HSBC 2015 Annual Report Download - page 122

Report of the Directors: Risk (continued)
Credit risk
HSBC HOLDINGS PLC
120
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 to
credit risk 2,234 2,434
–
off-balance sheet
commitments subject
to 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 % of
gross 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 of
impairment 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.