Annual Financial Report - 30 of 56

RNS Number : 6310S

HSBC Holdings PLC

18 March 2016

 

The above tables analyse loans and advances by industry sector and by the location of the principal operations of the lending subsidiary or, in the case of the operations of The Hongkong and Shanghai Banking Corporation, HSBC Bank, HSBC Bank Middle East and HSBC Bank USA, by the location of the lending branch.

HSBC Holdings

(Audited)

Risk in HSBC Holdings is overseen by the HSBC Holdings Asset and Liability Management Committee ('HALCO'). The major risks faced by HSBC Holdings are credit risk, liquidity risk and market risk (in the form of interest rate risk and foreign exchange risk), of which the most significant is credit risk.

Credit risk in HSBC Holdings primarily arises from transactions with Group subsidiaries and from guarantees issued in support of obligations assumed by certain Group operations in the normal conduct of their business. It is reviewed and managed within regulatory and internal limits for exposures by our Global Risk function, which provides high-level centralised oversight and management of credit risks worldwide.

HSBC Holdings' maximum exposure to credit risk at 31 December 2015 is shown below. Its financial assets principally represent claims on Group subsidiaries in Europe and North America.

All the derivative transactions are with HSBC undertakings that are banking counterparties (2014: 100%) and for which HSBC Holdings has in place master netting arrangements. Since 2012, the credit risk exposure has been managed on a net basis and the remaining net exposure is specifically collateralised in the form of cash.

HSBC Holdings - maximum exposure to credit risk

(Audited)

		2015						2014
		Maximum exposure		Offset		Exposure to credit risk (net)		Maximum exposure		Offset		Exposure to credit risk (net)
		$m		$m		$m		$m		$m		$m
Cash at bank and in hand:
- balances with HSBC undertakings		242		-		242		249		-		249
Derivatives		2,467		(2,467)		-		2,771		(2,610)		161
Loans and advances to HSBC undertakings		44,350		-		44,350		43,910		-		43,910
Financial investments in HSBC undertakings		4,285		-		4,285		4,073		-		4,073
Other assets		109		-		109
Financial guarantees and similar contracts		68,333		-		68,333		52,023		-		52,023
Loan and other credit-related commitments		-		-		-		16		-		16
At 31 December		119,786		(2,467)		117,319		103,042		(2,610)		100,432

The credit quality of loans and advances and financial investments, both of which consist of intra-Group lending, is assessed as 'strong' or 'good', with 100% of the exposure being neither past due nor impaired (2014: 100%).

Securitisation exposures and other structured products

The following table summarises the carrying amount of our ABS exposure by categories of collateral and includes assets held in the GB&M legacy credit portfolio with a carrying value of $15bn (2014: $23bn).

At 31 December 2015, the available-for-sale reserve in respect of ABSs was a deficit of $1,021m (2014: deficit of $777m). For 2015, the impairment write-back in respect of ABSs was $85m (2014: write-back of $276m).

Carrying amount of HSBC's consolidated holdings of ABSs

		Trading		Available for sale		Held to maturity		Designated    at fair value            through   profit or loss		Loans and receivables		Total		Of which held through   consolidated                     SEs
		$m		$m		$m		$m		$m		$m		$m
Mortgage-related assets:
Sub-prime residential		73		2,247		-		1		132		2,453		1,075
US Alt-A residential		-		1,989		7		-		55		2,051		1,796
US Government agency and sponsored enterprises:
MBSs		166		15,082		13,997		-		-		29,245		-
Other residential		812		780		-		-		108		1,700		253
Commercial property		590		2,308		-		-		201		3,099		1,656
Leveraged finance-related assets		240		2,294		-		-		149		2,683		1,310
Student loan-related assets		236		2,991		-		-		25		3,252		2,679
Other assets		1,184		880		-		23		128		2,215		565
At 31 December 2015		3,301		28,571		14,004		24		798		46,698		9,334
Mortgage-related assets:
Sub-prime residential		122		3,081		-		-		308		3,511		2,075
US Alt-A residential		96		3,022		11		-		110		3,239		2,411
US Government agency and sponsored enterprises:
MBSs		82		10,401		13,436		-		-		23,919		-
Other residential		928		1,220		-		-		330		2,478		652
Commercial property		654		3,627		-		-		516		4,797		2,854
Leveraged finance-related assets		172		3,660		-		-		218		4,050		2,526
Student loan-related assets		242		3,545		-		-		119		3,906		3,284
Other assets		1,264		1,114		-		19		646		3,043		758
At 31 December 2014		3,560		29,670		13,447		19		2,247		48,943		14,560

 

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