Annual Financial Report - 28 of 54

RNS Number : 0438I

HSBC Holdings PLC

20 March 2015

 



Notional contract amounts and fair values of derivatives by product type

(Unaudited)

		2014						2013
		Notional		Fair value				Notional		Fair value
		amount		Assets		Liabilities		amount		Assets		Liabilities
		US$m		US$m		US$m		US$m		US$m		US$m
Foreign exchange		5,573,415		97,312		95,759		5,291,003		80,914		75,798
- exchange traded		81,785		229		369		41,384		121		93
- central counterparty cleared OTC		18,567		321		349		16,869		415		622
- non-central counterparty cleared OTC		5,473,063		96,762		95,041		5,232,750		80,378		75,083
Interest rate		22,328,518		473,243		468,152		27,347,918		458,576		452,531
- exchange traded		1,432,333		112		161		857,562		335		225
- central counterparty cleared OTC		15,039,001		261,880		264,509		18,753,836		285,390		285,375
- non-central counterparty cleared OTC		5,857,184		211,251		203,482		7,736,520		172,851		166,931
Equity		568,932		11,694		13,654		589,903		18,389		22,573
- exchange traded		289,140		2,318		3,201		274,880		8,403		2,949
- non-central counterparty cleared OTC		279,792		9,376		10,453		315,023		9,986		19,624
Credit		550,197		9,340		10,061		678,256		9,092		8,926
- central counterparty cleared OTC		126,115		1,999		2,111		104,532		1,346		1,409
- non-central counterparty cleared OTC		424,082		7,341		7,950		573,724		7,746		7,517
Commodity and other		77,565		3,884		3,508		77,842		2,624		1,786
- exchange traded		7,015		80		23		6,531		182		6
- non-central counterparty cleared OTC		70,550		3,804		3,485		71,311		2,442		1,780
Total OTC derivatives		27,288,354		592,735		587,379		32,804,565		560,554		558,341
- total OTC derivatives cleared by central counterparties		15,183,683		264,200		266,968		18,875,237		287,151		287,406
- total OTC derivatives not cleared by central counterparties		12,104,671		328,535		320,411		13,929,328		273,403		270,935
Total exchange traded derivatives		1,810,273		2,739		3,755		1,180,357		9,041		3,273
Gross		29,098,627		595,473		591,134		33,984,922		569,595		561,614
Offset				(250,465)		(250,465)				(287,330)		(287,330)
Total at 31 December				345,008		340,669				282,265		274,284

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

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

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

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

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

The majority of the counterparties with whom we have a collateral agreement are European. The majority of our CSAs are with financial institutional clients.

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

OTC collateral agreements by type

(Unaudited)

		Number of        agreements
ISDA CSA (English law)		2,434
ISDA CSA (New York law)		1,628
ISDA CSA (Japanese law)		18
French Master Agreement and CSA equivalent15		227
German Master Agreement and CSA equivalent16		90
Others		205
At 31 December 2014		4,602

For footnotes, see page 202.

See page 130 and Note 32 on the Financial Statements for details regarding legally enforceable right of offset in the event of counterparty default and collateral received in respect of derivatives.

Reverse repos - non-trading by geographical region

Following the change in balance sheet presentation explained on page 347, non-trading reverse repos are presented separately on the face of the balance sheet and are no longer included in 'Loans and advances to customers' and 'Loans and advances to banks'.

Comparative data have been re‑presented accordingly. As a result, any analysis in the Credit Risk section that references loans and advances to customers or banks excludes non-trading reverse repos to customers or banks, respectively. For reference, the amount of non-trading reverse repos to customers and banks is set out below.

Reverse repos - non-trading by geographical region

(Audited)

		Europe		Asia4		MENA		North              America		Latin              America		Total
		US$m		US$m		US$m		US$m		US$m		US$m
With customers		25,841		5,409		-		35,060		-		66,310
With banks		34,748		22,813		19		29,008		8,815		95,403
At 31 December 2014		60,589		28,222		19		64,068		8,815		161,713
With customers		48,091		6,448		-		33,676		-		88,215
With banks		49,631		12,973		24		23,744		5,103		91,475
At 31 December 2013		97,722		19,421		24		57,420		5,103		179,690

For footnote, see page 202.

Personal lending

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

Total personal lending

(Unaudited)

		Europe		Asia4		MENA		North            America		Latin            America		Total
		US$m		US$m		US$m		US$m		US$m		US$m
First lien residential mortgages (A)		131,000		93,147		2,647		55,577		4,153		286,524
Of which:
- interest only (including offset)		44,163		956		-		276		-		45,395
- affordability including ARMs		337		5,248		-		16,452		-		22,037
Other personal lending (B)		47,531		36,368		3,924		9,823		9,384		107,030
- other		34,567		25,695		2,633		4,328		4,846		72,069
- credit cards		12,959		10,289		897		1,050		3,322		28,517
- second lien residential mortgages		-		56		2		4,433		-		4,491
- motor vehicle finance		5		328		392		12		1,216		1,953
Total gross loans at 31 December 2014 (C)		178,531		129,515		6,571		65,400		13,537		393,554
Impairment allowances on personal lending
First lien residential mortgages (a)		306		46		97		1,644		36		2,129
Other personal lending (b)		786		208		97		350		1,030		2,471
- other		438		87		59		43		672		1,299
- credit cards		347		119		33		36		298		833
- second lien residential mortgages		-		-		-		271		-		271
- motor vehicle finance		1		2		5		-		60		68
Total impairment allowances at 31 December 2014 (c)		1,092		254		194		1,994		1,066		4,600
(a) as a percentage of A		0.2%		-		3.7%		3.0%		0.9%		0.7%
(b) as a percentage of B		1.7%		0.6%		2.5%		3.6%		11.0%		2.3%
(c) as a percentage of C		0.6%		0.2%		3.0%		3.0%		7.9%		1.2%

		Europe		Asia4		MENA		North            America		Latin            America		Total
		US$m		US$m		US$m		US$m		US$m		US$m
First lien residential mortgages (D)		140,474		92,047		2,451		60,955		3,948		299,875
s
Of which:
- interest only (including offset)		49,460		1,115		-		352		-		50,927
- affordability including ARMs		508		5,593		-		16,274		-		22,375
Other personal lending (E)		51,633		32,482		4,033		11,735		10,970		110,853
- other		37,126		21,636		2,728		5,309		5,651		72,450
- credit cards		14,496		10,274		915		1,145		3,526		30,356
- second lien residential mortgages		-		91		2		5,261		-		5,354
- motor vehicle finance		11		481		388		20		1,793		2,693
Total gross loans at 31 December 2013 (F)		192,107		124,529		6,484		72,690		14,918		410,728
Impairment allowances on personal lending
First lien residential mortgages (d)		439		57		124		2,886		32		3,538
Other personal lending (e)		959		222		169		532		1,182		3,064
- other		553		93		104		59		881		1,690
- credit cards		403		127		61		47		217		855
- second lien residential mortgages		-		-		-		426		-		426
- motor vehicle finance		3		2		4		-		84		93
Total impairment allowances at 31 December 2013 (f)		1,398		279		293		3,418		1,214		6,602
(d) as a percentage of D		0.3%		0.1%		5.1%		4.7%		0.8%		1.2%
(e) as a percentage of E		1.9%		0.7%		4.2%		4.5%		10.8%		2.8%
(f) as a percentage of F		0.7%		0.2%		4.5%		4.7%		8.1%		1.6%

For footnote, see page 202.

Total personal lending was US$394bn at 31 December 2014, down from US$411bn at the end of 2013 (US$392bn on a constant currency basis). We continued to run-off our CML portfolio in North America and the balance declined by a further US$5.7bn during the year.

Personal lending excluding the US CML run-off portfolio grew by US$7.7bn on a constant currency basis in 2014. This was mainly due to increased mortgage and other lending in Asia and growth in the mortgage portfolio in the US and Brazil. It was partially offset by a reduction in personal lending in UK.

Mortgage lending

(Unaudited)

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

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

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

The commentary that follows is on a constant currency basis

Personal lending excluding the US CML run-off portfolio, mortgage lending balances increased by US$3.9bn during the year. Mortgage lending in Asia, excluding the reclassification to Other Personal lending discussed on page 153, grew by US$4.8bn. The increases were primarily attributable to continued growth in Hong Kong (US$2.9bn) and, to a lesser extent, in Australia (US$0.5bn), Malaysia (US$0.4bn), and Taiwan (US$0.3bn) as a result of strong demand and competitive customer offerings. The quality of our Asian mortgage book remained high with negligible defaults and impairment allowances. The average LTV ratio on new mortgage lending in Hong Kong was 47% compared with an estimated 29% for the overall portfolio.

In North America, our Canadian mortgage balances increased by US$0.5bn during the year as a result of a focused mortgage campaign and process improvements. The Premier mortgage portfolio in the US also increased by US$0.9bn during 2014 as we continued to focus on growth in our core portfolios. Our business in the US exhibited lower collectively assessed impairment charges due to continued improvement in the credit quality of the mortgage portfolio. The US CML portfolio declined by US$5.7bn in 2014.

Mortgage lending in Brazil increased by US$0.5bn as a result of improvements to both our process and products offered and overall growth in the mortgage market in the country during the year.

In Europe, there was a marginal decline of US$1.4bn or 1% due to decreased lending and effects of repayments, mainly in the UK mortgage portfolio.

Interest-only products made up US$44bn of total UK mortgage lending, including US$19bn of offset mortgages in First Direct. The LTV ratio on new lending was 60% compared with an average of 43.7% for the total mortgage portfolio. The credit quality of our UK mortgage portfolio remained high and both loan impairment charges and delinquency levels declined in 2014.

We grew our mortgage book in France by US$0.6bn in the year due to strong demand.

Other personal lending

(Unaudited)

Other personal lending increased by US$3.7bn in 2014. This was driven by growth in personal loans and revolving credit facilities in Asia, mainly in Hong Kong (US$3.1bn). We also reclassified US$1.7bn of loans in mainland China from Residential mortgages to other personal lending as the supporting collateral over some of the properties either under construction or completed was yet to be fully registered. These increases were partially offset by a reduction in credit card lending of US$0.7bn in the UK and US$0.3bn in Turkey, due to repayments. Term lending in North America, primarily Canada, declined by US$0.7bn during the year. There was also a US$0.2bn reduction in the auto finance dealers run off portfolio in Brazil.

HSBC Finance US Consumer and Mortgage Lending - residential mortgages¹⁷

(Unaudited)

		2014		2013
		US$m		US$m
Residential mortgages:
- first lien		21,915		27,305
Other personal lending:
- second lien		2,509		3,014
Total (A) at 31 December		24,424		30,319
Impairment allowances		1,679		3,028
- as a percentage of A		6.9%		10.0%

For footnote, see page 202.

HSBC Finance

Mortgage lending balances in HSBC Finance declined by US$5.7bn during 2014. In addition to the continued loan sales in the CML portfolio, we transferred a further US$2.9bn to assets held for sale during the year, and expect to sell these in multiple transactions over the next 12 months.

The decrease in impairment allowances reflected lower levels of both new impaired loans and loan balances outstanding as a result of continued liquidation of the portfolio. This included loan sales and loss estimates due to lower delinquency and loss severity levels than in 2013.

Across the first and second lien residential mortgages in our CML portfolio, two months and over delinquent balances reduced by US$2.5bn to US$2.4bn during 2014 reflecting the continued portfolio run-off and loan sales.

HSBC Finance: foreclosed properties in the US

(Unaudited)

		2014		2013
		US$m		US$m
Number of foreclosed properties at year-end		2,139		4,254
Number of properties added to foreclosed inventory in the period		3,716		9,752
Average (gain)/loss on sale of foreclosed properties18		(1%)		1%
Average total loss on foreclosed properties19		51%		51%
Average time to sell foreclosed properties (days)		189		154

For footnotes, see page 202.

The number of foreclosed properties at 31 December 2014 significantly decreased compared with the end of 2013 as during 2014 more properties were sold than were added to the foreclosed inventory. We added fewer properties to the inventory as many of them were sold prior to taking title as a result of the ongoing sale of receivables from the CML portfolio.

HSBC Bank USA

In HSBC Bank USA, mortgage balances grew by US$0.9bn during 2014 as we implemented our strategy to grow the HSBC Premier customer base. Credit quality improved further during 2014 and balances which were two months and over delinquent in our first lien residential mortgage portfolio declined by US$0.3bn to US$1.1bn at December 2014. We also continued to sell all agency eligible new originations in the secondary market as a means of managing our interest rate risk and improving structural liquidity.

Trends in two months and over contractual delinquency in the US

(Unaudited)

		2014		2013
		US$m		US$m
In personal lending in the US
First lien residential mortgages		3,271		5,931
- Consumer and Mortgage Lending		2,210		4,595
- other mortgage lending		1,061		1,336
Second lien residential mortgages		216		406
- Consumer and Mortgage Lending		154		276
- other mortgage lending		62		130
Credit card		17		25
Personal non-credit card		7		25
Total at 31 December		3,511		6,387
		%		%
As a percentage of the equivalent loans and receivables balances
First lien residential mortgages		8.6		14.0
Second lien residential mortgages		5.0		8.1
Credit card		2.4		3.4
Personal non-credit card		1.4		4.9
Total at 31 December		8.1		13.1

Gross loan portfolio of HSBC Finance real estate secured balances

(Unaudited)

		Re-aged20		Modified and re-aged		Modified		Total renegotiated loans	Total non- renegotiated loans			Total gross loans		Total impairment allowances		Impairment allowances/ gross loans
		US$m		US$m		US$m		US$m		US$m		US$m		US$m		%
At 31 December 2014		6,637		6,581		587		13,805		10,619		24,424		1,679		7
At 31 December 2013		8,167		8,213		768		17,148		13,171		30,319		3,028		10

For footnote, see page 202.

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

(Unaudited)

		Number of renegotiated loans (000s)								Total number of loans (000s)
		Re-aged		Modified and re-aged		Modified		Total
At 31 December 2014		85		64		6		155		297
At 31 December 2013		102		78		8		188		352

HSBC Finance loan modifications and re-age programmes

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

Since 2006, HSBC Finance has implemented an extensive loan renegotiation programme, and a significant portion of its loan portfolio has been subject to renegotiation at some stage in the life of the customer relationship as a consequence of the economic conditions in the US and the characteristics of HSBC Finance's customer base.

The volume of loans that qualify for modification has reduced significantly in recent years and we expect this trend to continue. Volumes of new loan modifications are decreasing due to improvements in economic conditions, the cessation of new real estate secured and personal non-credit card receivables originations, and the continued run-off and loan sales in the CML portfolio.

Qualifying criteria

For an account to qualify for renegotiation it must meet certain criteria, and HSBC Finance retains the right to decline a renegotiation. The extent to which HSBC Finance renegotiates accounts that are eligible under its existing policies varies according to its view of prevailing economic conditions and other factors which may change from year to year. In addition, exceptions to policies and practices may be made in specific situations in response to legal or regulatory agreements or orders.

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

2014 compared with 2013

At 31 December 2014, renegotiated real estate secured accounts in HSBC Finance represented 91% (2013: 91%) of North America's total renegotiated loans. US$8.0bn of renegotiated real estate secured loans were classified as impaired (2013: US$10bn). During 2014, the aggregate number of renegotiated loans in HSBC Finance reduced, due to the run-off and loan sales in the CML portfolio, despite renegotiation activity continuing.

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

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

Types of loan renegotiation programmes in HSBC Finance ·   A temporary modification is a change to the contractual terms of a loan that results in HSBC Finance giving up a right to contractual cash flows over a pre-defined period. With a temporary modification the loan is expected to revert back to the original contractual terms, including the interest rate charged, after the modification period. An example is reduced interest payments. A substantial number of HSBC Finance modifications involve interest rate reductions, which lower the amount of interest income HSBC Finance is contractually entitled to receive in future periods. Historically, modifications were granted for terms as low as six months, although, more recent modifications have a minimum term of two years. Loans that have been re-aged are classified as impaired with the exception of first-time loan re-ages that were less than 60 days past due at the time of re-age. These remain classified as impaired until they have demonstrated a history of payment performance against their original contracted terms for at least 12 months. ·   A permanent modification is a change to the contractual terms of a loan that results in HSBC Finance giving up a right to contractual cash flows over the life of the loan. An example is a permanent reduction in the interest rate charged. Permanent or long-term modifications which are due to an underlying hardship event remain classified as impaired for their full life. The term 're-age' describes a renegotiation by which the contractual delinquency status of a loan is reset to current after demonstrating payment performance. The overdue principal and/or interest is deferred and paid at a later date. Loan re-ageing enables customers who have been unable to make a small number of payments to have their loan delinquency status reset to current so that their credit score is not affected by the overdue balances. Loans that have been re-aged remain classified as impaired until they have demonstrated a history of payment performance against the original contractual terms for at least 12 months. A temporary or permanent modification may also lead to a re‑ageing of a loan although a loan may be re-aged without any modification to its original terms and conditions. Where loans have been granted multiple concessions, subject to the qualifying criteria discussed above, the concession is deemed to have been made due to concern regarding the

borrower's ability to pay, and the loan is disclosed as impaired. The loan remains disclosed as impaired from that date forward until the borrower has demonstrated a history of repayment performance for the period of time required for either modifications or re-ages, as described above. Valuation of foreclosed properties in the US We obtain real estate by foreclosing on the collateral pledged as security for residential mortgages. Prior to foreclosure, carrying amounts of the loans in excess of fair value less costs to sell are written down to the discounted cash flows expected to be recovered, including from the sale of the property. Broker price opinions are obtained and updated every 180 days and real estate price trends are reviewed quarterly to reflect any improvement or additional deterioration. Our methodology is regularly validated by comparing the discounted cash flows expected to be recovered based on current market conditions (including estimated cash flows from the sale of the property) to the updated broker price opinion, adjusted for the estimated historical difference between interior and exterior appraisals. The fair values of foreclosed properties are initially determined on the basis of broker price opinions. Within 90 days of foreclosure, a more detailed property valuation is performed reflecting information obtained from a physical interior inspection of the property and additional allowances or write-downs are recorded as appropriate. Updates to the valuation are performed no less than once every 45 days until the property is sold, with declines or increases recognised through changes to allowances. Second lien mortgages in the US The majority of second lien residential mortgages were taken up by customers who held a first lien mortgage issued by a third party. Second lien residential mortgage loans have a risk profile characterised by higher LTV ratios, because in the majority of cases the loans were taken out to complete the refinancing of properties. Loss severity on default of second liens has typically approached 100% of the amount outstanding, as any equity in the property is consumed through the repayment of the first lien loan. Impairment allowances for these loans were determined by applying a roll-rate migration analysis which captures the propensity of these loans to default based on past experience. Once we believe that a second lien residential mortgage loan is likely to progress to write-off, the loss severity assumed in establishing our impairment allowance is close to 100% in the CML portfolios, and more than 80% in HSBC Bank USA.

Collateral and other credit enhancements held

(Audited)

Loans and advances held at amortised cost

Details of the Group's practice regarding the use of collateral are provided in the Appendix to Risk on page 213.

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

Residential mortgage loans including loan commitments by level of collateral

(Audited)

		Europe		Asia4		MENA		North            America		Latin            America		Total
		US$m		US$m		US$m		US$m		US$m		US$m
Non-impaired loans and advances
Fully collateralised		135,875		99,257		2,431		43,317		3,759		284,639
LTV ratio:
- less than 50%		66,075		60,315		1,324		14,003		1,454		143,171
- 51% to 75%		56,178		31,142		856		20,872		1,777		110,825
- 76% to 90%		11,856		6,906		212		5,994		480		25,448
- 91% to 100%		1,766		894		39		2,448		48		5,195
Partially collateralised:
- greater than 100% LTV (A)		537		99		60		2,209		167		3,072
- collateral value on A		532		81		44		1,999		24		2,680
		136,412		99,356		2,491		45,526		3,926		287,711
Impaired loans and advances
Fully collateralised		906		256		122		8,618		154		10,056
LTV ratio:
- less than 50%		232		130		53		1,291		103		1,809
- 51% to 75%		417		90		29		3,462		35		4,033
- 76% to 90%		163		32		19		2,471		10		2,695
- 91% to 100%		94		4		21		1,394		6		1,519
Partially collateralised:
- greater than 100% LTV (B)		55		7		31		1,395		2		1,490
- collateral value on B		40		5		23		1,181		1		1,250
		961		263		153		10,013		156		11,546
At 31 December 2014		137,373		99,619		2,644		55,539		4,082		299,257
Non-impaired loans and advances
Fully collateralised		146,326		98,332		2,235		44,125		3,749		294,767
LTV ratio:
- less than 50%		55,028		55,479		749		13,172		1,337		125,765
- 51% to 75%		66,452		34,370		1,095		20,751		1,715		124,383
- 76% to 90%		21,603		6,836		348		6,933		606		36,326
- 91% to 100%		3,243		1,647		43		3,269		91		8,293
Partially collateralised:
- greater than 100% LTV (C)		1,410		362		42		4,150		59		6,023
- collateral value on C		852		307		37		3,681		49		4,926
		147,736		98,694		2,277		48,275		3,808		300,790
Impaired loans and advances
Fully collateralised		1,369		254		90		10,128		160		12,001
LTV ratio:
- less than 50%		244		100		15		1,393		97		1,849
- 51% to 75%		452		96		31		4,250		47		4,876
- 76% to 90%		320		49		34		2,809		13		3,225
- 91% to 100%		353		9		10		1,676		3		2,051
Partially collateralised:
- greater than 100% LTV (D)		104		17		6		2,548		8		2,683
- collateral value on D		91		4		6		2,272		4		2,377
		1,473		271		96		12,676		168		14,684
At 31 December 2013		149,209		98,965		2,373		60,951		3,976		315,474

For footnote, see page 202.

Supplementary information

Gross loans and advances by industry sector over five years

(Unaudited)

		2014		Currency     translation    adjustment		Movement		2013		2012		2011		2010
		US$m		US$m		US$m		US$m		US$m		US$m		US$m
Personal		393,554		(19,092)		1,918		410,728		415,093		393,625		425,320
- first lien residential mortgages6		286,524		(12,372)		(979)		299,875		301,862		278,963		268,681
- other personal7		107,030		(6,720)		2,897		110,853		113,231		114,662		156,639
Corporate and commercial		540,556		(24,729)		22,020		543,265		513,229		472,784		445,505
- manufacturing		106,986		(5,856)		(1,008)		113,850		112,149		96,054		91,121
- international trade and services		180,791		(8,232)		4,355		184,668		169,389		152,709		146,567
- commercial real estate		73,293		(3,270)		1,717		74,846		76,760		73,941		71,880
- other property-related		52,387		(922)		8,477		44,832		40,532		39,539		34,838
- government		6,143		(395)		(739)		7,277		10,785		11,079		8,594
- other commercial8		120,956		(6,054)		9,218		117,792		103,614		99,462		92,505
Financial		50,818		(2,303)		2,598		50,523		46,871		44,832		41,213
- non-bank financial institutions		48,799		(2,180)		2,442		48,537		45,430		43,888		39,651
- settlement accounts		2,019		(123)		156		1,986		1,441		944		1,562
Asset-backed securities reclassified		2,069		(147)		(500)		2,716		3,891		5,280		5,892
Total gross loans and advances to customers (A)		986,997		(46,271)		26,036		1,007,232		979,084		916,521		917,930
Gross loans and advances to banks		112,198		(4,925)		(2,981)		120,104		117,142		139,203		142,027
Total gross loans and advances		1,099,195		(51,196)		23,055		1,127,336		1,096,226		1,055,724		1,059,957
Impaired loans and advances to customers		29,283		(1,538)		(5,607)		36,428		38,671		41,584		46,871
- . as a percentage of A		3.0%						3.6%		3.9%		4.5%		4.8%
Impairment allowances on loans and advances to customers		12,337		(776)		(2,030)		15,143		16,112		17,511		20,083
- . as a percentage of A		1.2%						1.5%		1.6%		1.9%		2.2%
Loan impairment charge		4,055		(160)		(1,833)		6,048		8,160		11,505		13,548
- new allowances net of allowance releases		5,010		(158)		(2,176)		7,344		9,306		12,931		14,568
- recoveries		(955)		(2)		343		(1,296)		(1,146)		(1,426)		(1,020)

For footnotes, see page 202.

The personal lending currency effect on gross loans and advances of US$19bn was made up as follows: Europe US$13bn, Asia US$2.6bn, Latin America US$1.8bn, North America US$1.8bn. The wholesale lending currency effect on gross loans and advances of US$32bn was made up as follows: Europe US$21bn, Asia US$4.8bn, Latin America US$4.7bn, North America US$1.5bn and Middle East and North Africa US$0.3bn.

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

(Unaudited)

		31 Dec 13      as reported		Currency      translation     adjustment21		31 Dec 13   at 31 Dec 14         exchange                  rates		Movement        - constant            currency                   basis		31 Dec 14     as reported		Reported             change22		Constant         currency             change22
		US$m		US$m		US$m		US$m		US$m		%		%
Impaired loans
Europe		13,228		(1,011)		12,217		(1,975)		10,242		(23)		(16)
Asia4		1,623		(54)		1,569		479		2,048		26		31
Middle East and North Africa		2,285		(8)		2,277		(296)		1,981		(13)		(13)
North America		15,123		(42)		15,081		(3,387)		11,694		(23)		(22)
Latin America		4,244		(425)		3,819		(454)		3,365		(21)		(12)
		36,503		(1,540)		34,963		(5,633)		29,330		(20)		(16)
Impairment allowances
Europe		5,598		(420)		5,178		(723)		4,455		(20)		(14)
Asia4		1,214		(32)		1,182		174		1,356		12		15
Middle East and North Africa		1,583		(4)		1,579		(173)		1,406		(11)		(11)
North America		4,242		(28)		4,214		(1,574)		2,640		(38)		(37)
Latin America		2,564		(294)		2,270		259		2,529		(1)		11
		15,201		(778)		14,423		(2,037)		12,386		(19)		(14)
Loan impairment charge
Europe		1,732		62		1,794		(715)		1,079		(38)		(40)
Asia4		483		(17)		466		178		644		33		38
Middle East and North Africa		(44)		-		(44)		43		(1)		98		98
North America		1,235		(15)		1,220		(920)		300		(76)		(75)
Latin America		2,642		(190)		2,452		(419)		2,033		(23)		(17)
		6,048		(160)		5,888		(1,833)		4,055		(33)		(31)

For footnotes, see page 202.

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

(Unaudited)

		31 Dec 13      as reported		Currency      translation     adjustment21		31 Dec 13   at 31 Dec 14         exchange                  rates		Movement        - constant            currency                   basis		31 Dec 14     as reported		Reported             change22		Constant         currency             change22
		US$m		US$m		US$m		US$m		US$m		%		%
Loan impairment charge
Europe		1,732		62		1,794		(715)		1,079		(38)		(40)
- new allowances		3,082		99		3,181		(736)		2,445		(21)		(23)
- releases		(713)		(11)		(724)		(338)		(1,062)		(49)		(47)
- recoveries		(637)		(26)		(663)		359		(304)		52		54
Asia4		483		(17)		466		178		644		33		38
- new allowances		953		(31)		922		193		1,115		17		21
- releases		(303)		8		(295)		(23)		(318)		(5)		(8)
- recoveries		(167)		6		(161)		8		(153)		8		5
Middle East and North Africa		(44)		-		(44)		43		(1)		98		98
- new allowances		408		(1)		407		(52)		355		(13)		(13)
- releases		(365)		2		(363)		49		(314)		14		13
- recoveries		(87)		(1)		(88)		46		(42)		52		52
North America		1,235		(15)		1,220		(920)		300		(76)		(75)
- new allowances		1,640		(17)		1,623		(715)		908		(45)		(44)
- releases		(282)		2		(280)		(213)		(493)		(75)		(76)
- recoveries		(123)		-		(123)		8		(115)		7		7
Latin America		2,642		(190)		2,452		(419)		2,033		(23)		(17)
- new allowances		3,262		(243)		3,019		(312)		2,707		(17)		(10)
- releases		(338)		34		(304)		(29)		(333)		1		(10)
- recoveries		(282)		19		(263)		(78)		(341)		(21)		(30)
Total		6,048		(160)		5,888		(1,833)		4,055		(33)		(31)
- new allowances		9,345		(193)		9,152		(1,622)		7,530		(19)		(18)
- releases		(2,001)		35		(1,966)		(554)		(2,520)		(26)		(28)
- recoveries		(1,296)		(2)		(1,298)		343		(955)		26		26

For footnotes, see page 202.

Loan impairment charges by industry sector over five years

(Unaudited)

		2014		2013		2012		2011		2010
		US$m		US$m		US$m		US$m		US$m
Loan impairment charge/(release)
Personal		1,803		3,196		5,362		9,318		11,187
Corporate and commercial		2,256		2,974		2,802		2,114		2,198
Financial5		(4)		(122)		(4)		73		163
Year ended 31 December		4,055		6,048		8,160		11,505		13,548

For footnotes, see page 202.

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

(Unaudited)

		2014		2013		2012		2011		2010
		%		%		%		%		%
New allowances net of allowance releases		0.53		0.81		1.00		1.34		1.65
Recoveries		(0.10)		(0.14)		(0.12)		(0.15)		(0.12)
Total charge for impairment losses		0.43		0.67		0.88		1.19		1.53
Amount written off net of recoveries		0.58		0.59		0.93		1.14		2.08

Movement in impairment allowances over five years

(Unaudited)

		2014		2013		2012		2011		2010
		US$m		US$m		US$m		US$m		US$m
Impairment allowances at 1 January		15,201		16,169		17,636		20,241		25,649
Amounts written off		(6,379)		(6,655)		(9,812)		(12,480)		(19,300)
- personal		(3,733)		(4,367)		(6,905)		(10,431)		(16,458)
- corporate and commercial		(2,425)		(2,229)		(2,677)		(2,009)		(2,789)
- financial5		(221)		(59)		(230)		(40)		(53)
Recoveries of amounts written off in previous years		955		1,296		1,146		1,426		1,020
- personal		818		1,097		966		1,175		846
- corporate and commercial		128		198		172		242		156
- financial5		9		1		8		9		18
Loan impairment charge		4,055		6,048		8,160		11,505		13,548
Exchange and other movements13		(1,446)		(1,657)		(961)		(3,056)		(676)
Impairment allowances at 31 December		12,386		15,201		16,169		17,636		20,241
Impairment allowances
- individually assessed		6,244		7,130		6,629		6,662		6,615
- collectively assessed		6,142		8,071		9,540		10,974		13,626
Impairment allowances at 31 December		12,386		15,201		16,169		17,636		20,241
Amount written off net of recoveries as a percentage of average gross loans and advances to customers		0.6%		0.6%		1.0%		1.2%		2.2%

For footnotes, see page 202.

Gross loans and advances to customers by country

(Unaudited)

		First lien               residential               mortgages6                        US$m		Other                   personal7                        US$m		Property-                      related                        US$m		Commercial,           international     trade and other                        US$m		Total                       US$m
Europe		131,000		47,531		35,313		200,313		414,157
UK		123,239		21,023		25,927		156,577		326,766
France		2,914		12,820		7,341		21,834		44,909
Germany		6		212		304		7,275		7,797
Switzerland		298		8,149		225		614		9,286
Turkey		645		3,389		297		4,244		8,575
Other		3,898		1,938		1,219		9,769		16,824
Asia		93,147		36,368		70,057		164,739		364,311
Hong Kong		56,656		22,891		52,208		82,362		214,117
Australia		9,154		815		2,130		6,360		18,459
India		1,235		285		613		5,099		7,232
Indonesia		64		469		202		5,476		6,211
Mainland China		4,238		1,981		6,606		24,875		37,700
Malaysia		5,201		1,750		1,988		5,217		14,156
Singapore		9,521		5,878		4,210		11,951		31,560
Taiwan		3,920		626		118		7,057		11,721
Other		3,158		1,673		1,982		16,342		23,155
Middle East and North Africa (excluding Saudi Arabia)		2,647		3,924		2,246		21,633		30,450
Egypt		1		510		98		2,272		2,881
UAE		2,263		1,782		1,545		13,814		19,404
Other		383		1,632		603		5,547		8,165
North America		55,577		9,823		15,492		51,535		132,427
US		37,937		5,482		11,461		38,632		93,512
Canada		16,236		4,085		3,708		11,825		35,854
Other		1,404		256		323		1,078		3,061
Latin America		4,153		9,384		2,572		29,543		45,652
Argentina		15		1,169		93		2,119		3,396
Brazil		2,067		5,531		1,077		16,814		25,489
Mexico		1,967		2,642		1,336		9,503		15,448
Other		104		42		66		1,107		1,319
At 31 December 2014		286,524		107,030		125,680		467,763		986,997
Europe		140,474		51,633		38,634		230,932		461,673
UK		132,174		22,913		28,127		185,534		368,748
France		2,661		13,840		8,442		23,962		48,905
Germany		7		218		127		6,361		6,713
Switzerland		364		8,616		269		320		9,569
Turkey		833		4,002		305		4,059		9,199
Other		4,435		2,044		1,364		10,696		18,539
Asia		92,047		32,482		61,707		151,875		338,111
Hong Kong		53,762		19,794		44,904		75,547		194,007
Australia		9,468		1,236		2,511		7,138		20,353
India		1,080		297		425		4,231		6,033
Indonesia		69		447		78		5,361		5,955
Mainland China		4,880		300		5,808		22,149		33,137
Malaysia		5,140		1,994		1,997		5,420		14,551
Singapore		10,283		5,754		3,953		12,188		32,178
Taiwan		3,797		660		158		5,198		9,813
Other		3,568		2,000		1,873		14,643		22,084
Middle East and North Africa (excluding Saudi Arabia)		2,451		4,033		1,972		20,320		28,776
Egypt		1		477		146		2,232		2,856
UAE		2,082		1,842		1,331		12,344		17,599
Other		368		1,714		495		5,744		8,321
North America		60,955		11,735		14,616		44,884		132,190
US		42,317		6,257		10,174		30,952		89,700
Canada		17,036		5,116		3,912		13,079		39,143
Other		1,602		362		530		853		3,347
Latin America		3,948		10,970		2,749		28,815		46,482
Argentina		20		1,425		62		2,103		3,610
Brazil		1,811		6,466		1,268		17,132		26,677
Mexico		2,117		3,079		1,398		8,994		15,588
Other		-		-		21		586		607
At 31 December 2013		299,875		110,853		119,678		476,826		1,007,232

For footnotes, see page 202.

 

END

 

 

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