HSBC 2009 Annual Report Download - page 230

HSBC HOLDINGS PLC
Report of the Directors: Risk (continued)
Credit risk > Credit quality > Risk ratings / 2009 / Past due but not impaired
228
Distribution of financial instruments by credit quality (continued)
Neither past due nor impaired Impair-
Medium
Strong Good Satisfactory
Sub
standard
Past due
but not
impaired Impaired
ment
allowances23 Total
US$m US$m US$m US$m US$m US$m US$m US$m
At 31 December 2008
Cash and balances at central
banks ....................................... 50,070 206 1,831 289 – – 52,396
Items in the course of collection
from other banks ..................... 4,541 4 1,392 – 66 – 6,003
Hong Kong Government
certificates of indebtedness .... 15,358 – – – – – 15,358
Trading assets24 ........................... 303,307 37,349 61,628 3,167 405,451
– treasury and other eligible
bills ...................................... 32,314 75 17 52 32,458
– debt securities ...................... 175,681 5,294 17,547 1,097 199,619
– loans and advances to banks 60,400 7,501 5,013 141 73,055
– loans and advances to
customers ............................. 34,912 24,479 39,051 1,877 100,319
Financial assets designated at fair
value24 ..................................... 5,288 4,141 7,293 818 17,540
– treasury and other eligible
bills ...................................... 204 – 31 – 235
– debt securities ...................... 4,129 4,140 7,262 818 16,349
– loans and advances to banks 230 – – – 230
– loans and advances to
customers ............................. 725 1 – – 726
Derivatives24 ............................... 383,393 79,243 27,105 5,135 494,876
Loans and advances held at
amortised cost ......................... 565,542 231,966 195,822 43,432 48,422 25,422 (23,972) 1,086,634
– loans and advances to banks 118,684 23,753 10,013 1,268 41 70 (63) 153,766
– loans and advances to
customers25 .......................... 446,858 208,213 185,809 42,164 48,381 25,352 (23,909) 932,868
Financial investments ................. 257,435 16,170 16,719 1,382 32 1,246 292,984
– treasury and other similar
bills ...................................... 37,932 1,904 1,023 168 – – 41,027
– debt securities ...................... 219,503 14,266 15,696 1,214 32 1,246 251,957
Other assets ................................. 11,959 9,491 17,026 1,747 219 417 40,859
– endorsements and
acceptances .......................... 1,851 4,333 3,460 805 30 3 10,482
– accrued income and other ... 10,108 5,158 13,566 942 189 414 30,377
For footnotes, see page 291.
2009 compared with 2008
Financial instruments on which credit quality
has been assessed declined by 8 per cent to
US$2,216 billion at 31 December 2009, of which
US$1,466 billion was classified as ‘strong’,
representing 66 per cent (2008: 66 per cent) of the
total of such financial instruments. This percentage
held constant in 2009 as management actions to
mitigate the Group’s exposure to credit risk offset
the effects on credit quality of the global economic
slowdown. The proportion of financial instruments
classified as ‘medium-good’ increased by nearly one
percentage point to 16.4 per cent. The proportion of
‘medium-satisfactory’ declined by one percentage
point to 12.5 per cent. The proportion of ‘sub-
standard’ rose marginally.
Factors contributing to the relative improvement
in credit quality included the run-off of the consumer
finance exit portfolios in the US, while factors
contributing to relative deterioration in credit quality
included higher delinquency levels in personal and
commercial lending.
Derivative assets on which credit quality has
been assessed decreased to US$251 billion at the end
of 2009 and led to a reduction in balances in each of
the credit risk categories. The decline in the overall
balance was driven mainly by a reduction in foreign
exchange, interest rate and credit derivatives as
lower levels of volatility within the financial
markets, steepening yield curves and narrowing
credit spreads led to a fall in the fair value of
outstanding derivative contracts.