HSBC 2015 Annual Report Download - page 146

Report of the Directors: Risk (continued)
Credit risk
HSBC HOLDINGS PLC
144
Total personal lending (continued)
Europe Asia MENA
North
America
Latin
America Total
$m $m $m $m $m $m
First lien residential mortgages (D) 131,000 93,147 2,647 55,577 4,153 286,524
Of which:
–
interest only (including offset) 44,163 956
–
276
–
45,395
–
affordability including ARMs 337 5,248
–
16,452
–
22,037
Other personal lending (E) 47,531 36,368 3,924 9,823 9,384 107,030
–
other 34,567 25,695 2,633 4,328 4,846 72,069
–
credit cards 12,959 10,289 897 1,050 3,322 28,517
–
second lien residential mortgages
–
56 2 4,433
–
4,491
–
motor vehicle finance 5 328 392 12 1,216 1,953
Total gross loans at 31 December 2014 (F) 178,531 129,515 6,571 65,400 13,537 393,554
Impairment allowances on personal lending
First lien residential mortgages (d) 306 46 97 1,644 36 2,129
Other personal lending (e) 786 208 97 350 1,030 2,471
–
other 438 87 59 43 672 1,299
–
credit cards 347 119 33 36 298 833
–
second lien residential mortgages
–
–
–
271
–
271
–
motor vehicle finance 125
–
60 68
Total impairment allowances at 31 December 2014 (f) 1,092 254 194 1,994 1,066 4,600
%%%% % %
(d) as a percentage of D 0.2
–
3.7 3.0 0.9 0.7
(e) as a percentage of E 1.7 0.6 2.5 3.6 11.0 2.3
(f) as a percentage of F 0.6 0.2 3.0 3.0 7.9 1.2
On a reported basis, total personal lending was $374bn at
31 December 2015, down from $394bn at the end of 2014.
The reduction of $20bn was mainly due to adverse foreign
exchange movements of $19bn, the reclassification of
$7.6bn of assets of our Brazilian operations as ‘Assets held
for sale’ and the run-off of our CML portfolio in North
America of $5bn during the year. Excluding these factors,
personal lending balances grew by $12bn in 2015. This was
primarily driven by increased mortgage and other lending
in Asia.
Loan impairment allowances reduced by $1.7bn on a
reported basis, mainly due to the Brazilian reclassification
($0.8bn) and the run-off of the US CML portfolio ($0.7bn).
Personal lending loan impairment charges were largely
unchanged at $1.8bn on a reported basis. On a constant
currency basis, they were $0.3bn higher than in 2014,
reflecting increased write-offs in the UAE following a
review of the quality and value of residential mortgage
collateral and the effects of adverse macroeconomic
conditions in Brazil.
Mortgage lending
We offer a wide range of mortgage products designed
to meet customer needs, including capital repayment,
interest-only, affordability and offset mortgages.
Group credit policy prescribes the range of acceptable
residential property LTV thresholds with the maximum
upper limit for new loans set at between 75% and 95%.
Specific LTV thresholds and debt-to-income ratios are
managed at regional and country levels and, although the
parameters must comply with Group policy, strategy and
risk appetite, they differ in the various locations in which
we operate to reflect the local economic and housing
market conditions, regulations, portfolio performance,
pricing and other product features.
Reported gross mortgage lending balances declined by
$12bn. Adverse foreign exchange differences and the
Brazilian reclassification reduced the gross mortgage
lending balances by further $13bn and $2.1bn respectively.
The commentary that follows is on a constant currency
basis, while tables are presented on a reported basis.
Excluding the effect of the Brazilian reclassification and the
US CML run-off portfolio, mortgage lending balances
increased by $7.7bn during the year.
Mortgage lending in Asia, excluding the reclassification to
other personal lending discussed on page 145, grew by
$6.4bn. The increases were primarily attributable to
continued growth in Hong Kong ($4.2bn), mainland China
($1.7bn) and Australia ($1.1bn) as a result of strong
demand and our competitive customer offerings. During
the year, mortgage lending in Singapore fell by $1.1bn
due to a business decision to constrain the level of our
mortgage portfolio, coupled with the effect of a range of
personal lending regulations. The quality of our Asian
mortgage book remained high with negligible defaults and
impairment allowances. The average LTV ratio on new
mortgage lending in Hong Kong was 43% compared with an
estimated 29% for the overall portfolio.
In North America, the US CML portfolio, including second
lien mortgages, declined by $5.2bn in 2015 as we
continued to run it off. The US Premier mortgage portfolio
increased by $1.1bn during 2015 as we focused on growth
in our core portfolios of higher quality mortgages. Our
Canadian mortgage lending balances also grew by $0.8bn
during the year. Collectively assessed impairment
allowances reduced during the year due to continued
improvements in the credit quality of the mortgage
portfolio and continued loan sales.
In Europe, UK mortgage balances were unchanged and our
products remained competitive in the prolonged low
interest rate market environment. In the UK, the credit