HSBC 2012 Annual Report Download - page 187

185
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Business model
(Unaudited)
Balance Sheet Management (see page 222) holds
ABSs primarily issued by government agency and
sponsored enterprises as part of our investment
portfolios.
Our investment portfolios include SICs and
money market funds. We also originate leveraged
finance loans for the purpose of syndicating or
selling them down to generate trading profit or
holding them to earn interest margin over their lives.
Exposure in 2012
(Audited)
2012 saw an improvement in the US housing
market with home prices rising during the year. This
improvement coincided with decreasing concerns
around sovereign credit, particularly in the second
half of the year, and gave rise to price appreciation
across this range of ABS asset classes. Unrealised
losses in our available-for-sale portfolios reduced in
the year from US$5.1bn to US$2.2bn, mainly as a
result of price appreciation.
Within the following table are assets held in
the GB&M legacy credit portfolio with a carrying
value of US$31.6bn (2011: US$35.4bn).
A summary of the nature of HSBC’s
exposures is provided in the
A
ppendix to Risk
on page 259.
Overall exposure of HSBC
(Audited)
At 31 December 2012 At 31 December 2011
Carrying
amount26
Including
sub-prime
and Alt-A
Carrying
amount26
Including
sub-prime
and Alt-A
US$bn US$bn US$bn US$bn
Asset-backed securities ............................................................................ 59.0 7.0 65.6 6.9
– fair value through profit or loss ........................................................ 3.4 0.2 3.0 0.2
– available for sale27 ............................................................................. 49.6 6.1 54.6 5.7
– held to maturity27 ............................................................................... 1.6 0.1 2.0 0.2
– loans and receivables ......................................................................... 4.4 0.6 6.0 0.8
Direct lending at fair value through profit or loss .................................... 1.0 0.6 1.2 0.8
Total asset-backed securities and direct lending at fair value through
profit or loss ......................................................................................... 60.0 7.6 66.8 7.7
Less securities subject to risk mitigation from credit derivatives with
monolines and other financial institutions ........................................... (1.9) (0.2) (1.9) (0.2)
58.1 7.4 64.9 7.5
Leveraged finance loans ........................................................................... 2.8 – 3.6 –
– fair value through profit or loss ........................................................ – – 0.2 –
– loans and receivables ......................................................................... 2.8 – 3.4 –
60.9 7.4 68.5 7.5
Exposure including securities subject to risk mitigation from credit
derivatives with monolines and other financial institutions ................ 62.8 7.6 70.4 7.7
For footnotes, see page 249.
ABSs classified as available for sale
Our principal holdings of available-for-sale ABSs
are in GB&M through special purpose entities
(‘SPE’s), which were established from the outset
with the benefit of external investor first loss
protection support, together with positions held
directly and by Solitaire, where we provide first
loss protection of US$1.2bn through credit
enhancement and a liquidity facility.