Last checked at 18 Mar 2016 16:41
Credit risk
Credit risk | 120 | 195 | Summary of credit risk | 120 | ||
Gross loans to customers and banks over five years | 121 | |||||
Loan impairment charge over five years | 121 | |||||
Loan impairment charges by geographical region | 121 | |||||
Loan impairment charges by industry | 121 | |||||
Loan impairment allowances over five years | 121 | |||||
Credit risk management | 195 | |||||
Assets held for sale | 121 | Loans and advances to customers and banks measured at amortised cost | 121 | |||
Gross loans and impairment allowances on loans and advances to customers and banks reported in 'Assets held for sale' | 122 | |||||
Loan impairment charges and other credit risk provisions | 122 | |||||
Credit exposure | 122 | |||||
Maximum exposure to credit risk | 122 | |||||
Other credit risk mitigants | 122 | Maximum exposure to credit risk | 123 | |||
Loan and other credit-related commitments | 123 | |||||
Concentration of exposure | 123 | 196 | ||||
Financial investments | 123 | |||||
Trading assets | 124 | |||||
Derivatives | 124 | |||||
Loans and advances | 124 | Gross loans and advances by industry sector and by geographical region | 124 | |||
Credit quality of financial instruments | 125 | 196 | ||||
Credit quality classification | 196 | Distribution of financial instruments by credit quality | 125 | |||
Past due but not impaired gross financial instruments | 127 | Past due but not impaired gross financial instruments by geographical region | 127 | |||
Ageing analysis of days for past due but not impairedgross financial instruments | 127 | |||||
Impaired loans | 128 | Movement in impaired loans by geographical region | 128 | |||
Renegotiated loans and forbearance | 129 | 197 | Renegotiated loans and advances to customers bygeographical region | 130 | ||
Movement in renegotiated loans and advances to customers by geographical region | 131 | |||||
Renegotiated loans by arrangement type:corporate and commercial and financial | 132 | |||||
Renegotiated loans by arrangement type:personal lending | 132 | |||||
Impairment of loans and advances | 132 | Loan impairment charge to the income statement by industry sector | 132 | |||
Loan impairment charge to the income statement by assessment type | 132 | |||||
Charge for impairment losses as a percentage ofaverage gross loans and advances to customersby geographical region | 133 | |||||
Movement in impairment allowances by industry sector and geographical region | 134 | |||||
Movement in impairment allowances on loans and advances to customers and banks | 135 | |||||
Impairment assessment | 201 | |||||
Wholesale lending | 135 | Total wholesale lending | 136 | |||
Commercial real estate | 137 | Commercial real estate lending | 137 | |||
Commercial real estate loans and advances maturity analysis | 138 | |||||
Commercial real estate loans and advances including loan commitments by level of collateral | 139 | |||||
Other corporate, commercial and non-bank financial institutions loans and advances including loan commitments by level of collateral rated CRR/EL8 to 10 only | 140 |
Other credit risk exposures | 141 | |||||
Derivatives | 141 | Notional contract amounts and fair values of derivatives by product type | 142 | |||
OTC collateral agreements by type | 142 | |||||
Reverse repos - non-trading by geographical region | 143 | Reverse repos - non-trading by geographical region | 143 | |||
Loan Management Unit | 202 | |||||
Personal lending | 143 | Total personal lending | 143 | |||
Mortgage lending | 144 | UK interest-only mortgage loans | 145 | |||
Other personal lending | 145 | HSBC Finance US Consumer and Mortgage Lending residential mortgages | 145 | |||
Trends in two months and over contractual delinquency in the US | 146 | |||||
Gross loan portfolio of HSBC Finance real estate secured balances | 146 | |||||
Number of renegotiated real estate secured accounts remaining in HSBC Finance's portfolio | 146 | |||||
HSBC Finance loan modifications and re-age programmes | 146 | |||||
Collateral and other credit enhancements held | 147 | Residential mortgage loans including loan commitments by level of collateral | 147 | |||
Supplementary information | 148 | Gross loans and advances by industry sector over 5 years | 148 | |||
Reconciliation of reported and constant currency impaired loans, allowances and charges by geographical region | 149 | |||||
Reconciliation of reported and constant currency loan impairment charges to the income statement | 149 | |||||
Loan impairment charges by industry sector over 5 years | 150 | |||||
Charge for impairment losses as a percentage of average gross loans and advances to customers | 150 | |||||
Movement in impairment allowances over 5 years | 150 | |||||
Gross loans and advances to customers by country | 151 | |||||
Refinance risk | 203 | |||||
HSBC Holdings | 152 | HSBC Holdings - maximum exposure to credit risk | 152 | |||
Securitisation exposures and other structured products | 152 | 203 | Carrying amount of HSBC's consolidated holdings of ABSs | 153 | ||
Definitions and classifications of ABSs and CDOs | 203 | |||||
| ||||||
1 Appendix to Risk - risk policies and practices. | ||||||
Credit risk
Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises principally from direct lending, trade finance and leasing business, but also from other products such as guarantees and credit derivatives and from holding assets in the form of debt securities.
There have been no material changes to the policies and practices for the management of credit risk in 2015.
A summary of our current policies and practices regarding credit risk is provided in the Appendix to Risk on page 193.
Our maximum exposure to credit risk is presented on page 122 and credit quality on page 125. While credit risk arises across most of our balance sheet, losses have typically been incurred on loans and advances and securitisation exposures and other structured products. As a result, our disclosures focus primarily on these two areas.
Our exposures to mainland China and the effects of the decline in 'metals and mining' and 'oil and gas' prices are provided in 'Areas of special interest' on page 116.
In 2015, reported gross loans and advances declined by $75bn, mainly due to foreign exchange effects reducing balances by $51bn and the reclassification of Brazilian assets as 'Assets held for sale' reducing balances by a further $31bn. Additional details relating to the Brazilian reclassification are provided on page 121. Excluding foreign exchange movements and the reclassification, both wholesale and personal lending grew.
Loan impairment charges reduced by $0.5bn or 11% compared with 2014 with notable decreases in Latin America from favourable foreign exchange effects.
Information on constant currency movements is provided on page 148. While tables are presented on a reported basis, the commentary that follows in this summary section excludes the effects of the Brazilian reclassification and is on a constant currency basis.
Summary of credit risk
2015 | 2014 | Page | ||||
$bn | $bn | |||||
At year-end | ||||||
Maximum exposure to credit risk | ||||||
- total assets subject tocredit risk | 2,234 | 2,434 | ||||
- off-balance sheetcommitments subjectto credit risk2 | 713 | 699 | ||||
2,947 | 3,133 | 123 | ||||
Gross loans and advances | ||||||
- personal lending | 374 | 393 | 143 | |||
- wholesale lending | 650 | 706 | 136 | |||
1,024 | 1,099 | 124 | ||||
Impaired loans | ||||||
- personal lending | 12 | 15 | 128 | |||
- wholesale lending | 12 | 14 | 128 | |||
24 | 29 | 128 | ||||
Impaired loans as a % ofgross loans and advances | ||||||
- personal lending | 3.1% | 3.9% | ||||
- wholesale lending | 1.9% | 2.0% | ||||
- total | 2.3% | 2.7% | ||||
$bn | $bn | |||||
Impairment allowances | ||||||
- personal lending | 2.9 | 4.6 | 135 | |||
- wholesale lending | 6.7 | 7.8 | 136 | |||
9.6 | 12.4 | 134 | ||||
Loans and advances net ofimpairment allowances | 1,015 | 1,087 | ||||
For year ended 31 December | ||||||
Loan impairment charge | 3.6 | 4.1 | 133 | |||
- personal lending | 1.8 | 1.8 | 132 | |||
- wholesale lending | 1.8 | 2.3 | 132 | |||
Other credit risk provisions | 0.1 | (0.2) | ||||
3.7 | 3.9 |
For footnote, see page 191.
In 2015, wholesale and personal gross loans and advances grew by $0.5bn and $7bn, respectively.
In wholesale lending, Asia balances decreased by $9.6bn and were partly offset by an increase of $7.5bn in North America and $3.2bn in Europe. Middle East and North Africa decreased $1.2bn and Latin America remained relatively unchanged.
In personal lending, Asia balances grew by $7.4bn across both its mortgage and other personal lending, and there was a $1.9bn increase in the Premier mortgage portfolio in the US and Canada. The increase was partly offset by a $5.0bn reduction in the US CML portfolio as a result of the ongoing run-off of the portfolio and continued loan sales.
Loan impairment charges increased by $0.2bn compared with 2014, notably in Middle East and North Africa and North America.
Gross loans to customers and banks over five years ($bn) |
Loan impairment charge over five years ($bn) |
Loan impairment charges by geographical region ($bn) |
Loan impairment charges by industry ($bn) |
Loan impairment allowances over five years |
Assets held for sale
(Audited)
During 2015, gross loans and advances and related impairment allowances arising in our Brazilian operations were reclassified from 'Loans and advances to customers' and 'Loans and advances to banks' to 'Assets held for sale' in the balance sheet.
Disclosures relating to assets held for sale are provided in the following credit risk management tables, primarily where the disclosure is relevant to the measurement of these financial assets:
· Maximum exposure to credit risk (page 122);
· Distribution of financial instruments by credit quality (page 125);
· Past due but not impaired gross financial instruments by geographical region (page 127); and
· Ageing analysis of days past due but not impaired gross financial instruments (page 127).
Although there was a reclassification on the balance sheet, there was no separate income statement reclassification. As a result, charges for loan impairment losses shown in the credit risk disclosures include loan impairment charges relating to financial assets classified as 'Assets held for sale'.
Loans and advances to customers and banks measured at amortised cost
(Audited)
Total gross loans and advances | Impairment allowances on loans and advances | |||
$m | $m | |||
As reported | 1,024,428 | (9,573) | ||
Reported in 'Assets held for sale' | 24,544 | (1,454) | ||
At 31 December 2015 | 1,048,972 | (11,027) |
At 31 December 2014, the gross loans and advances and related impairment allowances of our Brazilian operations were $31bn and $1.7bn, respectively. Gross loans and advances reduced by $8.5bn, mainly as a result of foreign exchange movements.
Lending balances held for sale continue to be measured at amortised cost less allowances for impairment; such carrying amounts may differ from fair value. Any difference between the carrying amount and the sales price, which is the fair value at the time of sale, would be recognised as a gain or loss at the time of sale.
See Note 23 on the Financial Statements for the carrying amount and the fair value at 31 December 2015 of loans and advances to banks and customers classified as held for sale.
Gross loans and impairment allowances on loans and advances to customers and banks reported in 'Assets held for sale'
(Audited)
Brazil | Other | Total | ||||
$m | $m | $m | ||||
Gross loans | ||||||
Loans and advances to customers | 18,103 | 2,042 | 20,145 | |||
- personal | 5,571 | 40 | 5,611 | |||
- corporate and commercial | 12,532 | 2,002 | 14,534 | |||
Financial | 4,399 | - | 4,399 | |||
- non-bank financial institutions | 331 | - | 331 | |||
- banks | 4,068 | - | 4,068 | |||
At 31 December 2015 | 22,502 | 2,042 | 24,544 | |||
24,543 | ||||||
Impairment allowances | ||||||
Loans and advances to customers | (1,433) | (21) | (1,454) | |||
- personal | (664) | - | (664) | |||
- corporate and commercial | (769) | (21) | (790) | |||
Financial | - | - | - | |||
- non-bank financial institutions | - | - | - | |||
- banks | - | - | - | |||
- banks | ||||||
At 31 December 2015 | (1,433) | (21) | (1,454) |
The table below analyses the amount of LICs arising from assets held for sale. The held for sale assets primarily relate to the Brazilian operations.
Loan impairment charges and other credit risk provisions
(Audited)
2015 | ||
$m | ||
LICs arising from: | ||
- assets held for sale | 965 | |
- assets not held for sale | 2,757 | |
Year ended 31 December | 3,722 |
Credit exposure
Maximum exposure to credit risk
(Audited)
The table on page 123 provides information on balance sheet items, offsets and loan and other credit-related commitments. Commentary on balance sheet movements is provided on page 62.
The offset in derivatives decreased in line with the decrease in maximum exposure amounts.
The offset on corporate and commercial loans to customers decreased by $15bn. This reduction was mainly related to corporate overdraft balances where a small number of clients benefited from the use of net interest arrangements across overdrafts and deposits. As a result, while net risk exposures are generally stable, gross balances can be volatile.
| 'Maximum exposure to credit risk' table (page 123) The table presents our maximum exposure to credit risk from balance sheet and off-balance sheet financial instruments before taking account of any collateral held or other credit enhancements (unless such enhancements meet accounting offsetting requirements). For financial assets recognised on the balance sheet, the maximum exposure to credit risk equals their carrying amount; for financial guarantees and similar contracts granted, it is the maximum amount that we would have to pay if the guarantees were called upon. For loan commitments and other credit-related commitments, it is generally the full amount of the committed facilities. The offset in the table relates to amounts where there is a legally enforceable right of offset in the event of counterparty default and where, as a result, there is a net exposure for credit risk purposes. However, as there is no intention to settle these balances on a net basis under normal circumstances, they do not qualify for net presentation for accounting purposes. No offset has been applied to off-balance sheet collateral. In the case of derivatives the offset column also includes collateral received in cash and other financial assets. |
Other credit risk mitigants
While not disclosed as an offset in the 'Maximum exposure to credit risk' table, other arrangements are in place which reduce our maximum exposure to credit risk. These include a charge over collateral over borrowers' specific assets such as residential properties. Other credit risk mitigants include short positions in securities and financial assets held as part of linked insurance/investment contracts where the risk is predominantly borne by the policyholder. In addition, we hold collateral in the form of financial instruments that are not recognised on the balance sheet.
See Note 32 and from page 139 and page 147 respectively on the Financial Statements for further details on collateral in respect of certain loans and advances and derivatives.
Maximum exposure to credit risk
(Audited)
2015 | 2014 | |||||||||||
Maximumexposure | Offset | Net | Maximumexposure | Offset | Net | |||||||
$m | $m | $m | $m | $m | $m | |||||||
Cash and balances at central banks | 98,934 | - | 98,934 | 129,957 | - | 129,957 | ||||||
Items in the course of collection from other banks | 5,768 | - | 5,768 | 4,927 | - | 4,927 | ||||||
Hong Kong Government certificates of indebtedness | 28,410 | - | 28,410 | 27,674 | - | 27,674 | ||||||
Trading assets | 158,346 | - | 158,346 | 228,944 | - | 228,944 | ||||||
- Treasury and other eligible bills | 7,829 | - | 7,829 | 16,170 | - | 16,170 | ||||||
- debt securities | 99,038 | - | 99,038 | 141,532 | - | 141,532 | ||||||
- loans and advances to banks | 22,303 | - | 22,303 | 27,581 | - | 27,581 | ||||||
- loans and advances to customers | 29,176 | - | 29,176 | 43,661 | - | 43,661 | ||||||
Financial assets designated at fair value | 4,857 | - | 4,857 | 9,031 | - | 9,031 | ||||||
- Treasury and other eligible bills | 396 | - | 396 | 56 | - | 56 | ||||||
- debt securities | 4,341 | - | 4,341 | 8,891 | - | 8,891 | ||||||
- loans and advances to banks | 120 | - | 120 | 84 | - | 84 | ||||||
- loans and advances to customers | - | - | - | - | - | - | ||||||
Derivatives | 288,476 | (258,755) | 29,721 | 345,008 | (313,300) | 31,708 | ||||||
Loans and advances to customers held at amortised cost | 924,454 | (52,190) | 872,264 | 974,660 | (67,094) | 907,566 | ||||||
- personal | 371,203 | (5,373) | 365,830 | 388,954 | (4,412) | 384,542 | ||||||
- corporate and commercial | 493,078 | (44,260) | 448,818 | 535,184 | (59,197) | 475,987 | ||||||
- non-bank financial institutions | 60,173 | (2,557) | 57,616 | 50,522 | (3,485) | 47,037 | ||||||
Loans and advances to banks held at amortised cost | 90,401 | (53) | 90,348 | 112,149 | (258) | 111,891 | ||||||
Reverse repurchase agreements - non-trading | 146,255 | (900) | 145,355 | 161,713 | (5,750) | 155,963 | ||||||
Financial investments | 423,120 | - | 423,120 | 404,773 | - | 404,773 | ||||||
- Treasury and other similar bills | 104,551 | - | 104,551 | 81,517 | - | 81,517 | ||||||
- debt securities | 318,569 | - | 318,569 | 323,256 | - | 323,256 | ||||||
Assets held for sale | 40,078 | - | 40,078 | 1,375 | - | 1,375 | ||||||
- disposal groups | 38,097 | - | 38,097 | 889 | - | 889 | ||||||
- non-current assets held for sale | 1,981 | - | 1,981 | 486 | - | 486 | ||||||
Other assets | 25,310 | - | 25,310 | 33,889 | - | 33,889 | ||||||
- endorsements and acceptances | 9,149 | - | 9,149 | 10,775 | - | 10,775 | ||||||
- other | 16,161 | - | 16,161 | 23,114 | - | 23,114 | ||||||
Total balance sheet exposure to credit risk | 2,234,409 | (311,898) | 1,922,511 | 2,434,100 | (386,402) | 2,047,698 | ||||||
Total off-balance sheet2 | 712,546 | - | 712,546 | 698,458 | - | 698,458 | ||||||
- financial guarantees and similar contracts | 46,116 | - | 46,116 | 47,078 | - | 47,078 | ||||||
- loan and other credit-related commitments2 | 666,430 | - | 666,430 | 651,380 | - | 651,380 | ||||||
At 31 December | 2,946,955 | (311,898) | 2,635,057 | 3,132,558 | (386,402) | 2,746,156 | ||||||
For footnote, see page 191.
Loan and other credit-related commitments2
Europe | Asia | MENA | North America | Latin America | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
Personal | 70,013 | 103,153 | 3,092 | 14,510 | 12,175 | 202,943 | ||||||
Corporate and commercial | 105,303 | 159,947 | 20,139 | 102,369 | 18,155 | 405,913 | ||||||
Financial | 20,230 | 11,619 | 186 | 24,543 | 996 | 57,574 | ||||||
At 31 December 2015 | 195,546 | 274,719 | 23,417 | 141,422 | 31,326 | 666,430 | ||||||
Personal | 86,247 | 96,497 | 2,995 | 15,636 | 11,679 | 213,054 | ||||||
Corporate and commercial | 98,045 | 138,366 | 20,141 | 102,911 | 17,540 | 377,003 | ||||||
Financial | 26,605 | 9,355 | 711 | 23,559 | 1,093 | 61,323 | ||||||
At 31 December 2014 | 210,897 | 244,218 | 23,847 | 142,106 | 30,312 | 651,380 |
For footnote, see page 191.
Concentration of exposure
The geographical diversification of our lending portfolio and our broad range of global businesses and products ensured that we did not overly depend on a few markets to generate growth in 2015. This diversification also supported our strategy for growth in faster-growing markets and those with international connectivity.
Financial investments
Our holdings of available-for-sale government and government agency debt securities, corporate debt securities, ABSs and other securities were spread across a wide range of issuers and geographical regions in 2015, with 14% invested in securities issued by banks and other financial institutions and 75% in government or government agency debt securities. We also held assets backing insurance and investment contracts.
For an analysis of financial investments, see Note 17 on the Financial Statements.
Trading assets
Trading securities remained the largest concentration within trading assets at 77% in 2015 and 2014. The largest concentration within the trading securities portfolio was in government and government agency debt securities. We had significant exposures to US Treasury and government agency debt securities ($15bn) and UK ($10bn) and Hong Kong ($6.5bn) government debt securities.
For an analysis of debt and equity securities held for trading, see Note 12 on the Financial Statements.
Derivatives
Derivative assets were $288bn at 31 December 2015 (2014: $345bn). Details of derivative amounts cleared through an exchange, central counterparty and non-central counterparty are shown on page 142.
For an analysis of derivatives, see page 141 and Note 16 on the Financial Statements.
Loans and advances
The following tables analyse loans by industry sector and by the location of the principal operations of the lending subsidiary or, in the case of the operations of The Hongkong and Shanghai Banking Corporation, HSBC Bank, HSBC Bank Middle East Limited and HSBC Bank USA, by the location of the lending branch. Excluding the effect of the classification of Brazilian assets as 'Assets held for sale', the distribution of loans across geographical regions and industries remained similar to last year.
For an analysis of loans and advances by country see page 151.
Gross loans and advances by industry sector and by geographical region
(Audited)
Europe | Asia | MENA | North America | Latin America | Total | As a % of total | ||||||||
$m | $m | $m | $m | $m | $m | gross loans | ||||||||
Personal | 170,526 | 132,707 | 6,705 | 58,186 | 5,958 | 374,082 | 36.5 | |||||||
- first lien residential mortgages | 125,544 | 94,606 | 2,258 | 50,117 | 1,986 | 274,511 | 26.8 | |||||||
- other personal3 | 44,982 | 38,101 | 4,447 | 8,069 | 3,972 | 99,571 | 9.7 | |||||||
Wholesale | ||||||||||||||
Corporate and commercial | 191,765 | 211,224 | 22,268 | 62,882 | 11,374 | 499,513 | 48.8 | |||||||
- manufacturing | 39,003 | 34,272 | 2,504 | 17,507 | 2,572 | 95,858 | 9.4 | |||||||
- international trade and services | 62,667 | 72,199 | 9,552 | 11,505 | 3,096 | 159,019 | 15.5 | |||||||
- commercial real estate | 26,256 | 32,371 | 690 | 7,032 | 1,577 | 67,926 | 6.7 | |||||||
- other property-related | 7,323 | 35,206 | 1,908 | 8,982 | 45 | 53,464 | 5.2 | |||||||
- government | 3,653 | 1,132 | 1,695 | 203 | 772 | 7,455 | 0.7 | |||||||
- other commercial4 | 52,863 | 36,044 | 5,919 | 17,653 | 3,312 | 115,791 | 11.3 | |||||||
Financial | 51,969 | 68,321 | 10,239 | 16,308 | 3,996 | 150,833 | 14.7 | |||||||
- non-bank financial institutions | 33,621 | 13,969 | 2,321 | 9,822 | 681 | 60,414 | 5.9 | |||||||
- banks | 18,348 | 54,352 | 7,918 | 6,486 | 3,315 | 90,419 | 8.8 | |||||||
Total wholesale | 243,734 | 279,545 | 32,507 | 79,190 | 15,370 | 650,346 | 63.5 | |||||||
Total gross loans and advancesat 31 December 2015 | 414,260 | 412,252 | 39,212 | 137,376 | 21,328 | 1,024,428 | 100.0 | |||||||
Percentage of total gross loans and advances | 40.4% | 40.3% | 3.8% | 13.4% | 2.1% | 100.0% | ||||||||
Personal | 178,531 | 129,515 | 6,571 | 65,400 | 13,537 | 393,554 | 35.8 | |||||||
- first lien residential mortgages | 131,000 | 93,147 | 2,647 | 55,577 | 4,153 | 286,524 | 26.0 | |||||||
- other personal3 | 47,531 | 36,368 | 3,924 | 9,823 | 9,384 | 107,030 | 9.8 | |||||||
Wholesale | ||||||||||||||
Corporate and commercial | 212,523 | 220,799 | 20,588 | 57,993 | 30,722 | 542,625 | 49.4 | |||||||
- manufacturing | 39,456 | 37,767 | 2,413 | 15,299 | 12,051 | 106,986 | 9.7 | |||||||
- international trade and services | 76,629 | 72,814 | 9,675 | 13,484 | 8,189 | 180,791 | 16.4 | |||||||
- commercial real estate | 28,187 | 35,678 | 579 | 6,558 | 2,291 | 73,293 | 6.7 | |||||||
- other property-related | 7,126 | 34,379 | 1,667 | 8,934 | 281 | 52,387 | 4.8 | |||||||
- government | 2,264 | 1,195 | 1,552 | 164 | 968 | 6,143 | 0.6 | |||||||
- other commercial4 | 58,861 | 38,966 | 4,702 | 13,554 | 6,942 | 123,025 | 11.2 | |||||||
Financial | 45,081 | 76,957 | 13,786 | 16,439 | 10,753 | 163,016 | 14.8 | |||||||
- non-bank financial institutions | 23,103 | 13,997 | 3,291 | 9,034 | 1,393 | 50,818 | 4.6 | |||||||
- banks | 21,978 | 62,960 | 10,495 | 7,405 | 9,360 | 112,198 | 10.2 | |||||||
Total wholesale | 257,604 | 297,756 | 34,374 | 74,432 | 41,475 | 705,641 | 64.2 | |||||||
Total gross loans and advancesat 31 December 2014 | 436,135 | 427,271 | 40,945 | 139,832 | 55,012 | 1,099,195 | 100.0 | |||||||
Percentage of total gross loans and advances | 39.7% | 38.9% | 3.7% | 12.7% | 5.0% | 100.0% |
For footnotes, see page 191.
Credit quality of financial instruments
(Audited)
We assess credit quality on all financial instruments which are subject to credit risk. Additional credit quality information in respect of our consolidated holdings of ABSs is provided on page 153.For the purpose of the following disclosure, retail loans which are past due up to 90 days and are not otherwise classified as impaired in accordance with our disclosure convention are not disclosed within the expected loss grade to which they relate, but are separately classified as past due but not impaired.
Distribution of financial instruments by credit quality
(Audited)
Neither past due nor impaired | Past due but not impaired |
| Impaired | Total gross amount | Total | |||||||||||||
Strong | Good | Satisfactory | Sub- standard | Impairment allowances5 | ||||||||||||||
|
| |||||||||||||||||
$m |
| $m |
| $m |
| $m | $m |
| $m |
| $m |
| $m |
| $m | |||
Cash and balances at central banks | 97,365 | 583 | 939 | 47 | - | - | 98,934 | 98,934 | ||||||||||
Items in the course of collection from other banks | 5,318 | 32 | 416 | 2 | - | - | 5,768 | 5,768 | ||||||||||
Hong Kong Government certificates of indebtedness | 28,410 | - | - | - | - | - | 28,410 | 28,410 | ||||||||||
Trading assets6 | 116,633 | 21,243 | 19,894 | 576 | 158,346 | 158,346 | ||||||||||||
- treasury and other eligible bills | 6,749 | 790 | 190 | 100 | 7,829 | 7,829 | ||||||||||||
- debt securities | 77,088 | 10,995 | 10,656 | 299 | 99,038 | 99,038 | ||||||||||||
- loans and advances: | ||||||||||||||||||
to banks | 14,546 | 4,391 | 3,239 | 127 | 22,303 | 22,303 | ||||||||||||
to customers | 18,250 | 5,067 | 5,809 | 50 | 29,176 | 29,176 | ||||||||||||
Financial assets designated at fair value6 | 3,037 | 701 | 736 | 383 | 4,857 | 4,857 | ||||||||||||
- treasury and other eligible bills | 139 | 193 | - | 64 | 396 | 396 | ||||||||||||
- debt securities | 2,898 | 508 | 616 | 319 | 4,341 | 4,341 | ||||||||||||
- loans and advances: | ||||||||||||||||||
to banks | - | - | 120 | - | 120 | 120 | ||||||||||||
to customers | - | - | - | - | - | - | ||||||||||||
Derivatives6 | 248,101 | 32,056 | 7,209 | 1,110 | 288,476 | 288,476 | ||||||||||||
Loans and advances to customers held at amortised cost7 | 472,691 | 214,152 | 194,393 | 16,836 | 12,179 | 23,758 | 934,009 | (9,555) | 924,454 | |||||||||
- personal | 309,720 | 29,322 | 15,021 | 944 | 7,568 | 11,507 | 374,082 | (2,879) | 371,203 | |||||||||
- corporate and commercial | 127,673 | 168,772 | 171,466 | 15,379 | 4,274 | 11,949 | 499,513 | (6,435) | 493,078 | |||||||||
- non-bank financial institutions | 35,298 | 16,058 | 7,906 | 513 | 337 | 302 | 60,414 | (241) | 60,173 | |||||||||
Loans and advances to banks heldat amortised cost | 73,226 | 11,929 | 4,836 | 407 | 1 | 20 | 90,419 | (18) | 90,401 | |||||||||
Reverse repurchase agreements- non-trading | 108,238 | 16,552 | 20,931 | 46 | - | 488 | 146,255 | - | 146,255 | |||||||||
Financial investments | 382,328 | 18,600 | 16,341 | 4,525 | - | 1,326 | 423,120 | 423,120 | ||||||||||
- treasury and other similar bills | 93,562 | 3,963 | 4,756 | 2,270 | - | - | 104,551 | 104,551 | ||||||||||
- debt securities | 288,766 | 14,637 | 11,585 | 2,255 | - | 1,326 | 318,569 | 318,569 | ||||||||||
Assets held for sale | 10,177 | 9,605 | 17,279 | 1,635 | 703 | 2,133 | 41,532 | (1,454) | 40,078 | |||||||||
- disposal groups | 10,149 | 8,815 | 16,213 | 1,567 | 701 | 2,085 | 39,530 | (1,433) | 38,097 | |||||||||
- non-current assets held for sale | 28 | 790 | 1,066 | 68 | 2 | 48 | 2,002 | (21) | 1,981 | |||||||||
Other assets | 8,306 | 5,688 | 10,204 | 632 | 147 | 333 | 25,310 | - | 25,310 | |||||||||
- endorsements and acceptances | 1,084 | 3,850 | 3,798 | 343 | 22 | 52 | 9,149 | 9,149 | ||||||||||
- accrued income and other | 7,222 | 1,838 | 6,406 | 289 | 125 | 281 | 16,161 | 16,161 | ||||||||||
At 31 December 2015 | 1,553,830 | 331,141 | 293,178 | 26,199 | 13,030 | 28,058 | 2,245,436 | (11,027) | 2,234,409 | |||||||||
% | % | % | % | % | % | % | ||||||||||||
Percentage of total gross amount | 69.2 | 14.7 | 13.1 | 1.2 | 0.6 | 1.2 | 100.0 | |||||||||||
Distribution of financial instruments by credit quality (continued)
Neither past due nor impaired | Past due but not impaired |
| Impaired | Total gross amount | Total | |||||||||||||
Strong | Good | Satisfactory | Sub- standard | Impairment allowances5 | ||||||||||||||
$m | $m | $m | $m | $m | $m | $m | $m | $m | ||||||||||
Cash and balances at central banks | 127,971 | 1,438 | 195 | 353 | 129,957 | 129,957 | ||||||||||||
Items in the course of collection from other banks | 4,515 | 46 | 365 | 1 | 4,927 | 4,927 | ||||||||||||
Hong Kong Government certificates of indebtedness | 27,674 | - | - | - | 27,674 | 27,674 | ||||||||||||
Trading assets6 | 168,521 | 35,042 | 24,740 | 641 | 228,944 | 228,944 | ||||||||||||
- treasury and other eligible bills | 13,938 | 1,641 | 559 | 32 | 16,170 | 16,170 | ||||||||||||
- debt securities | 111,138 | 17,786 | 12,305 | 303 | 141,532 | 141,532 | ||||||||||||
- loans and advances: | ||||||||||||||||||
to banks | 17,492 | 4,961 | 5,016 | 112 | 27,581 | 27,581 | ||||||||||||
to customers | 25,953 | 10,654 | 6,860 | 194 | 43,661 | 43,661 | ||||||||||||
Financial assets designated at fair value6 | 3,017 | 4,476 | 1,207 | 331 | 9,031 | 9,031 | ||||||||||||
- treasury and other eligible bills | 5 | - | - | 51 | 56 | 56 | ||||||||||||
- debt securities | 3,011 | 4,476 | 1,124 | 280 | 8,891 | 8,891 | ||||||||||||
- loans and advances: | ||||||||||||||||||
to banks | 1 | - | 83 | - | 84 | 84 | ||||||||||||
to customers | - | - | - | - | - | - | ||||||||||||
Derivatives6 | 269,490 | 58,596 | 15,962 | 960 | 345,008 | 345,008 | ||||||||||||
Loans and advances to customers held at amortised cost7 | 487,734 | 239,136 | 196,685 | 20,802 | 13,357 | 29,283 | 986,997 | (12,337) | 974,660 | |||||||||
- personal | 320,678 | 32,601 | 15,109 | 1,130 | 8,876 | 15,160 | 393,554 | (4,600) | 388,954 | |||||||||
- corporate and commercial | 141,375 | 192,799 | 171,748 | 18,986 | 3,922 | 13,795 | 542,625 | (7,441) | 535,184 | |||||||||
- non-bank financial institutions | 25,681 | 13,736 | 9,828 | 686 | 559 | 328 | 50,818 | (296) | 50,522 | |||||||||
Loans and advances to banks heldat amortised cost | 83,766 | 19,525 | 7,945 | 914 | 1 | 47 | 112,198 | (49) | 112,149 | |||||||||
Reverse repurchase agreements- non-trading | 98,470 | 28,367 | 33,283 | 1,593 | - | - | 161,713 | - | 161,713 | |||||||||
Financial investments | 347,218 | 27,373 | 22,600 | 5,304 | - | 2,278 | 404,773 | 404,773 | ||||||||||
- treasury and other similar bills | 68,966 | 6,294 | 4,431 | 1,826 | - | - | 81,517 | 81,517 | ||||||||||
- debt securities | 278,252 | 21,079 | 18,169 | 3,478 | - | 2,278 | 323,256 | 323,256 | ||||||||||
Assets held for sale | 802 | 43 | 79 | - | 2 | 465 | 1,391 | (16) | 1,375 | |||||||||
- disposal groups | 768 | 43 | 79 | - | - | - | 890 | - | 890 | |||||||||
- non-current assets held for sale | 34 | - | - | - | 2 | 465 | 501 | (16) | 485 | |||||||||
Other assets | 12,213 | 7,521 | 12,897 | 631 | 208 | 419 | 33,889 | 33,889 | ||||||||||
- endorsements and acceptances | 1,507 | 4,644 | 4,281 | 298 | 34 | 11 | 10,775 | 10,775 | ||||||||||
- accrued income and other | 10,706 | 2,877 | 8,616 | 333 | 174 | 408 | 23,114 | 23,114 | ||||||||||
At 31 December 2014 | 1,631,391 | 421,563 | 315,958 | 31,530 | 13,568 | 32,492 | 2,446,502 | (12,402) | 2,434,100 | |||||||||
% | % | % | % | % | % | % | ||||||||||||
Percentage of total gross amount | 66.7 | 17.2 | 12.9 | 1.3 | 0.6 | 1.3 | 100.0 | |||||||||||
For footnotes, see page 191.
Past due but not impaired gross financial instruments
(Audited)
Past due but not impaired gross financial instruments are those loans where, although customers have failed to make payments in accordance with the contractual terms of theirfacilities, they have not met the impaired loan criteria described on page 128.
In personal lending, past due but not impaired balances decreased, mainly due to the Brazilian reclassification and the continued run-off and loan sales in the CML portfolio.
Past due but not impaired gross financial instruments by geographical region
(Audited)
Europe | Asia | MENA | North America | Latin America | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
Loans and advances to customers held at amortised cost | 1,928 | 3,405 | 909 | 5,392 | 545 | 12,179 | ||||||
- personal | 1,152 | 2,573 | 180 | 3,287 | 376 | 7,568 | ||||||
- corporate and commercial | 762 | 790 | 710 | 1,843 | 169 | 4,274 | ||||||
- non-bank financial institutions | 14 | 42 | 19 | 262 | - | 337 | ||||||
Assets held for sale | - | - | - | 2 | 701 | 703 | ||||||
- disposal group | - | - | - | - | 701 | 701 | ||||||
- non-current assets held for sale | - | - | - | 2 | - | 2 | ||||||
Other financial instruments | 10 | 39 | 15 | 80 | 4 | 148 | ||||||
At 31 December 2015 | 1,938 | 3,444 | 924 | 5,474 | 1,250 | 13,030 | ||||||
Loans and advances to customers held at amortised cost | 2,409 | 4,260 | 704 | 4,634 | 1,350 | 13,357 | ||||||
- personal | 1,159 | 2,880 | 182 | 3,759 | 896 | 8,876 | ||||||
- corporate and commercial | 1,244 | 1,102 | 508 | 623 | 445 | 3,922 | ||||||
- non-bank financial institutions | 6 | 278 | 14 | 252 | 9 | 559 | ||||||
Assets held for sale | - | - | - | 2 | - | 2 | ||||||
- disposal group | - | - | - | - | - | - | ||||||
- non-current assets held for sale | - | - | - | 2 | - | 2 | ||||||
Other financial instruments | 6 | 52 | 31 | 95 | 25 | 209 | ||||||
At 31 December 2014 | 2,415 | 4,312 | 735 | 4,731 | 1,375 | 13,568 |
Ageing analysis of days for past due but not impaired gross financial instruments
(Audited)
Up to 29 days | 30-59days | 60-89days | 90-179 days | 180 days and over | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
Loans and advances to customers held at amortised cost | 9,403 | 1,917 | 727 | 111 | 21 | 12,179 | ||||||
- personal | 5,665 | 1,401 | 502 | - | - | 7,568 | ||||||
- corporate and commercial | 3,432 | 505 | 225 | 93 | 19 | 4,274 | ||||||
- non-bank financial institutions | 306 | 11 | - | 18 | 2 | 337 | ||||||
Assets held for sale | 476 | 137 | 90 | - | - | 703 | ||||||
- disposal group | 476 | 136 | 89 | - | - | 701 | ||||||
- non-current assets held for sale | - | 1 | 1 | - | - | 2 | ||||||
Other financial instruments | 80 | 35 | 14 | 10 | 9 | 148 | ||||||
At 31 December 2015 | 9,959 | 2,089 | 831 | 121 | 30 | 13,030 | ||||||
Loans and advances to customers held at amortised cost | 10,427 | 2,057 | 801 | 54 | 18 | 13,357 | ||||||
- personal | 6,477 | 1,717 | 676 | 5 | 1 | 8,876 | ||||||
- corporate and commercial | 3,417 | 328 | 114 | 48 | 15 | 3,922 | ||||||
- non-bank financial institutions | 533 | 12 | 11 | 1 | 2 | 559 | ||||||
Assets held for sale | - | - | - | 1 | 1 | 2 | ||||||
- disposal group | - | - | - | - | - | - | ||||||
- non-current assets held for sale | - | - | - | 1 | 1 | 2 | ||||||
Other financial instruments | 130 | 33 | 18 | 11 | 17 | 209 | ||||||
At 31 December 2014 | 10,557 | 2,090 | 819 | 66 | 36 | 13,568 |
Impaired loans
(Audited)
Impaired loans and advances are those that meet any of the following criteria:
· wholesale loans and advances classified as Customer Risk Rating ('CRR') 9 or CRR 10. These grades are assigned when the bank considers that either the customer is unlikely to pay their credit obligations in full without recourse to security, or when the customer is more than 90 days past due on any material credit obligation to HSBC.
· retail loans and advances classified as Expected Loss ('EL') 9 or EL 10. These grades are typically assigned to retail loans and advances more than 90 days past dueunless individually they have been assessed as not impaired.
· renegotiated loans and advances that have been subject to a change in contractual cash flows as a result of a concession which the lender would not otherwise consider, and where it is probable that without the concession the borrower would be unable to meet the contractual payment obligations in full, unless the concession is insignificant and there are no other indicators of impairment. Renegotiated loans remain classified as impaired until there is sufficient evidence to demonstrate a significant reduction in the risk of non-payment of future cash flows, and there are no other indicators of impairment.
Movement in impaired loans by geographical region
Europe | Asia | MENA | North America | Latin America | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
Impaired loans at 1 January 2015 | 10,242 | 2,048 | 1,981 | 11,694 | 3,365 | 29,330 | ||||||
- personal | 2,544 | 491 | 242 | 10,826 | 1,057 | 15,160 | ||||||
- corporate and commercial | 7,385 | 1,545 | 1,696 | 862 | 2,307 | 13,795 | ||||||
- financial | 313 | 12 | 43 | 6 | 1 | 375 | ||||||
313 | ||||||||||||
Classified as impaired during the year | 3,909 | 1,893 | 338 | 2,986 | 2,434 | 11,560 | ||||||
- personal | 1,257 | 813 | 178 | 2,245 | 1,502 | 5,995 | ||||||
- corporate and commercial | 2,567 | 1,079 | 159 | 740 | 924 | 5,469 | ||||||
- financial | 85 | 1 | 1 | 1 | 8 | 96 | ||||||
Transferred from impaired to unimpaired duringthe year | (964) | (204) | (107) | (1,786) | (245) | (3,306) | ||||||
- personal | (211) | (169) | (82) | (1,699) | (185) | (2,346) | ||||||
- corporate and commercial | (734) | (35) | (6) | (87) | (60) | (922) | ||||||
- financial | (19) | - | (19) | - | - | (38) | ||||||
Amounts written off | (870) | (595) | (335) | (589) | (1,312) | (3,701) | ||||||
- personal | (280) | (416) | (113) | (493) | (961) | (2,263) | ||||||
- corporate and commercial | (577) | (179) | (222) | (95) | (351) | (1,424) | ||||||
- financial | (13) | - | - | (1) | - | (14) | ||||||
Net repayments and other | (2,640) | (767) | (111) | (3,375) | (3,212) | (10,105) | ||||||
- personal | (780) | (203) | - | (2,885) | (1,171) | (5,039) | ||||||
- corporate and commercial | (1,778) | (562) | (110) | (486) | (2,033) | (4,969) | ||||||
- financial | (82) | (2) | (1) | (4) | (8) | (97) | ||||||
Impaired loans at 31 December 2015 | 9,677 | 2,375 | 1,766 | 8,930 | 1,030 | 23,778 | ||||||
- personal | 2,530 | 516 | 225 | 7,994 | 242 | 11,507 | ||||||
- corporate and commercial | 6,863 | 1,848 | 1,517 | 934 | 787 | 11,949 | ||||||
- financial | 284 | 11 | 24 | 2 | 1 | 322 | ||||||
% | % | % | % | % | % | |||||||
Impaired loans as a percentage of gross loans | % | 2.3 | 0.6 | 4.5 | 6.5 | 4.8 | 2.3 | |||||
- personal | 1.5 | 0.4 | 3.4 | 13.7 | 4.1 | 3.1 | ||||||
- corporate and commercial | 3.6 | 0.9 | 6.8 | 1.5 | 6.9 | 2.4 | ||||||
- financial | 0.5 | 0.0 | 0.2 | 0.0 | 0.0 | 0.2 |
Europe | Asia | MENA | North America | Latin America | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
Impaired loans at 1 January 2014 | 13,228 | 1,623 | 2,285 | 15,123 | 4,244 | 36,503 | ||||||
- personal | 2,938 | 526 | 317 | 13,669 | 1,348 | 18,798 | ||||||
- corporate and commercial | 9,714 | 1,082 | 1,765 | 1,427 | 2,889 | 16,877 | ||||||
- financial | 576 | 15 | 203 | 27 | 7 | 828 | ||||||
Classified as impaired during the year | 3,367 | 1,970 | 346 | 4,724 | 3,342 | 13,749 | ||||||
- personal | 1,168 | 857 | 193 | 4,360 | 1,958 | 8,536 | ||||||
- corporate and commercial | 2,166 | 1,113 | 153 | 354 | 1,383 | 5,169 | ||||||
- financial | 33 | - | - | 10 | 1 | 44 | ||||||
Transferred from impaired to unimpaired duringthe year | (1,661) | (230) | (320) | (2,609) | (730) | (5,550) | ||||||
- personal | (282) | (184) | (178) | (2,551) | (364) | (3,559) | ||||||
- corporate and commercial | (1,319) | (46) | (53) | (57) | (366) | (1,841) | ||||||
- financial | (60) | - | (89) | (1) | - | (150) | ||||||
Amounts written off | (2,037) | (617) | (111) | (1,369) | (2,048) | (6,182) | ||||||
- personal | (631) | (470) | (77) | (1,007) | (1,371) | (3,556) | ||||||
- corporate and commercial | (1,201) | (147) | (29) | (356) | (673) | (2,406) | ||||||
- financial | (205) | - | (5) | (6) | (4) | (220) | ||||||
Net repayments and other | (2,655) | (698) | (219) | (4,175) | (1,443) | (9,190) | ||||||
- personal | (649) | (238) | (13) | (3,645) | (514) | (5,059) | ||||||
- corporate and commercial | (1,975) | (457) | (140) | (506) | (926) | (4,004) | ||||||
- financial | (31) | (3) | (66) | (24) | (3) | (127) | ||||||
Impaired loans at 31 December 2014 | 10,242 | 2,048 | 1,981 | 11,694 | 3,365 | 29,330 | ||||||
- personal | 2,544 | 491 | 242 | 10,826 | 1,057 | 15,160 | ||||||
- corporate and commercial | 7,385 | 1,545 | 1,696 | 862 | 2,307 | 13,795 | ||||||
- financial | 313 | 12 | 43 | 6 | 1 | 375 | ||||||
% | % | % | % | % | % | |||||||
Impaired loans as a percentage of gross loans | % | 2.3 | 0.5 | 4.8 | 8.4 | 6.1 | 2.7 | |||||
- personal | 1.4 | 0.4 | 3.7 | 16.6 | 7.8 | 3.9 | ||||||
- corporate and commercial | 3.5 | 0.7 | 8.2 | 1.5 | 7.5 | 2.5 | ||||||
- financial | 0.7 | 0.0 | 0.3 | 0.0 | 0.0 | 0.2 |
At 31 December 2014, our Brazilian impaired loans were $1.4bn in corporate and commercial and $0.8bn in personal.
Excluding the Brazilian reclassification to 'Assets held for sale', corporate and commercial impaired loans decreased $0.4bn including the favourable effects of a $0.8bn foreign exchange reduction. In personal, the continued run-off of the US CML portfolio reduced collectively assessed impaired loan balances by a further $2.7bn. 'Net repayments and other' included $2.1bn of CML portfolio assets that were reclassified as held for sale or sold during the year. Whilst there was a reduction in total personal impaired loans, there was a marginal increase in the UK resulting from improved identification of impaired residential mortgages.
Renegotiated loans and forbearance
The contractual terms of a loan may be modified for a number of reasons, including changes in market conditions, customer retention and other factors not related to the current or potential credit deterioration of a customer. 'Forbearance' describes concessions made on the contractual terms of a loan in response to an obligor's financial difficulties. We classify and report loans on which concessions have been granted under conditions of credit distress as 'renegotiated loans' when their contractual payment terms have been modified because we have significant concerns about the borrowers' ability to meet contractual payments when due. On renegotiation, where the existing agreement is cancelled and a new agreement is made on substantially different terms, or if the terms of an existing agreement are modified such that the renegotiated loan is substantially a different financial instrument, the loan would be derecognised and recognised as a new loan for accounting purposes. However, the newly recognised financial asset will retain the renegotiated loan classification. Concessions on loans made to customers which do not affect the payment structure or basis of repayment, such as waivers of financial or security covenants, do not directly provide concessionary relief to customers in terms of their ability to service obligations as they fall due and are therefore not included in this classification.
The most significant portfolio of renegotiated loans remained in North America, substantially all of which were retail loans held by HSBC Finance Corporation ('HSBC Finance').
The following tables show the gross carrying amounts of the Group's holdings of renegotiated loans and advances to customers by industry sector, geography, credit quality classification and by arrangement type.
Renegotiated loans and advances to customers by geographical region
Europe | Asia | MENA | North America | Latin America | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
First lien residential mortgages | 1,461 | 68 | 36 | 10,680 | 37 | 12,282 | ||||||
- neither past due nor impaired | 512 | 47 | 11 | 3,376 | 27 | 3,973 | ||||||
- past due but not impaired | 174 | 5 | 4 | 1,567 | 3 | 1,753 | ||||||
- impaired | 775 | 16 | 21 | 5,737 | 7 | 6,556 | ||||||
Other personal lending3 | 298 | 272 | 33 | 1,054 | 35 | 1,692 | ||||||
- neither past due nor impaired | 131 | 141 | 24 | 410 | 10 | 716 | ||||||
- past due but not impaired | 51 | 16 | 2 | 173 | 1 | 243 | ||||||
- impaired | 116 | 115 | 7 | 471 | 24 | 733 | ||||||
Corporate and commercial | 5,215 | 599 | 1,411 | 638 | 506 | 8,369 | ||||||
- neither past due nor impaired | 1,467 | 119 | 343 | 93 | 130 | 2,152 | ||||||
- past due but not impaired | 109 | - | 14 | - | - | 123 | ||||||
- impaired | 3,639 | 480 | 1,054 | 545 | 376 | 6,094 | ||||||
Non-bank financial institutions | 340 | 4 | 272 | - | - | 616 | ||||||
- neither past due nor impaired | 143 | - | 248 | - | - | 391 | ||||||
- past due but not impaired | - | - | 24 | - | - | 24 | ||||||
- impaired | 197 | 4 | - | - | - | 201 | ||||||
Renegotiated loans at 31 December 2015 | 7,314 | 943 | 1,752 | 12,372 | 578 | 22,959 | ||||||
- neither past due nor impaired | 2,253 | 307 | 626 | 3,879 | 167 | 7,232 | ||||||
- past due but not impaired | 334 | 21 | 44 | 1,740 | 4 | 2,143 | ||||||
- impaired | 4,727 | 615 | 1,082 | 6,753 | 407 | 13,584 | ||||||
Impairment allowances on renegotiated loans | 1,402 | 193 | 575 | 1,014 | 155 | 3,339 | ||||||
- renegotiated loans as % of total gross loans | 1.8% | 0.3% | 5.6% | 9.5% | 3.2% | 2.5% | ||||||
First lien residential mortgages | 1,605 | 94 | 58 | 13,540 | 60 | 15,357 | ||||||
- neither past due nor impaired | 529 | 63 | 19 | 3,695 | 32 | 4,338 | ||||||
- past due but not impaired | 221 | 8 | 1 | 1,894 | 5 | 2,129 | ||||||
- impaired | 855 | 23 | 38 | 7,951 | 23 | 8,890 | ||||||
Other personal lending3 | 324 | 292 | 27 | 1,267 | 326 | 2,236 | ||||||
- neither past due nor impaired | 184 | 173 | 16 | 453 | 14 | 840 | ||||||
- past due but not impaired | 40 | 22 | 5 | 214 | 1 | 282 | ||||||
- impaired | 100 | 97 | 6 | 600 | 311 | 1,114 | ||||||
Corporate and commercial | 5,469 | 501 | 1,439 | 427 | 1,324 | 9,160 | ||||||
- neither past due nor impaired | 1,383 | 102 | 483 | 36 | 303 | 2,307 | ||||||
- past due but not impaired | 68 | - | 31 | 1 | 1 | 101 | ||||||
- impaired | 4,018 | 399 | 925 | 390 | 1,020 | 6,752 | ||||||
Non-bank financial institutions | 413 | 4 | 323 | 1 | 1 | 742 | ||||||
- neither past due nor impaired | 219 | - | 305 | - | - | 524 | ||||||
- past due but not impaired | - | - | - | - | - | - | ||||||
- impaired | 194 | 4 | 18 | 1 | 1 | 218 | ||||||
Renegotiated loans at 31 December 2014 | 7,811 | 891 | 1,847 | 15,235 | 1,711 | 27,495 | ||||||
- neither past due nor impaired | 2,315 | 338 | 823 | 4,184 | 349 | 8,009 | ||||||
- past due but not impaired | 329 | 30 | 37 | 2,109 | 7 | 2,512 | ||||||
- impaired | 5,167 | 523 | 987 | 8,942 | 1,355 | 16,974 | ||||||
Impairment allowances on renegotiated loans | 1,458 | 170 | 458 | 1,499 | 704 | 4,289 | ||||||
- renegotiated loans as % of total gross loans | 1.9% | 0.2% | 6.1% | 11.5% | 3.7% | 2.8% |
For footnote, see page 191.
The following table shows movements in renegotiated loans during the year. Renegotiated loans decreased by $4.5bn to $23bn in 2015, partly due to the Brazilian reclassification of $1bn. Renegotiated loans in personal lending reduced by $3.6bn. Included within 'other' movements is $2.1bn of CML portfolio assets that were transferred to 'Assets held for sale'. Write-offs reduced as a result of improvements in US economic conditions and housing market.
Movement in renegotiated loans and advances to customers by geographical region
Europe | Asia | MENA | North America | Latin America | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
Renegotiated loans at 1 January 2015 | 7,811 | 891 | 1,847 | 15,235 | 1,711 | 27,495 | ||||||
- personal | 1,929 | 386 | 85 | 14,807 | 386 | 17,593 | ||||||
- corporate and commercial | 5,469 | 501 | 1,439 | 427 | 1,324 | 9,160 | ||||||
- non-bank financial institutions | 413 | 4 | 323 | 1 | 1 | 742 | ||||||
Loans renegotiated in the year without derecognition | 1,970 | 421 | 115 | 999 | 553 | 4,058 | ||||||
- personal | 471 | 87 | 7 | 625 | 250 | 1,440 | ||||||
- corporate and commercial | 1,494 | 334 | 89 | 374 | 303 | 2,594 | ||||||
- non-bank financial institutions | 5 | - | 19 | - | - | 24 | ||||||
Loans renegotiated in the year resulting in recognition of a new loan | 222 | 16 | 196 | (1) | 175 | 608 | ||||||
- personal | 57 | - | - | (1) | 18 | 74 | ||||||
- corporate and commercial | 156 | 16 | 4 | - | 157 | 333 | ||||||
- non-bank financial institutions | 9 | - | 192 | - | - | 201 | ||||||
Repayments | (1,675) | (351) | (276) | (1,304) | (467) | (4,073) | ||||||
- personal | (574) | (88) | (32) | (1,166) | (185) | (2,045) | ||||||
- corporate and commercial | (1,054) | (263) | (159) | (138) | (282) | (1,896) | ||||||
- non-bank financial institutions | (47) | - | (85) | - | - | (132) | ||||||
Amounts written off | (294) | (52) | (11) | (254) | (290) | (901) | ||||||
- personal | (45) | (24) | (5) | (241) | (139) | (454) | ||||||
- corporate and commercial | (249) | (28) | (6) | (12) | (150) | (445) | ||||||
- non-bank financial institutions | - | - | - | (1) | (1) | (2) | ||||||
Other | (720) | 18 | (119) | (2,303) | (1,104) | (4,228) | ||||||
- personal | (79) | (21) | 14 | (2,290) | (258) | (2,634) | ||||||
- corporate and commercial | (601) | 39 | 44 | (13) | (846) | (1,377) | ||||||
- non-bank financial institutions | (40) | - | (177) | - | - | (217) | ||||||
At 31 December 2015 | 7,314 | 943 | 1,752 | 12,372 | 578 | 22,959 | ||||||
- personal | 1,759 | 340 | 69 | 11,734 | 72 | 13,974 | ||||||
- corporate and commercial | 5,215 | 599 | 1,411 | 638 | 506 | 8,369 | ||||||
- non-bank financial institutions | 340 | 4 | 272 | - | - | 616 | ||||||
Renegotiated loans at 1 January 2014 | 9,756 | 767 | 2,094 | 18,789 | 2,769 | 34,175 | ||||||
- personal | 2,251 | 435 | 149 | 18,130 | 607 | 21,572 | ||||||
- corporate and commercial | 7,270 | 330 | 1,583 | 658 | 2,161 | 12,002 | ||||||
- non-bank financial institutions | 235 | 2 | 362 | 1 | 1 | 601 | ||||||
Loans renegotiated in the year without derecognition | 1,543 | 371 | 296 | 862 | 725 | 3,797 | ||||||
- personal | 433 | 83 | 10 | 774 | 310 | 1,610 | ||||||
- corporate and commercial | 939 | 288 | 286 | 78 | 415 | 2,006 | ||||||
- non-bank financial institutions | 171 | - | - | 10 | - | 181 | ||||||
Loans renegotiated in the year resulting in recognition of a new loan | 500 | 5 | 79 | - | 92 | 676 | ||||||
- personal | 69 | 2 | - | - | 28 | 99 | ||||||
- corporate and commercial | 381 | - | 61 | - | 64 | 506 | ||||||
- non-bank financial institutions | 50 | 3 | 18 | - | - | 71 | ||||||
Repayments | (2,416) | (246) | (562) | (1,518) | (1,036) | (5,778) | ||||||
- personal | (635) | (96) | (47) | (1,319) | (288) | (2,385) | ||||||
- corporate and commercial | (1,757) | (149) | (445) | (189) | (747) | (3,287) | ||||||
- non-bank financial institutions | (24) | (1) | (70) | (10) | (1) | (106) | ||||||
Amounts written off | (828) | (42) | (23) | (640) | (510) | (2,043) | ||||||
- personal | (88) | (28) | (7) | (568) | (223) | (914) | ||||||
- corporate and commercial | (740) | (14) | (16) | (72) | (286) | (1,128) | ||||||
- non-bank financial institutions | - | - | - | - | (1) | (1) | ||||||
Other | (744) | 36 | (37) | (2,258) | (329) | (3,332) | ||||||
- personal | (101) | (10) | (20) | (2,210) | (48) | (2,389) | ||||||
- corporate and commercial | (624) | 46 | (30) | (48) | (283) | (939) | ||||||
- non-bank financial institutions | (19) | - | 13 | - | 2 | (4) | ||||||
At 31 December 2014 | 7,811 | 891 | 1,847 | 15,235 | 1,711 | 27,495 | ||||||
- personal | 1,929 | 386 | 85 | 14,807 | 386 | 17,593 | ||||||
- corporate and commercial | 5,469 | 501 | 1,439 | 427 | 1,324 | 9,160 | ||||||
- non-bank financial institutions | 413 | 4 | 323 | 1 | 1 | 742 | ||||||
A range of forbearance strategies are employed in order to improve the management of customer relationships, maximise collection opportunities and, if possible, avoid default, foreclosure or repossession.
The table below shows the arrangement type as a percentage of the total value of arrangements offered. Corporate renegotiated loans often require the granting of more than one arrangement type as part of an effective strategy. The
percentages reported in the table below includes the effect of loans being reported in more than one arrangement type.
Renegotiated loans by arrangement type: corporate and commercial and financial
R | % | |
Maturity term extensions | 42.4 | |
Reductions in margin, principal forgiveness, debt equity swaps and interest, fees or penalty payment forgiveness | 19.6 | |
Other changes to repayment profile | 14.1 | |
Interest only conversion | 13.9 | |
Other | 10.0 | |
At 31 December 2015 | 100.0 |
In personal lending, renegotiated loans have been allocated to the single most dominant arrangement type.
Renegotiated loans by arrangement type: personal lending
% | ||
Personal | ||
- interest rate and terms modifications | 11.4 | |
- payment concessions | 6.0 | |
- collection re-age8 | 35.0 | |
- modification re-age9 | 42.9 | |
- other | 4.7 | |
At 31 December 2015 | 100.0 |
For footnotes, see page 191.
Impairment of loans and advances
(Audited)
For an analysis of loan impairment charges and other credit risk provisions by global business, see page 65.
The tables below analyse the loan impairment charges for the year by industry sector, for impaired loans and advances that are either individually or collectively assessed, and collective impairment allowances on loans and advances that are classified as not impaired.
Loan impairment charge to the income statement by industry sector
Europe | Asia | MENA | North America | Latin America | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
Personal | 263 | 309 | 122 | 157 | 983 | 1,834 | ||||||
- first lien residential mortgages | (7) | (1) | 49 | 70 | 41 | 152 | ||||||
- other personal3 | 270 | 310 | 73 | 87 | 942 | 1,682 | ||||||
Corporate and commercial | 432 | 372 | 195 | 319 | 451 | 1,769 | ||||||
- manufacturing and international trade and services | 158 | 250 | 107 | 26 | 305 | 846 | ||||||
- commercial real estate and other property-related | 33 | 18 | 49 | 24 | 47 | 171 | ||||||
- other commercial4 | 241 | 104 | 39 | 269 | 99 | 752 | ||||||
Financial | 14 | - | (18) | (7) | - | (11) | ||||||
Total loan impairment charge for the year ended 31 December 2015 | 709 | 681 | 299 | 469 | 1,434 | 3,592 | ||||||
Personal | 245 | 321 | 25 | 117 | 1,095 | 1,803 | ||||||
- first lien residential mortgages | (75) | 6 | (24) | 26 | 15 | (52) | ||||||
- other personal3 | 320 | 315 | 49 | 91 | 1,080 | 1,855 | ||||||
Corporate and commercial | 790 | 327 | 6 | 196 | 937 | 2,256 | ||||||
- manufacturing and international trade and services | 520 | 197 | 36 | 116 | 382 | 1,251 | ||||||
- commercial real estate and other property-related | 78 | 29 | (28) | 27 | 176 | 282 | ||||||
- other commercial4 | 192 | 101 | (2) | 53 | 379 | 723 | ||||||
Financial | 44 | (4) | (32) | (13) | 1 | (4) | ||||||
Total loan impairment charge for the year ended31 December 2014 | 1,079 | 644 | (1) | 300 | 2,033 | 4,055 |
For footnotes, see page 191.
Loan impairment charge to the income statement by assessment type
Europe | Asia | MENA | North America | Latin America | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
| ||||||||||||
Individually assessed impairment allowances | 495 | 300 | 161 | 227 | 322 | 1,505 | ||||||
- new allowances | 991 | 518 | 216 | 290 | 401 | 2,416 | ||||||
- release of allowances no longer required | (455) | (179) | (52) | (46) | (93) | (825) | ||||||
- recoveries of amounts previously written off | (41) | (39) | (3) | (17) | 14 | (86) | ||||||
Collectively assessed impairment allowances10 | 214 | 381 | 138 | 242 | 1,112 | 2,087 | ||||||
- new allowances net of allowance releases | 561 | 507 | 168 | 301 | 1,272 | 2,809 | ||||||
- recoveries of amounts previously written off | (347) | (126) | (30) | (59) | (160) | (722) | ||||||
Total loan impairment charge for the year ended 31 December 2015 | 709 | 681 | 299 | 469 | 1,434 | 3,592 |
For footnote, see page 191.