |
Impaired ...................................................................................................................... |
CRR9 to CRR10 |
|
100 |
Credit quality of HSBC's retail lending |
Internal credit rating21 |
|
Expected loss % |
|
|
|
|
Quality classification |
|
|
|
Strong .......................................................................................................................... |
EL1 to EL2 |
|
0 - 0.999 |
Medium-good................................................................................................................ |
EL3 |
|
1.000 - 4.999 |
Medium-satisfactory..................................................................................................... |
EL4 to EL5 |
|
5.000- 19.999 |
Sub-standard.................................................................................................................. |
EL6 to EL8 |
|
20.000 - 99.999 |
Impaired ...................................................................................................................... |
EL9 to EL10 |
100+ or defaulted22 |
For footnotes, see page 291.
Quality classification definitions
· 'Strong': exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default and/or low levels of expected loss. Retail accounts operate within product parameters and only exceptionally show any period of delinquency.
· 'Medium-good': exposures require closer monitoring and demonstrate a good capacity to meet financial commitments, with low default risk. Retail accounts typically show only short periods of delinquency, with any losses expected to be minimal following the adoption of recovery processes.
· 'Medium-satisfactory': exposures require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default risk. Retail accounts typically show only short periods of delinquency, with any losses expected to be minor following the adoption of recovery processes.
· 'Sub-standard': exposures require varying degrees of special attention and default risk is of greater concern. Retail portfolio segments show longer delinquency periods of generally up to 90 days past due and/or expected losses are higher due to a reduced ability to mitigate these through security realisation or other recovery processes.
· 'Impaired': exposures have been assessed, individually or collectively, as impaired.
Risk rating scales
The Customer Risk Rating ('CRR') 10-grade scale above summarises a more granular underlying 22‑grade scale of obligor probability of default ('PD'). All distinct HSBC customers are rated using one of these two PD scales, depending on the degree of sophistication of the Basel II approach adopted for the exposure.
The Expected Loss ('EL') 10-grade scale for retail business summarises a more granular underlying EL scale for these customer segments; this combines obligor and facility/product risk factors in a composite measure.
For debt securities and certain other financial instruments, external ratings have been aligned to the five quality classifications. The ratings of Standard and Poor's are cited, with those of other agencies being treated equivalently. Debt securities with short-term issue ratings are reported against the long-term rating of the issuer of those securities. If major rating agencies have different ratings for the same debt securities, a prudent rating selection is made in line with regulatory requirements.
Additional credit quality information in respect of HSBC's consolidated holdings of ABSs and assets held in consolidated SIVs and conduits is provided on pages 160 to 161 and 182 to 183, respectively.
For the purpose of the following disclosure, retail loans which are past due up to 89 days and are not otherwise classified as EL9 or EL10, are separately classified as past due but not impaired.
The following tables set out the Group's distribution of financial instruments by measures of credit quality:
Distribution of financial instruments by credit quality
(Audited)
|
Neither past due nor impaired |
|
Past due but not impaired |
|
|
|
Impair- |
|
|
||||||
|
|
|
Medium |
|
Sub standard |
|
|
Impaired |
ment allowances23 |
|
Total |
||||
|
Strong |
|
Good |
Satisfactory |
|
|
|
|
|||||||
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks ...... |
55,355 |
|
3,414 |
|
1,589 |
|
297 |
|
- |
|
- |
|
|
|
60,655 |
Items in the course of collection from other banks ......... |
5,922 |
|
20 |
|
453 |
|
- |
|
- |
|
- |
|
|
|
6,395 |
Hong Kong Government certificates of deposit ................ |
17,463 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
17,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets24 ...... |
306,481 |
|
37,911 |
|
39,457 |
|
2,221 |
|
|
|
|
|
|
|
386,070 |
- treasury and other eligible bills .................. |
21,747 |
|
315 |
|
169 |
|
115 |
|
|
|
|
|
|
|
22,346 |
- debt securities .. |
180,876 |
|
7,499 |
|
12,360 |
|
863 |
|
|
|
|
|
|
|
201,598 |
- loans and advances to banks ............... |
59,152 |
|
14,213 |
|
4,572 |
|
189 |
|
|
|
|
|
|
|
78,126 |
- loans and advances to customers ......... |
44,706 |
|
15,884 |
|
22,356 |
|
1,054 |
|
|
|
|
|
|
|
84,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets designated at fair value24 ................ |
11,163 |
|
3,834 |
|
7,122 |
|
79 |
|
|
|
|
|
|
|
22,198 |
- treasury and other eligible bills .................. |
223 |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
223 |
- debt securities .. |
9,701 |
|
3,834 |
|
7,104 |
|
79 |
|
|
|
|
|
|
|
20,718 |
- loans and advances to banks ............... |
336 |
|
- |
|
18 |
|
- |
|
|
|
|
|
|
|
354 |
- loans and advances to customers ......... |
903 |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives24 .......... |
169,430 |
|
60,759 |
|
15,688 |
|
5,009 |
|
|
|
|
|
|
|
250,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances held at amortised cost .................... |
570,357 |
|
231,394 |
|
185,167 |
|
43,820 |
|
40,078 |
|
30,845 |
|
(25,649) |
|
1,076,012 |
- loans and advances to banks ............... |
130,403 |
|
34,646 |
|
13,154 |
|
1,434 |
|
12 |
|
239 |
|
(107) |
|
179,781 |
- loans and advances to customers8,25 .... |
439,954 |
|
196,748 |
|
172,013 |
|
42,386 |
|
40,066 |
|
30,606 |
|
(25,542) |
|
896,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial investments ............ |
316,604 |
|
20,080 |
|
15,359 |
|
5,602 |
|
- |
|
2,389 |
|
|
|
360,034 |
- treasury and other similar bills .................. |
54,158 |
|
1,458 |
|
2,315 |
|
498 |
|
- |
|
5 |
|
|
|
58,434 |
- debt securities .. |
262,446 |
|
18,622 |
|
13,044 |
|
5,104 |
|
- |
|
2,384 |
|
|
|
301,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets ............ |
13,454 |
|
6,968 |
|
12,477 |
|
1,718 |
|
908 |
|
848 |
|
|
|
36,373 |
- endorsements and acceptances |
1,349 |
|
3,200 |
|
4,161 |
|
512 |
|
12 |
|
77 |
|
|
|
9,311 |
- accrued income and other ............ |
12,105 |
|
3,768 |
|
8,316 |
|
1,206 |
|
896 |
|
771 |
|
|
|
27,062 |
.
Distribution of financial instruments by credit quality (continued)
|
Neither past due nor impaired |
|
Past due but not |
|
|
|
Impair- |
|
|
||||||
|
|
|
Medium |
|
Sub standard |
|
|
Impaired |
ment allowances23 |
|
Total |
||||
|
Strong |
|
Good |
Satisfactory |
|
|
|
||||||||
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks ......... |
50,070 |
|
206 |
|
1,831 |
|
289 |
|
- |
|
- |
|
|
|
52,396 |
Items in the course of collection from other banks ........... |
4,541 |
|
4 |
|
1,392 |
|
- |
|
66 |
|
- |
|
|
|
6,003 |
Hong Kong Government certificates of indebtedness .......... |
15,358 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
15,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets24 ......... |
303,307 |
|
37,349 |
|
61,628 |
|
3,167 |
|
|
|
|
|
|
|
405,451 |
- treasury and other eligible bills ......... |
32,314 |
|
75 |
|
17 |
|
52 |
|
|
|
|
|
|
|
32,458 |
- debt securities ..... |
175,681 |
|
5,294 |
|
17,547 |
|
1,097 |
|
|
|
|
|
|
|
199,619 |
- loans and advances to banks ........................... |
60,400 |
|
7,501 |
|
5,013 |
|
141 |
|
|
|
|
|
|
|
73,055 |
- loans and advances to customers ........... |
34,912 |
|
24,479 |
|
39,051 |
|
1,877 |
|
|
|
|
|
|
|
100,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets designated at fair value24 ................... |
5,288 |
|
4,141 |
|
7,293 |
|
818 |
|
|
|
|
|
|
|
17,540 |
- treasury and other eligible bills ......... |
204 |
|
- |
|
31 |
|
- |
|
|
|
|
|
|
|
235 |
- debt securities ..... |
4,129 |
|
4,140 |
|
7,262 |
|
818 |
|
|
|
|
|
|
|
16,349 |
- loans and advances to banks ........................... |
230 |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
230 |
- loans and advances to customers ........... |
725 |
|
1 |
|
- |
|
- |
|
|
|
|
|
|
|
726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives24 ............. |
383,393 |
|
79,243 |
|
27,105 |
|
5,135 |
|
|
|
|
|
|
|
494,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances held at amortised cost ....................... |
565,542 |
|
231,966 |
|
195,822 |
|
43,432 |
|
48,422 |
|
25,422 |
|
(23,972) |
|
1,086,634 |
- loans and advances to banks ........................... |
118,684 |
|
23,753 |
|
10,013 |
|
1,268 |
|
41 |
|
70 |
|
(63) |
|
153,766 |
- loans and advances to customers25 ........ |
446,858 |
|
208,213 |
|
185,809 |
|
42,164 |
|
48,381 |
|
25,352 |
|
(23,909) |
|
932,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial investments |
257,435 |
|
16,170 |
|
16,719 |
|
1,382 |
|
32 |
|
1,246 |
|
|
|
292,984 |
- treasury and other similar bills ......... |
37,932 |
|
1,904 |
|
1,023 |
|
168 |
|
- |
|
- |
|
|
|
41,027 |
- debt securities ..... |
219,503 |
|
14,266 |
|
15,696 |
|
1,214 |
|
32 |
|
1,246 |
|
|
|
251,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets .............. |
11,959 |
|
9,491 |
|
17,026 |
|
1,747 |
|
219 |
|
417 |
|
|
|
40,859 |
- endorsements and acceptances ........ |
1,851 |
|
4,333 |
|
3,460 |
|
805 |
|
30 |
|
3 |
|
|
|
10,482 |
- accrued income and other .............. |
10,108 |
|
5,158 |
|
13,566 |
|
942 |
|
189 |
|
414 |
|
|
|
30,377 |
For footnotes, see page 291.
2009 compared with 2008
Financial instruments on which credit quality has been assessed declined by 8 per cent to US$2,216 billion at 31 December 2009, of which US$1,466 billion was classified as 'strong', representing 66 per cent (2008: 66 per cent) of the total of such financial instruments. This percentage held constant in 2009 as management actions to mitigate the Group's exposure to credit risk offset the effects on credit quality of the global economic slowdown. The proportion of financial instruments classified as 'medium-good' increased by nearly one percentage point to 16.4 per cent. The proportion of 'medium-satisfactory' declined by one percentage point to 12.5 per cent. The proportion of 'sub-standard' rose marginally.
Factors contributing to the relative improvement in credit quality included the run-off of the consumer finance exit portfolios in the US, while factors contributing to relative deterioration in credit quality included higher delinquency levels in personal and commercial lending.
Derivative assets on which credit quality has been assessed decreased to US$251 billion at the end of 2009 and led to a reduction in balances in each of the credit risk categories. The decline in the overall balance was driven mainly by a reduction in foreign exchange, interest rate and credit derivatives as lower levels of volatility within the financial markets, steepening yield curves and narrowing credit spreads led to a fall in the fair value of outstanding derivative contracts.
Financial investments on which credit quality has been assessed increased by 23 per cent to US$360 billion, with a significant increase in the balance classified as 'strong'. This reflected the investment of surplus funds in government-guaranteed, agency, supranational and government debt securities in line with the bank's risk appetite.
Past due but not impaired gross financial instruments
(Audited)
Examples of exposures past due but not impaired include overdue loans fully secured by cash collateral; mortgages that are individually assessed for impairment, and that are in arrears more than 90 days, but where the value of collateral is sufficient to repay both the principal debt and all potential interest for at least one year; and short-term trade facilities past due more than 90 days for technical reasons such as delays in documentation, but where there is no concern over the creditworthiness of the counterparty.
Past due but not impaired loans and advances to customers and banks by geographical region
(Audited)
|
Europe |
|
Hong Kong |
|
Rest of Pacific7 |
|
Middle East7 |
|
North America |
|
Latin America |
|
Gross impaired |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2009 ............................... |
3,759 |
|
1,165 |
|
1,996 |
|
1,661 |
|
27,989 |
|
3,508 |
|
40,078 |
At 31 December 2008 ................................. |
3,800 |
|
1,805 |
|
1,863 |
|
2,457 |
|
35,247 |
|
3,250 |
|
48,422 |
For footnote, see page 291.
Past due but not impaired loans and advances to customers and banks by industry sector
(Audited)
|
At 31 December |
||
|
2009 |
|
2008 |
|
US$m |
|
US$m |
|
|
|
|
Banks .................................................................................................................................... |
12 |
|
41 |
|
|
|
|
Customers .............................................................................................................................. |
40,066 |
|
48,381 |
Personal ............................................................................................................................. |
34,306 |
|
39,592 |
Corporate and commercial ................................................................................................. |
5,522 |
|
8,603 |
Financial ............................................................................................................................ |
238 |
|
186 |
|
|
|
|
|
|
|
|
|
40,078 |
|
48,422 |
Ageing analysis of days past due but not impaired gross financial instruments
(Audited)
|
Up to 29 days |
|
30-59 |
|
60-89 |
|
90-179 |
|
180 days and over |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
Loans and advances held at amortised cost ................. |
24,330 |
|
9,920 |
|
5,259 |
|
355 |
|
214 |
|
40,078 |
- loans and advances to banks ................................. |
12 |
|
- |
|
- |
|
- |
|
- |
|
12 |
- loans and advances to customers .......................... |
24,318 |
|
9,920 |
|
5,259 |
|
355 |
|
214 |
|
40,066 |
|
|
|
|
|
|
|
|
|
|
|
|
Other assets ................................................................ |
609 |
|
130 |
|
63 |
|
24 |
|
82 |
|
908 |
- endorsements and acceptances ............................. |
9 |
|
1 |
|
- |
|
1 |
|
1 |
|
12 |
- other ................................................................... |
600 |
|
129 |
|
63 |
|
23 |
|
81 |
|
896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,939 |
|
10,050 |
|
5,322 |
|
379 |
|
296 |
|
40,986 |
|
Up to 29 days |
|
30-59 |
|
60-89 |
|
90-179 |
|
180 days and over |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2008 |
|
|
|
|
|
|
|
|
|
|
|
Items in the course of collection from other banks ..... |
66 |
|
- |
|
- |
|
- |
|
- |
|
66 |
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances held at amortised cost ................. |
31,034 |
|
10,814 |
|
5,493 |
|
621 |
|
460 |
|
48,422 |
- loans and advances to banks ................................. |
41 |
|
- |
|
- |
|
- |
|
- |
|
41 |
- loans and advances to customers .......................... |
30,993 |
|
10,814 |
|
5,493 |
|
621 |
|
460 |
|
48,381 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial investments |
|
|
|
|
|
|
|
|
|
|
|
- debt securities ...................................................... |
32 |
|
- |
|
- |
|
- |
|
- |
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
Other assets ................................................................ |
45 |
|
22 |
|
118 |
|
7 |
|
27 |
|
219 |
- endorsements and acceptances ............................. |
21 |
|
6 |
|
1 |
|
2 |
|
- |
|
30 |
- other ................................................................... |
24 |
|
16 |
|
117 |
|
5 |
|
27 |
|
189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,177 |
|
10,836 |
|
5,611 |
|
628 |
|
487 |
|
48,739 |
Impaired loans and advances
(Audited)
|
Impaired loans and advances at |
|
Impaired loans and advances at |
||||||||
|
Individually assessed |
|
Collectively assessed |
|
Total |
|
Individually assessed26 |
|
Collectively assessed26 |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
|
|
|
|
|
|
|
|
|
|
|
Banks .................................................. |
239 |
|
- |
|
239 |
|
70 |
|
- |
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
Customers ............................................ |
14,767 |
|
15,839 |
|
30,606 |
|
7,922 |
|
17,430 |
|
25,352 |
Personal8 ......................................... |
1,977 |
|
15,451 |
|
17,428 |
|
1,538 |
|
17,071 |
|
18,609 |
Corporate and commercial ............... |
11,839 |
|
387 |
|
12,226 |
|
6,086 |
|
357 |
|
6,443 |
Financial .......................................... |
951 |
|
1 |
|
952 |
|
298 |
|
2 |
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,006 |
|
15,839 |
|
30,845 |
|
7,992 |
|
17,430 |
|
25,422 |
For footnote, see page 291.
(Audited)
HSBC obtained assets by taking possession of collateral held as security, or calling upon other credit enhancements, as follows:
|
Carrying amount |
||
|
2009 |
|
2008 |
|
US$m |
|
US$m |
Nature of assets |
|
|
|
Residential property ................ |
1,587 |
|
2,562 |
Commercial and industrial property .............................. |
93 |
|
21 |
Other ...................................... |
355 |
|
382 |
|
|
|
|
|
2,035 |
|
2,965 |
Repossessed properties are made available for sale in an orderly fashion, with the proceeds used to reduce or repay the outstanding indebtedness. If excess funds arise after the debt has been repaid, they are made available either to repay other secured lenders with lower priority or are returned to the customer. HSBC does not generally occupy repossessed properties for its business use.
(Audited)
The tables below analyse by geographical region the impairment allowances recognised for impaired loans and advances that are either individually assessed or collectively assessed, and collective impairment allowances on loans and advances classified as not impaired.
(Audited)
|
Europe |
|
Hong |
|
Rest of Pacific7 |
|
Middle East7 |
|
North America |
|
Latin America |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loans and advances |
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed impaired loans27 ................ |
8,800 |
|
823 |
|
1,006 |
|
1,310 |
|
1,990 |
|
838 |
|
14,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively assessed28 ...................................... |
436,816 |
|
99,362 |
|
80,033 |
|
22,912 |
|
218,539 |
|
49,344 |
|
907,006 |
Impaired loans8,27 ......................................... |
1,922 |
|
18 |
|
194 |
|
336 |
|
11,256 |
|
2,113 |
|
15,839 |
Non-impaired loans29 .................................... |
434,894 |
|
99,344 |
|
79,839 |
|
22,576 |
|
207,283 |
|
47,231 |
|
891,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross loans and advances8 ........................ |
445,616 |
|
100,185 |
|
81,039 |
|
24,222 |
|
220,529 |
|
50,182 |
|
921,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed ...................................... |
3,742 |
|
490 |
|
508 |
|
688 |
|
650 |
|
416 |
|
6,494 |
Collectively assessed8 .................................... |
2,393 |
|
314 |
|
488 |
|
690 |
|
13,026 |
|
2,137 |
|
19,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment allowances8 .......................... |
6,135 |
|
804 |
|
996 |
|
1,378 |
|
13,676 |
|
2,553 |
|
25,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans and advances ..................................... |
439,481 |
|
99,381 |
|
80,043 |
|
22,844 |
|
206,853 |
|
47,629 |
|
896,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
Individually assessed allowances as a |
42.5 |
|
59.5 |
|
50.5 |
|
52.5 |
|
32.7 |
|
49.7 |
|
44.0 |
Collectively assessed allowances as a |
0.5 |
|
0.3 |
|
0.6 |
|
3.0 |
|
6.0 |
|
4.3 |
|
2.1 |
Total allowances as a percentage of total |
1.4 |
|
0.8 |
|
1.2 |
|
5.7 |
|
6.2 |
|
5.1 |
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loans and advances |
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed impaired loans26,27 ............ |
4,817 |
|
813 |
|
705 |
|
160 |
|
832 |
|
595 |
|
7,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively assessed28 ...................................... |
425,233 |
|
100,140 |
|
80,769 |
|
27,549 |
|
271,472 |
|
43,692 |
|
948,855 |
Impaired loans26,27 ........................................ |
1,957 |
|
39 |
|
130 |
|
119 |
|
13,453 |
|
1,732 |
|
17,430 |
Non-impaired loans29 .................................... |
423,276 |
|
100,101 |
|
80,639 |
|
27,430 |
|
258,019 |
|
41,960 |
|
931,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross loans and advances ......................... |
430,050 |
|
100,953 |
|
81,474 |
|
27,709 |
|
272,304 |
|
44,287 |
|
956,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed ...................................... |
2,005 |
|
411 |
|
316 |
|
132 |
|
192 |
|
228 |
|
3,284 |
Collectively assessed ..................................... |
1,854 |
|
322 |
|
497 |
|
282 |
|
15,898 |
|
1,772 |
|
20,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment allowances ........................... |
3,859 |
|
733 |
|
813 |
|
414 |
|
16,090 |
|
2,000 |
|
23,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans and advances ..................................... |
426,191 |
|
100,220 |
|
80,661 |
|
27,295 |
|
256,214 |
|
42,287 |
|
932,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
Individually assessed allowances as a |
41.6 |
|
50.6 |
|
44.8 |
|
82.5 |
|
23.1 |
|
38.3 |
|
41.5 |
Collectively assessed allowances as a |
0.4 |
|
0.3 |
|
0.6 |
|
1.0 |
|
5.9 |
|
4.1 |
|
2.2 |
Total allowances as a percentage of total |
0.9 |
|
0.7 |
|
1.0 |
|
1.5 |
|
5.9 |
|
4.5 |
|
2.5 |
For footnotes, see page 291.
(Audited)
|
At 31 December 2009 |
|
At 31 December 2008 |
||||||||
|
Individually assessed allowances |
|
Collectively assessed allowances |
|
Total allowances |
|
Individually assessed allowances |
|
Collectively assessed allowances |
|
Total allowances |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
|
|
|
|
|
|
|
|
|
|
|
Banks30 ................................................ |
107 |
|
- |
|
107 |
|
63 |
|
- |
|
63 |
|
|
|
|
|
|
|
|
|
|
|
|
Customers ............................................ |
6,494 |
|
19,048 |
|
25,542 |
|
3,284 |
|
20,625 |
|
23,909 |
Personal8 ......................................... |
572 |
|
16,517 |
|
17,089 |
|
312 |
|
18,657 |
|
18,969 |
Corporate and commercial ............... |
5,528 |
|
2,354 |
|
7,882 |
|
2,845 |
|
1,795 |
|
4,640 |
Financial .......................................... |
394 |
|
177 |
|
571 |
|
127 |
|
173 |
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,601 |
|
19,048 |
|
25,649 |
|
3,347 |
|
20,625 |
|
23,972 |
(Unaudited)
|
At 31 December |
||
|
2009 |
|
2008 |
|
% |
|
% |
Banks |
|
|
|
Individually assessed impairment allowances32 .................................................................... |
0.09 |
|
0.06 |
|
|
|
|
Customers32 ........................................................................................................................... |
2.96 |
|
2.63 |
Individually assessed impairment allowances32 .................................................................... |
0.75 |
|
0.36 |
Collectively assessed impairment allowances32 ................................................................... |
2.21 |
|
2.27 |
For footnotes, see page 291.
(Audited)
|
Banks |
|
Customers |
|
|
||
|
individually assessed |
|
Individually assessed |
|
Collectively assessed |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
|
|
|
|
|
|
|
At 1 January 2009 .......................................................... |
63 |
|
3,284 |
|
20,625 |
|
23,972 |
Amounts written off 8 ..................................................... |
(35) |
|
(1,563) |
|
(23,242) |
|
(24,840) |
Recoveries of loans and advances written off in |
6 |
|
128 |
|
756 |
|
890 |
Charge to income statement ........................................... |
70 |
|
4,388 |
|
20,484 |
|
24,942 |
Exchange and other movements ..................................... |
3 |
|
257 |
|
425 |
|
685 |
|
|
|
|
|
|
|
|
At 31 December 2009 .................................................. |
107 |
|
6,494 |
|
19,048 |
|
25,649 |
|
|
|
|
|
|
|
|
At 1 January 2008 .......................................................... |
7 |
|
2,699 |
|
16,506 |
|
19,212 |
Amounts written off ....................................................... |
- |
|
(824) |
|
(17,131) |
|
(17,955) |
Recoveries of loans and advances written off in |
- |
|
113 |
|
721 |
|
834 |
Charge to income statement ........................................... |
54 |
|
2,010 |
|
22,067 |
|
24,131 |
Exchange and other movements ..................................... |
2 |
|
(714) |
|
(1,538) |
|
(2,250) |
|
|
|
|
|
|
|
|
At 31 December 2008 .................................................... |
63 |
|
3,284 |
|
20,625 |
|
23,972 |
For footnote, see page 291.
Movement in impairment allowances by industry sector
(Audited)
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 1 January ................................. |
23,972 |
|
19,212 |
|
13,585 |
|
11,366 |
|
12,559 |
|
|
|
|
|
|
|
|
|
|
Amounts written off ......................................................... |
(24,840) |
|
(17,955) |
|
(12,844) |
|
(9,473) |
|
(9,043) |
Personal2 ...................................................................... |
(22,703) |
|
(16,625) |
|
(11,670) |
|
(8,281) |
|
(8,046) |
- residential mortgages2 ............................................ |
(4,704) |
|
(2,110) |
|
(930) |
|
(628) |
|
(508) |
- other personal2 ...................................................... |
(17,999) |
|
(14,515) |
|
(10,740) |
|
(7,653) |
|
(7,538) |
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ............................................ |
(1,984) |
|
(1,294) |
|
(1,163) |
|
(1,153) |
|
(984) |
- commercial, industrial and international trade ........ |
(1,093) |
|
(789) |
|
(897) |
|
(782) |
|
(673) |
- commercial real estate and other property-related . |
(327) |
|
(115) |
|
(98) |
|
(111) |
|
(117) |
- other commercial ................................................... |
(564) |
|
(390) |
|
(168) |
|
(260) |
|
(194) |
|
|
|
|
|
|
|
|
|
|
Financial33 .................................................................... |
(153) |
|
(36) |
|
(11) |
|
(39) |
|
(13) |
|
|
|
|
|
|
|
|
|
|
Recoveries of amounts written off in previous years.......... |
890 |
|
834 |
|
1,005 |
|
779 |
|
494 |
Personal ........................................................................ |
712 |
|
686 |
|
837 |
|
605 |
|
320 |
- residential mortgages .............................................. |
61 |
|
19 |
|
19 |
|
19 |
|
18 |
- other personal ........................................................ |
651 |
|
667 |
|
818 |
|
586 |
|
302 |
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ............................................ |
170 |
|
142 |
|
157 |
|
163 |
|
174 |
- commercial, industrial and international trade ........ |
123 |
|
76 |
|
74 |
|
88 |
|
76 |
- commercial real estate and other property-related . |
9 |
|
6 |
|
29 |
|
21 |
|
9 |
- other commercial ................................................... |
38 |
|
60 |
|
54 |
|
54 |
|
89 |
|
|
|
|
|
|
|
|
|
|
Financial33 .................................................................... |
8 |
|
6 |
|
11 |
|
11 |
|
- |
|
|
|
|
|
|
|
|
|
|
Charge to income statement34 ........................................... |
24,942 |
|
24,131 |
|
17,177 |
|
10,547 |
|
7,860 |
Personal ........................................................................ |
19,781 |
|
20,950 |
|
15,968 |
|
9,929 |
|
7,249 |
- residential mortgages .............................................. |
4,185 |
|
5,000 |
|
1,840 |
|
1,096 |
|
605 |
- other personal ........................................................ |
15,596 |
|
15,950 |
|
14,128 |
|
8,833 |
|
6,644 |
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ............................................ |
4,711 |
|
2,879 |
|
1,176 |
|
664 |
|
618 |
- commercial, industrial and international trade ........ |
2,392 |
|
1,573 |
|
897 |
|
503 |
|
588 |
- commercial real estate and other property-related . |
1,492 |
|
755 |
|
152 |
|
75 |
|
56 |
- other commercial ................................................... |
827 |
|
551 |
|
127 |
|
86 |
|
(26) |
|
|
|
|
|
|
|
|
|
|
Financial33 .................................................................... |
450 |
|
302 |
|
36 |
|
(9) |
|
(13) |
Governments ................................................................ |
- |
|
- |
|
(3) |
|
(37) |
|
6 |
|
|
|
|
|
|
|
|
|
|
Exchange and other movements ....................................... |
685 |
|
(2,250) |
|
289 |
|
366 |
|
(504) |
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 31 December8 ................... |
25,649 |
|
23,972 |
|
19,212 |
|
13,585 |
|
11,366 |
|
|
|
|
|
|
|
|
|
|
Impairment allowances against banks: |
|
|
|
|
|
|
|
|
|
- individually assessed ................................................... |
107 |
|
63 |
|
7 |
|
7 |
|
9 |
Impairment allowances against customers: |
|
|
|
|
|
|
|
|
|
- individually assessed ................................................... |
6,494 |
|
3,284 |
|
2,699 |
|
2,565 |
|
2,683 |
- collectively assessed8 .................................................. |
19,048 |
|
20,625 |
|
16,506 |
|
11,013 |
|
8,674 |
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 31 December8 .......................... |
25,649 |
|
23,972 |
|
19,212 |
|
13,585 |
|
11,366 |
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
Impairment allowances against customers as a percentage of loans and advances to customers: |
|
|
|
|
|
|
|
|
|
- individually assessed ................................................... |
0.70 |
|
0.34 |
|
0.27 |
|
0.29 |
|
0.36 |
- collectively assessed ................................................... |
2.07 |
|
2.16 |
|
1.65 |
|
1.25 |
|
1.16 |
2 |
|
|
|
|
|
|
|
|
|
At 31 December ............................................................... |
2.77 |
|
2.50 |
|
1.92 |
|
1.54 |
|
1.52 |
For footnotes, see page 291.
Movement in impairment allowances by industry sector and by geographical region
(Audited)
|
2009 |
||||||||||||
|
Europe |
|
Hong |
|
Rest of Pacific7 |
|
Middle East7 |
|
North America |
|
Latin America |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 1 January .............. |
3,922 |
|
733 |
|
813 |
|
414 |
|
16,090 |
|
2,000 |
|
23,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts written off ..................................... |
(2,781) |
|
(357) |
|
(850) |
|
(384) |
|
(17,792) |
|
(2,676) |
|
(24,840) |
Personal2 .................................................... |
(1,876) |
|
(240) |
|
(787) |
|
(376) |
|
(17,204) |
|
(2,220) |
|
(22,703) |
- residential mortgages2 ........................... |
(41) |
|
(1) |
|
(9) |
|
- |
|
(4,610) |
|
(43) |
|
(4,704) |
- other personal2 ..................................... |
(1,835) |
|
(239) |
|
(778) |
|
(376) |
|
(12,594) |
|
(2,177) |
|
(17,999) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ......................... |
(810) |
|
(117) |
|
(63) |
|
(8) |
|
(534) |
|
(452) |
|
(1,984) |
- commercial, industrial and international |
(438) |
|
(114) |
|
(50) |
|
(8) |
|
(228) |
|
(255) |
|
(1,093) |
- commercial real estate and other property-related .................................... |
(148) |
|
(1) |
|
(3) |
|
- |
|
(163) |
|
(12) |
|
(327) |
- other commercial ................................. |
(224) |
|
(2) |
|
(10) |
|
- |
|
(143) |
|
(185) |
|
(564) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial33 .................................................. |
(95) |
|
- |
|
- |
|
- |
|
(54) |
|
(4) |
|
(153) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries of amounts written off in previous |
265 |
|
34 |
|
132 |
|
27 |
|
93 |
|
339 |
|
890 |
Personal ..................................................... |
200 |
|
32 |
|
123 |
|
25 |
|
60 |
|
272 |
|
712 |
- residential mortgages ............................ |
28 |
|
6 |
|
1 |
|
- |
|
7 |
|
19 |
|
61 |
- other personal ...................................... |
172 |
|
26 |
|
122 |
|
25 |
|
53 |
|
253 |
|
651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ......................... |
57 |
|
2 |
|
9 |
|
2 |
|
33 |
|
67 |
|
170 |
- commercial, industrial and international |
52 |
|
2 |
|
7 |
|
2 |
|
16 |
|
44 |
|
123 |
- commercial real estate and other property-related .................................... |
5 |
|
- |
|
1 |
|
- |
|
2 |
|
1 |
|
9 |
- other commercial ................................. |
- |
|
- |
|
1 |
|
- |
|
15 |
|
22 |
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial33 .................................................. |
8 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge to income statement34 ....................... |
4,409 |
|
450 |
|
874 |
|
1,333 |
|
15,372 |
|
2,504 |
|
24,942 |
Personal ..................................................... |
1,995 |
|
206 |
|
654 |
|
593 |
|
14,390 |
|
1,943 |
|
19,781 |
- residential mortgages ............................ |
158 |
|
(16) |
|
14 |
|
20 |
|
3,955 |
|
54 |
|
4,185 |
- other personal ...................................... |
1,837 |
|
222 |
|
640 |
|
573 |
|
10,435 |
|
1,889 |
|
15,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ......................... |
2,163 |
|
244 |
|
220 |
|
706 |
|
818 |
|
560 |
|
4,711 |
- commercial, industrial and international |
963 |
|
164 |
|
154 |
|
413 |
|
309 |
|
389 |
|
2,392 |
- commercial real estate and other property-related .................................... |
958 |
|
70 |
|
29 |
|
106 |
|
288 |
|
41 |
|
1,492 |
- other commercial ................................. |
242 |
|
10 |
|
37 |
|
187 |
|
221 |
|
130 |
|
827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial33 .................................................. |
251 |
|
- |
|
- |
|
34 |
|
164 |
|
1 |
|
450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange and other movements ................... |
412 |
|
(56) |
|
27 |
|
3 |
|
(87) |
|
386 |
|
685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 31 December8 |
6,227 |
|
804 |
|
996 |
|
1,393 |
|
13,676 |
|
2,553 |
|
25,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances against banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
- individually assessed ................................ |
92 |
|
- |
|
- |
|
15 |
|
- |
|
- |
|
107 |
Impairment allowances against customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
- individually assessed ................................ |
3,742 |
|
490 |
|
508 |
|
688 |
|
650 |
|
416 |
|
6,494 |
- collectively assessed8,35 ........................... |
2,393 |
|
314 |
|
488 |
|
690 |
|
13,026 |
|
2,137 |
|
19,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 31 December8 ....... |
6,227 |
|
804 |
|
996 |
|
1,393 |
|
13,676 |
|
2,553 |
|
25,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
Impairment allowances against customers as a percentage of loans and advances to customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
- individually assessed ................................ |
0.84 |
|
0.49 |
|
0.63 |
|
2.84 |
|
0.29 |
|
0.83 |
|
0.70 |
- collectively assessed35 ............................. |
0.54 |
|
0.31 |
|
0.60 |
|
2.85 |
|
5.91 |
|
4.26 |
|
2.07 |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December ............................................ .................................................................. |
1.38 |
|
0.80 |
|
1.23 |
|
5.69 |
|
6.20 |
|
5.09 |
|
2.77 |
|
2008 |
||||||||||||
|
Europe |
|
Hong |
|
Rest of Pacific7 |
|
Middle East7 |
|
North America |
|
Latin America |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 1 January ................. |
3,938 |
|
376 |
|
650 |
|
276 |
|
11,980 |
|
1,992 |
|
19,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts written off ......................................... |
(2,483) |
|
(219) |
|
(674) |
|
(164) |
|
(12,215) |
|
(2,200) |
|
(17,955) |
Personal ........................................................ |
(1,947) |
|
(179) |
|
(646) |
|
(153) |
|
(11,989) |
|
(1,711) |
|
(16,625) |
- residential mortgages ................................ |
(3) |
|
(1) |
|
(6) |
|
- |
|
(2,030) |
|
(70) |
|
(2,110) |
- other personal .......................................... |
(1,944) |
|
(178) |
|
(640) |
|
(153) |
|
(9,959) |
|
(1,641) |
|
(14,515) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ............................. |
(515) |
|
(38) |
|
(28) |
|
(11) |
|
(214) |
|
(488) |
|
(1,294) |
- commercial, industrial and international |
(367) |
|
(33) |
|
(16) |
|
(6) |
|
(153) |
|
(214) |
|
(789) |
- commercial real estate and other property-related ...................................................... |
(77) |
|
(2) |
|
(1) |
|
(3) |
|
(12) |
|
(20) |
|
(115) |
- other commercial ..................................... |
(71) |
|
(3) |
|
(11) |
|
(2) |
|
(49) |
|
(254) |
|
(390) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial33 ..................................................... |
(21) |
|
(2) |
|
- |
|
- |
|
(12) |
|
(1) |
|
(36) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries of amounts written off in previous |
294 |
|
39 |
|
107 |
|
30 |
|
100 |
|
264 |
|
834 |
Personal ........................................................ |
275 |
|
36 |
|
97 |
|
27 |
|
54 |
|
197 |
|
686 |
- residential mortgages ................................ |
- |
|
7 |
|
1 |
|
- |
|
- |
|
11 |
|
19 |
- other personal .......................................... |
275 |
|
29 |
|
96 |
|
27 |
|
54 |
|
186 |
|
667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ............................. |
19 |
|
3 |
|
6 |
|
2 |
|
45 |
|
67 |
|
142 |
- commercial, industrial and international |
19 |
|
1 |
|
5 |
|
1 |
|
27 |
|
23 |
|
76 |
- commercial real estate and other property-related ...................................................... |
- |
|
- |
|
1 |
|
- |
|
5 |
|
- |
|
6 |
- other commercial ..................................... |
- |
|
2 |
|
- |
|
1 |
|
13 |
|
44 |
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial33 ..................................................... |
- |
|
- |
|
4 |
|
1 |
|
1 |
|
- |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge to income statement34 .......................... |
3,411 |
|
556 |
|
815 |
|
274 |
|
16,589 |
|
2,486 |
|
24,131 |
Personal ........................................................ |
1,961 |
|
160 |
|
641 |
|
219 |
|
16,006 |
|
1,963 |
|
20,950 |
- residential mortgages ................................ |
18 |
|
- |
|
9 |
|
20 |
|
4,943 |
|
10 |
|
5,000 |
- other personal .......................................... |
1,943 |
|
160 |
|
632 |
|
199 |
|
11,063 |
|
1,953 |
|
15,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and commercial ............................. |
1,304 |
|
363 |
|
173 |
|
47 |
|
472 |
|
520 |
|
2,879 |
- commercial, industrial and international |
537 |
|
316 |
|
132 |
|
39 |
|
213 |
|
336 |
|
1,573 |
- commercial real estate and other property-related ...................................................... |
540 |
|
28 |
|
17 |
|
4 |
|
132 |
|
34 |
|
755 |
- other commercial ..................................... |
227 |
|
19 |
|
24 |
|
4 |
|
127 |
|
150 |
|
551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial33 ..................................................... |
146 |
|
33 |
|
1 |
|
8 |
|
111 |
|
3 |
|
302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange and other movements ....................... |
(1,238) |
|
(19) |
|
(80) |
|
(7) |
|
(364) |
|
(542) |
|
(2,250) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 31 December ........... |
3,922 |
|
733 |
|
813 |
|
414 |
|
16,090 |
|
2,000 |
|
23,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances against banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
- individually assessed ................................... |
63 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
63 |
Impairment allowances against customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
- individually assessed ................................... |
2,005 |
|
411 |
|
316 |
|
132 |
|
192 |
|
228 |
|
3,284 |
- collectively assessed35 ................................ |
1,854 |
|
322 |
|
497 |
|
282 |
|
15,898 |
|
1,772 |
|
20,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment allowances at 31 December ........... |
3,922 |
|
733 |
|
813 |
|
414 |
|
16,090 |
|
2,000 |
|
23,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
Impairment allowances against customers as a percentage of loans and advances to customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
- individually assessed ................................... |
0.47 |
|
0.41 |
|
0.39 |
|
0.48 |
|
0.07 |
|
0.51 |
|
0.34 |
- collectively assessed35 ................................ |
0.43 |
|
0.32 |
|
0.61 |
|
1.02 |
|
5.84 |
|
4.00 |
|
2.16 |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December ............................................... |
0.90 |
|
0.73 |
|
1.00 |
|
1.50 |
|
5.91 |
|
4.51 |
|
2.50 |
For footnotes, see page 291.
(Unaudited)
|
2009 |
|
2008 |
||||||||
|
Individually assessed US$m |
|
Collectively assessed US$m |
|
Total US$m |
|
Individually assessed US$m |
|
Collectively assessed US$m |
|
Total US$m |
|
|
|
|
|
|
|
|
|
|
|
|
Banks .......................................................... |
70 |
|
- |
|
70 |
|
54 |
|
- |
|
54 |
Personal ...................................................... |
316 |
|
19,465 |
|
19,781 |
|
110 |
|
20,840 |
|
20,950 |
Residential mortgages .............................. |
171 |
|
4,014 |
|
4,185 |
|
26 |
|
4,974 |
|
5,000 |
Other personal ......................................... |
145 |
|
15,451 |
|
15,596 |
|
84 |
|
15,866 |
|
15,950 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and commercial .......................... |
3,699 |
|
1,012 |
|
4,711 |
|
1,782 |
|
1,097 |
|
2,879 |
Commercial, industrial and international |
1,681 |
|
711 |
|
2,392 |
|
912 |
|
661 |
|
1,573 |
Commercial real estate and other |
1,330 |
|
162 |
|
1,492 |
|
613 |
|
142 |
|
755 |
Other commercial .................................... |
688 |
|
139 |
|
827 |
|
257 |
|
294 |
|
551 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial ..................................................... |
373 |
|
7 |
|
380 |
|
118 |
|
130 |
|
248 |
|
|
|
|
|
|
|
|
|
|
|
|
Total charge to income statement ............... |
4,458 |
|
20,484 |
|
24,942 |
|
2,064 |
|
22,067 |
|
24,131 |
(Unaudited)
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
Individually assessed impairment allowances |
|
|
|
|
|
|
|
|
|
New allowances ............................................................. |
5,173 |
|
2,742 |
|
1,533 |
|
1,297 |
|
1,715 |
Release of allowances no longer required ....................... |
(581) |
|
(565) |
|
(608) |
|
(711) |
|
(998) |
Recoveries of amounts previously written off ............... |
(134) |
|
(113) |
|
(129) |
|
(128) |
|
(199) |
|
|
|
|
|
|
|
|
|
|
|
4,458 |
|
2,064 |
|
796 |
|
458 |
|
518 |
|
|
|
|
|
|
|
|
|
|
Collectively assessed impairment allowances |
|
|
|
|
|
|
|
|
|
New allowances net of allowance releases ...................... |
21,240 |
|
22,788 |
|
17,257 |
|
10,740 |
|
8,425 |
Release of allowances no longer required ....................... |
- |
|
- |
|
- |
|
- |
|
(788) |
Recoveries of amounts previously written off ............... |
(756) |
|
(721) |
|
(876) |
|
(651) |
|
(295) |
|
|
|
|
|
|
|
|
|
|
|
20,484 |
|
22,067 |
|
16,381 |
|
10,089 |
|
7,342 |
|
|
|
|
|
|
|
|
|
|
Total charge for impairment losses ................................... |
24,942 |
|
24,131 |
|
17,177 |
|
10,547 |
|
7,860 |
Banks ........................................................................... |
70 |
|
54 |
|
- |
|
(3) |
|
(7) |
Customers .................................................................... |
24,872 |
|
24,077 |
|
17,177 |
|
10,550 |
|
7,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
Charge for impairment losses as a percentage of closing |
2.26 |
|
2.17 |
|
1.39 |
|
0.99 |
|
0.90 |
|
|
|
|
|
|
|
|
|
|
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December |
|
|
|
|
|
|
|
|
|
Impaired loans8 ................................................................. |
30,845 |
|
25,422 |
|
19,594 |
|
15,086 |
|
12,360 |
Impairment allowances8 .................................................... |
25,649 |
|
23,972 |
|
19,212 |
|
13,585 |
|
11,366 |
For footnote, see page 291.
(Unaudited)
|
Europe |
|
Hong |
|
Rest of Pacific7 |
|
Middle East7 |
|
North America |
|
Latin America |
|
Total |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
New allowances ............................................. |
2,573 |
|
315 |
|
341 |
|
598 |
|
1,052 |
|
294 |
|
5,173 |
Release of allowances no longer required ....... |
(255) |
|
(64) |
|
(82) |
|
(16) |
|
(112) |
|
(52) |
|
(581) |
Recoveries of amounts previously written off |
(70) |
|
(9) |
|
(15) |
|
(2) |
|
(24) |
|
(14) |
|
(134) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,248 |
|
242 |
|
244 |
|
580 |
|
916 |
|
228 |
|
4,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively assessed impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
New allowances net of allowance releases ...... |
2,356 |
|
233 |
|
747 |
|
778 |
|
14,525 |
|
2,601 |
|
21,240 |
Recoveries of amounts previously written off |
(195) |
|
(25) |
|
(117) |
|
(25) |
|
(69) |
|
(325) |
|
(756) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,161 |
|
208 |
|
630 |
|
753 |
|
14,456 |
|
2,276 |
|
20,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge for impairment losses .................. |
4,409 |
|
450 |
|
874 |
|
1,333 |
|
15,372 |
|
2,504 |
|
24,942 |
Banks ........................................................... |
55 |
|
- |
|
- |
|
15 |
|
- |
|
- |
|
70 |
Customers .................................................... |
4,354 |
|
450 |
|
874 |
|
1,318 |
|
15,372 |
|
2,504 |
|
24,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
Charge for impairment losses as a percentage |
0.86 |
|
0.33 |
|
0.75 |
|
4.08 |
|
6.52 |
|
3.64 |
|
2.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans8 ................................................ |
10,873 |
|
846 |
|
1,201 |
|
1,666 |
|
13,308 |
|
2,951 |
|
30,845 |
Impairment allowances8 ................................... |
6,227 |
|
804 |
|
996 |
|
1,393 |
|
13,676 |
|
2,553 |
|
25,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually assessed impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
New allowances ............................................. |
1,567 |
|
365 |
|
223 |
|
30 |
|
397 |
|
160 |
|
2,742 |
Release of allowances no longer required ....... |
(340) |
|
(25) |
|
(53) |
|
(36) |
|
(80) |
|
(31) |
|
(565) |
Recoveries of amounts previously written off |
(38) |
|
(10) |
|
(17) |
|
(3) |
|
(40) |
|
(5) |
|
(113) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,189 |
|
330 |
|
153 |
|
(9) |
|
277 |
|
124 |
|
2,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively assessed impairment allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
New allowances net of allowance releases ...... |
2,478 |
|
255 |
|
752 |
|
310 |
|
16,372 |
|
2,621 |
|
22,788 |
Recoveries of amounts previously written off |
(256) |
|
(29) |
|
(90) |
|
(27) |
|
(60) |
|
(259) |
|
(721) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,222 |
|
226 |
|
662 |
|
283 |
|
16,312 |
|
2,362 |
|
22,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge for impairment losses .................. |
3,411 |
|
556 |
|
815 |
|
274 |
|
16,589 |
|
2,486 |
|
24,131 |
Banks ........................................................... |
54 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
54 |
Customers .................................................... |
3,357 |
|
556 |
|
815 |
|
274 |
|
16,589 |
|
2,486 |
|
24,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
Charge for impairment losses as a percentage |
0.68 |
|
0.43 |
|
0.74 |
|
0.78 |
|
5.85 |
|
4.22 |
|
2.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
|
US$m |
At 31 December 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans .................................................. |
6,844 |
|
852 |
|
835 |
|
279 |
|
14,285 |
|
2,327 |
|
25,422 |
Impairment allowances ..................................... |
3,922 |
|
733 |
|
813 |
|
414 |
|
16,090 |
|
2,000 |
|
23,972 |
For footnotes, see page 291.
Charge for impairment losses as a percentage of average gross loans and advances to customers8
(Unaudited)
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
|
|
|
|
|
|
|
|
New allowances net of allowance releases .......................... |
2.92 |
|
2.54 |
|
2.09 |
|
1.49 |
|
1.25 |
Recoveries ........................................................................ |
(0.10) |
|
(0.09) |
|
(0.12) |
|
(0.10) |
|
(0.09) |
|
|
|
|
|
|
|
|
|
|
Total charge for impairment losses ................................... |
2.82 |
|
2.45 |
|
1.97 |
|
1.39 |
|
1.16 |
|
|
|
|
|
|
|
|
|
|
Amount written off net of recoveries ............................... |
2.71 |
|
1.75 |
|
1.36 |
|
1.15 |
|
1.26 |
For footnote, see page 291.
Charge for impairment losses as a percentage of average gross loans and advances to customers by geographical region8
(Unaudited)
|
Europe |
|
Hong |
|
Rest of Pacific7 |
|
Middle East7 |
|
North America |
|
Latin America |
|
Total |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
New allowances net of allowance releases ......... |
1.19 |
|
0.49 |
|
1.31 |
|
5.25 |
|
6.24 |
|
6.11 |
|
2.92 |
Recoveries ........................................................ |
(0.07) |
|
(0.03) |
|
(0.17) |
|
(0.11) |
|
(0.04) |
|
(0.73) |
|
(0.10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge for impairment losses .................. |
1.12 |
|
0.46 |
|
1.14 |
|
5.14 |
|
6.20 |
|
5.38 |
|
2.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount written off net of recoveries ............... |
0.63 |
|
0.33 |
|
0.94 |
|
1.40 |
|
7.14 |
|
5.03 |
|
2.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
New allowances net of allowance releases ......... |
0.86 |
|
0.63 |
|
1.04 |
|
1.12 |
|
5.73 |
|
5.32 |
|
2.54 |
Recoveries ........................................................ |
(0.07) |
|
(0.04) |
|
(0.12) |
|
(0.11) |
|
(0.03) |
|
(0.51) |
|
(0.09) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge for impairment losses .................. |
0.79 |
|
0.59 |
|
0.92 |
|
1.01 |
|
5.70 |
|
4.81 |
|
2.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount written off net of recoveries ............... |
0.52 |
|
0.19 |
|
0.64 |
|
0.50 |
|
4.16 |
|
3.73 |
|
1.75 |
Impaired loans and new loan impairment allowances
2009 compared with 2008
(Unaudited)
Loan impairment charges increased by 3 per cent to US$24.9 billion from US$24.1 billion in 2008. The commentary on net loan impairment allowances is on a constant currency basis while the commentary on impaired loans is on a reported basis.
New allowances for loan impairment charges rose by 7 per cent compared with 2008 to US$26.4 billion. Releases and recoveries of allowances increased by 17 per cent to US$1.5 billion. Total impaired loans to customers at 31 December 2009 were US$31 billion, an increase of 21 per cent compared with the end of 2008. Impaired loans remained at 3 per cent of customer loans and advances at 31 December 2009.
In Europe, new loan impairment allowances increased by 37 per cent to US$4.9 billion in 2009, driven by credit quality deterioration in individually impaired loans. Impaired loans increased by 59 per cent to US$10.9 billion at 31 December 2009.
In the UK, higher new loan impairment allowances reflected a small number of large individually assessed impairments against corporate and commercial exposures, together with the effects of credit quality deterioration in the personal lending portfolio. In the unsecured portfolios, credit quality declined in the cards and personal loans portfolios reflecting the deterioration in the economic environment. In the residential mortgage portfolios, credit quality remained strong despite higher unemployment in the UK. HSBC's exposure to this market remained well secured with typical loan-to-value ratios of below 60 per cent.
In Europe, releases and recoveries were US$520 million, a decrease of 5 per cent compared with 31 December 2008.
In Hong Kong, new loan impairment allowances were US$548 million, a decline of 12 per cent compared with 2008. Credit quality within the commercial lending portfolios improved compared with 2008, when significant impairments were taken on some exporters due to the contraction in global trade. New loan impairment allowances increased in the unsecured personal portfolios, reflecting the rise in unemployment and bankruptcy filings. Impaired loans were broadly stable at US$846 million.
In Rest of Asia-Pacific, new loan impairment allowances rose by 18 per cent to US$1.1 billion, mainly due to increased delinquencies on unsecured lending, particularly in the credit card and personal lending portfolios in India and, to a lesser extent, in Indonesia. In the corporate and commercial portfolios, new loan impairment allowances increased, reflecting a deterioration in India's economic conditions. Impaired loans increased by 44 per cent to US$1.2 billion.
Releases and recoveries in the Rest of Asia‑Pacific region rose by 42 per cent to US$214 million at 31 December 2009.
New loan impairment allowances in the Middle East increased significantly from a low base, to US$1.4 billion. The increase reflected higher charges in the UAE, largely in Dubai, due to a marked deterioration in credit quality which particularly affected the real estate and construction industries. Infrastructure projects were delayed or cancelled and unemployment levels increased. Delinquency rates rose as a result, particularly in the credit card and personal loan portfolios. Impaired loans increased by US$1.4 billion to US$1.7 billion.
New loan impairment allowances rose by 7 per cent to US$26.4 billion despite falls of 12 per cent in Hong Kong and 7 per cent in North America.
In North America, new loan impairment allowances declined by 7 per cent to US$15.6 billion against the backdrop of a widespread rise in unemployment, continued weakness in the US economy and housing markets, higher levels of personal bankruptcy filings and portfolio seasoning. This decline was the result of lower loan impairment charges in the Mortgage Services real estate secured, credit card and vehicle finance portfolios, partially offset by higher loan impairment charges in the branch-based Consumer Lending business. Apart from the changes made to the write-off period, the main contributing factors were as follows:
· new loan impairment allowances in the Mortgage Services business decreased in 2009 as the portfolio continued to run off. While loss severities increased compared with 2008, a higher percentage of impairment was in respect of first lien loans which have less severity than second lien loans;
· new loan impairment allowances in the vehicle finance loan portfolio decreased as a result of lower loan levels reflecting the discontinuance of vehicle finance originations in July 2008. In addition, loss severities decreased as prices on repossessed vehicles improved; and
· new loan impairment allowances in the branch-based Consumer Lending business increased in 2009, primarily in the unsecured portfolio due to the deterioration in the 2006 and 2007 vintages which were more pronounced in certain geographic regions and, to a lesser extent, first lien real estate secured loans. These increases were partially offset by lower new loan impairment allowances for second lien real estate secured loans.
New loan impairment allowances in the Cards and Retail Services portfolios declined due to lower outstanding balances and management action taken in the past two years to constrain origination activities in riskier segments. In addition, impairment provisioning reflects an improved outlook on future loss estimates as the impact of higher unemployment rates on losses has not been as severe as initially expected due, in part, to lower fuel prices and the boost to cash flow provided by government stimulus programmes that meaningfully benefit non-prime customers. In HSBC Bank USA personal lending portfolios, new loan impairment allowances increased, mainly in prime residential mortgage lending.
New loan impairment allowances in the corporate and commercial lending portfolios increased as the weaker economy affected firms in the commercial real estate and construction sectors in the US. In Canada, higher new loan impairment allowances were primarily against exposures in the commercial real estate, manufacturing and trade sectors.
In North America, releases and recoveries increased by 14 per cent to US$205 million at 31 December 2009 due to an increase in the repayment of loans previously impaired in the corporate, commercial and financial portfolios.
Impaired loans decreased by 7 per cent to US$13.3 billion at 31 December 2009.
New loan impairment allowances in Latin America increased by 18 per cent to US$2.9 billion, while impaired loans rose by 27 per cent to US$3.0 billion. The increase in new loan impairment allowances in Brazil was driven by higher delinquencies, mainly in credit cards, overdrafts and payroll loans, due to higher unemployment. In the commercial portfolio, higher new loan impairment allowances reflected the challenging economic environment which particularly affected the business banking and mid‑market business segments.
Releases and recoveries in Latin America increased by 56 per cent to US$391 million at 31 December 2009.
For an analysis of loan impairment charges and other credit risk provisions by customer group, see page 35.
2008 compared with 2007
(Unaudited)
Loan impairment charges increased by 40 per cent to US$24.1 billion from US$17.2 billion in 2007. The commentary that follows is on a constant currency basis.
New allowances for loan impairment charges rose by 37 per cent compared with 2007. Releases and recoveries of allowances declined by 10 per cent to US$1.4 billion. Impaired loans were 3 per cent of customer loans and advances at 31 December 2008, compared with 2 per cent at 31 December 2007.
In Europe, new loan impairment charges were US$4.0 billion, a rise of 24 per cent compared with 2007. Impaired loans increased by 32 per cent to US$6.8 billion at 31 December 2008.
Loan impairment charges increased in Global Banking and Markets following a significant charge against a single European commercial real estate corporate customer. Impairment charges against banks rose in the UK due to exposure to the Icelandic banks in 2008. New loan impairment charges rose in Turkey as delinquency rates increased across credit cards, personal loans and corporate lending in light of the deteriorating economic environment. Elsewhere, impairment charges on the commercial portfolio rose in the UK, particularly in the final quarter of 2008 as the weakening property market led to higher impairment charges against construction companies and businesses dependent upon the real estate sector. In France, the impact of declining commercial credit quality more than offset lower balances. Impairment allowances against firms in the financial sector rose due to exposure to a single asset management firm in the UK. Credit quality in the UK personal lending portfolio remained broadly stable, reflecting the strength of HSBC's loan book in a period of significant economic uncertainty. Mortgage lending in the UK remained well secured as actions taken since 2006 reduced risk exposure. Credit quality in the unsecured portfolios of M&S Money, HSBC Bank and Partnership Cards deteriorated slightly in 2008, particularly in the second half of the year, due to the weakening UK economy.
Releases and recoveries in Europe declined by 27 per cent, driven by the deterioration in economic conditions.
In Hong Kong, new loan impairment charges more than doubled from a low base, driven by deterioration in credit quality in the commercial portfolio in the second half of the year as the economy and trade flows weakened. Residential mortgage lending continued to be well secured, as regulatory restrictions constrained origination loan-to-value ratios to below 70 per cent. Impaired loans increased from a low base to US$852 million at 31 December 2008.
In Rest of Asia-Pacific, new loan impairment charges rose to US$975 million, primarily in India due to a combination of rising delinquency rates in consumer lending as credit conditions deteriorated, and increased lending.
In the Middle East, new loan impairment charges rose from a low base to US$340 million, due to rising delinquencies as growth rates declined and the property market slowed as economic conditions weakened because of lower oil and gas prices.
New loan impairment charges in North America rose by 37 per cent to US$16.8 billion, driven by the continued deterioration in credit quality in the HSBC Finance loan portfolio and, to a lesser extent, in HSBC USA. Impaired loans increased by 49 per cent to US$14.3 billion at 31 December 2008.
US credit quality showed significant deterioration across the portfolio, driven by the continued weakness of the US economy. The reasons behind the deterioration in US credit quality, the effects on the US personal lending portfolio and actions taken as a result are discussed in more detail on page 221. Partly offsetting the effect of the deterioration was a reduction in overall lending as HSBC continued to reduce its exposure in the US.
In Commercial Banking, impairment charges rose from a low base driven by deterioration in the commercial real estate loan book in the US, and higher impairment charges against firms in the manufacturing, export and commercial real estate sectors in Canada. Higher impairment charges in Global Banking and Markets reflected weaker credit fundamentals in the US in 2008. Impairment allowances against firms in the financial sector rose due to rising delinquencies, despite government intervention.
Releases and recoveries in North America rose by 55 per cent to US$180 million.
In Latin America, new loan impairment charges rose by 37 per cent to US$2.8 billion. Impaired loans increased by 37 per cent to US$2.3 billion at 31 December 2008.
The most significant increase was in Mexico, reflecting higher impairment charges in the credit card portfolio due to a combination of higher average balances from organic expansion and growing delinquency rates driven by a deterioration in credit quality as the 2006 and 2007 vintages continued to season and move into later stages of delinquency. Management action to improve the quality of new business included tightened underwriting, enhanced collection strategies and better managed customer acquisition channels. The commercial portfolio in Mexico also experienced higher impairment charges due to credit quality deterioration among small and medium sized enterprises as the economy weakened. In Brazil, higher impairment charges were driven by a combination of balance growth and credit quality deterioration in the vehicle finance and payroll loan portfolios.
HSBC Holdings
HSBC Holdings - maximum exposure to credit risk
(Audited)
|
Maximum exposure |
||
|
2009 |
|
2008 |
|
US$m |
|
US$m |
|
|
|
|
Derivatives ......................................................................................................................... |
2,981 |
|
3,682 |
Loans and advances to HSBC undertakings .......................................................................... |
23,212 |
|
11,804 |
Financial investments ......................................................................................................... |
2,455 |
|
2,629 |
Financial guarantees and similar contracts ........................................................................... |
35,073 |
|
47,341 |
Loan and other credit-related commitments ........................................................................ |
3,240 |
|
3,241 |
|
|
|
|
|
66,961 |
|
68,697 |
The credit quality of the loans and advances to HSBC undertakings is assessed as satisfactory risk, with 100 per cent of the exposure being neither past due nor impaired (2008: 100 per cent).
The long-term debt ratings of the HSBC Group issuers of the financial investments are within the Standard & Poor's ratings range of A+ to A- (2008: AA- to A).
(Unaudited)
·
impaired loans;
· unimpaired loans contractually past due 90 days or more as to interest or principal; and
· troubled debt restructurings not included in the above.
In the following tables, HSBC presents information on its impaired loans and advances in accordance with the classification approach described on page 225.
The SEC requires separate disclosure of any loans whose terms have been modified by the lender because of the borrower's financial difficulties, as a concession that the lender would not otherwise consider. These are classified as troubled debt restructurings ('TDR's). The definition of TDRs differs from the definition of renegotiated loans as disclosed under IFRSs, see page 224, as follows. After restructuring, TDRs may continue to be classified as impaired, as past due but not impaired or, where appropriate, as neither past due nor impaired. Under IFRSs, disclosure is required of loans that would otherwise have been classified as past due or impaired whose terms have been renegotiated.
Furthermore, a loan is no longer classified as a TDR after the end of the first year following the restructuring if the loan performs in accordance with the new terms, and the interest rate at the time of restructuring was a market rate for a loan with comparable risk.
Potential problem loans
Analysis of risk elements in the loan portfolio by geographical region
(Unaudited)
|
At 31 December |
||||||||
|
2009 US$m |
|
2008 US$m |
|
2007 |
|
2006 |
|
2005 |
Impaired loans |
|
|
|
|
|
|
|
|
|
Europe ................................................. |
10,873 |
|
6,844 |
|
6,266 |
|
5,858 |
|
5,081 |
Hong Kong .......................................... |
846 |
|
852 |
|
433 |
|
454 |
|
506 |
Rest of Asia-Pacific7 ............................ |
1,201 |
|
835 |
|
779 |
|
807 |
|
596 |
Middle East7 ........................................ |
1,666 |
|
279 |
|
309 |
|
381 |
|
349 |
North America8 ................................... |
13,308 |
|
14,285 |
|
9,662 |
|
6,108 |
|
4,602 |
Latin America ..................................... |
2,951 |
|
2,327 |
|
2,145 |
|
1,478 |
|
1,226 |
|
|
|
|
|
|
|
|
|
|
|
30,845 |
|
25,422 |
|
19,594 |
|
15,086 |
|
12,360 |
|
|
|
|
|
|
|
|
|
|
Unimpaired loans contractually past |
|
|
|
|
|
|
|
|
|
Europe ................................................. |
57 |
|
635 |
|
202 |
|
237 |
|
592 |
Hong Kong .......................................... |
4 |
|
43 |
|
49 |
|
79 |
|
74 |
Rest of Asia-Pacific7 ............................ |
36 |
|
84 |
|
94 |
|
75 |
|
40 |
Middle East7 ........................................ |
215 |
|
190 |
|
62 |
|
3 |
|
- |
North America .................................... |
217 |
|
108 |
|
24 |
|
78 |
|
32 |
Latin America ..................................... |
40 |
|
21 |
|
421 |
|
165 |
|
4 |
|
|
|
|
|
|
|
|
|
|
|
569 |
|
1,081 |
|
852 |
|
637 |
|
742 |
|
|
|
|
|
|
|
|
|
|
Troubled debt restructurings (not included in the classifications above) |
|
|
|
|
|
|
|
|
|
Europe ................................................. |
436 |
|
366 |
|
648 |
|
360 |
|
239 |
Hong Kong .......................................... |
236 |
|
165 |
|
146 |
|
189 |
|
198 |
Rest of Asia-Pacific7 ............................ |
135 |
|
90 |
|
23 |
|
56 |
|
96 |
Middle East7 ........................................ |
103 |
|
29 |
|
11 |
|
17 |
|
25 |
North America .................................... |
9,613 |
|
5,618 |
|
3,322 |
|
1,712 |
|
1,417 |
Latin America ..................................... |
1,518 |
|
1,067 |
|
848 |
|
915 |
|
878 |
|
|
|
|
|
|
|
|
|
|
|
12,041 |
|
7,335 |
|
4,998 |
|
3,249 |
|
2,853 |
|
|
|
|
|
|
|
|
|
|
Trading loans classified as in default |
|
|
|
|
|
|
|
|
|
North America .................................... |
798 |
|
561 |
|
675 |
|
127 |
|
11 |
|
|
|
|
|
|
|
|
|
|
Risk elements on loans |
|
|
|
|
|
|
|
|
|
Europe ................................................. |
11,366 |
|
7,845 |
|
7,116 |
|
6,455 |
|
5,912 |
Hong Kong .......................................... |
1,086 |
|
1,060 |
|
628 |
|
722 |
|
778 |
Rest of Asia-Pacific7 ............................ |
1,372 |
|
1,009 |
|
896 |
|
938 |
|
732 |
Middle East7 ........................................ |
1,984 |
|
498 |
|
382 |
|
401 |
|
374 |
North America .................................... |
23,936 |
|
20,572 |
|
13,683 |
|
8,025 |
|
6,062 |
Latin America ..................................... |
4,509 |
|
3,415 |
|
3,414 |
|
2,558 |
|
2,108 |
|
|
|
|
|
|
|
|
|
|
|
44,253 |
|
34,399 |
|
26,119 |
|
19,099 |
|
15,966 |
|
|
|
|
|
|
|
|
|
|
Assets held for resale |
|
|
|
|
|
|
|
|
|
Europe ................................................. |
52 |
|
81 |
|
59 |
|
30 |
|
205 |
Hong Kong .......................................... |
10 |
|
26 |
|
29 |
|
42 |
|
49 |
Rest of Asia-Pacific7 ............................ |
8 |
|
11 |
|
5 |
|
15 |
|
29 |
Middle East7 ........................................ |
2 |
|
2 |
|
2 |
|
2 |
|
2 |
North America .................................... |
707 |
|
1,758 |
|
1,172 |
|
999 |
|
582 |
Latin America ..................................... |
153 |
|
113 |
|
101 |
|
91 |
|
103 |
|
|
|
|
|
|
|
|
|
|
|
932 |
|
1,991 |
|
1,368 |
|
1,179 |
|
970 |
|
|
|
|
|
|
|
|
|
|
Total risk elements |
|
|
|
|
|
|
|
|
|
Europe ................................................. |
11,418 |
|
7,926 |
|
7,175 |
|
6,485 |
|
6,117 |
Hong Kong .......................................... |
1,096 |
|
1,086 |
|
657 |
|
764 |
|
827 |
Rest of Asia-Pacific7 ............................ |
1,380 |
|
1,020 |
|
901 |
|
953 |
|
761 |
Middle East7 ........................................ |
1,986 |
|
500 |
|
384 |
|
403 |
|
376 |
North America .................................... |
24,643 |
|
22,330 |
|
14,855 |
|
9,024 |
|
6,644 |
Latin America ..................................... |
4,662 |
|
3,528 |
|
3,515 |
|
2,649 |
|
2,211 |
|
|
|
|
|
|
|
|
|
|
|
45,185 |
|
36,390 |
|
27,487 |
|
20,278 |
|
16,936 |
|
|
|
|
|
|
|
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
Loan impairment allowances as a |
58.8 |
|
70.8 |
|
75.5 |
|
71.6 |
|
71.2 |
For footnotes, see page 291.