HSBC 2012 Annual Report Download - page 173

171
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
trade sector were written off or upgraded following
repayments, and delinquency rates reduced.
Releases and recoveries in Hong Kong were
US$65m, 27% lower than at the end of 2011 when
an allowance relating to a loan in GB&M that was
no longer considered impaired was released.
New loan impairment allowances in Rest of
Asia-Pacific increased by 8% to US$607m.
This reflected higher new collectively assessed
loan impairment allowances, mainly from the
growth in Singapore of RBWM’s credit card
portfolio. New individually assessed loan
impairment allowances also increased, as a result of
the impairment of a corporate exposure in Australia
and individual charges on a small number of
corporate exposures in India. Impaired loans in the
region increased by 4% to US$1.1bn in 2012 due to
the downgrade of a number of customers in Australia
and Taiwan, partly offset by the restructuring of a
significant loan in Singapore following the
renegotiation of terms, which is therefore regarded
as no longer impaired.
Releases and recoveries in the region decreased
by 7%, mainly in India as the cards portfolio
continued to run off, and in Thailand following
the sale of the RBWM business. These were
partly offset by an impairment allowance release
in Singapore compared with a charge in 2011.
In the Middle East and North Africa, new
loan impairment allowances decreased by 2% to
US$463m in 2012. New collectively assessed loan
impairment allowances declined, primarily in the
UAE, due to the improvement in credit quality
reflecting the repositioning of the book towards
higher quality lending in previous years. New
individually assessed loan impairment allowances
rose due to significant loan impairment charges
recorded for a small number of large exposures
in GB&M. Impaired loans remained broadly
unchanged compared with 31 December 2011.
Releases and recoveries in the region increased
by 14% to US$208m in 2012, mainly relating to
a small number of exposures in UAE.
In North America, new loan impairment
allowances fell sharply, reducing by 50% to
US$3.7bn. New collectively assessed loan
impairment allowances declined, largely in the CML
portfolio due to the reclassification of impairment
allowances on non-real estate personal loan balances
to ‘Assets held for sale’ as well as the continued run-
off in the residential portfolios. This was partly
offset by a portfolio risk factor adjustment of
US$225m which was made to increase the collective
loan impairment allowances for our US mortgage
lending portfolios. The adjustment was made
following a review completed in the fourth quarter
of 2012 which concluded that the estimated average
period of time from current status to write-off was
ten months for real estate loans (previously a period
of seven months was used). During 2013, this
revised estimate will be incorporated into the
statistical impairment allowance models. It
was also partly offset by new loan impairment
allowances by HSBC Bank Bermuda on a small
number of exposures. Releases and recoveries in
North America declined by 11% to US$214m. This
reflected lower levels of impairments being booked
due to improving market conditions within the
corporate and commercial sector.
Impaired loans decreased by 11% in 2012 to
US$20.3bn, due to the continued run-off of the CML
portfolio which included the reclassification
of certain non-real estate personal loan balances to
held for sale.
In Latin America, new loan impairment
allowances increased by 23% to US$2.5bn.
The increase in new collectively assessed loan
impairment allowances was mainly in Brazil, driven
by higher delinquency rates in RBWM and CMB,
particularly in the Business Banking portfolio,
reflecting lower economic growth in 2012. Impaired
loans were 9% higher than at the end of 2011, driven
by past growth in the CMB portfolio in Brazil.
Releases and recoveries in Latin America
decreased by 2% from the end of 2011 to US$401m,
mainly in Brazil.
For an analysis of loan impairment charges and
other credit risk provisions by global business, see
page 76.