HSBC 2015 Annual Report Download - page 149

HSBC HOLDINGS PLC
147
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Types of loan renegotiation programmes in HSBC Finance
• A temporary modification is a change to the contractual terms of
a loan that results in HSBC Finance giving up a right to contractual
cash flows over a pre-defined period, typically two years. With a
temporary modification the loan is expected to revert back to the
original contractual terms, including the interest rate charged,
after the modification period. An example is reduced interest
payments.
A substantial number of HSBC Finance modifications involve
interest rate reductions, which lower the amount of interest
income HSBC Finance is contractually entitled to receive in future
periods. Historically, modifications were granted for terms as low
as six months, although more recent modifications have a
minimum term of two years.
• A permanent modification is a change to the contractual terms of
a loan that results in HSBC Finance giving up a right to contractual
cash flows over the life of the loan.
An example is a permanent reduction in the interest rate charged.
HSBC Finance also offers a ‘re-age’ renegotiation programme,
which results in the resetting of an account’s contractual
delinquency status to current (non-delinquent) upon fulfilment
of certain requirements and without additional concessions. The
overdue principal and/or interest is deferred and paid at a later
date. Loan re-ageing enables customers who have been unable
to make a small number of payments to have their loan
delinquency status reset to current so that their credit score is
not affected by the overdue balances. Re-aging may be offered
to customers either without any modification of original loan
terms, or as part of a loan modification transaction.
All renegotiation transactions described above with the
exception of first time re-ages on accounts that are less than 60
days past due are classified as impaired. These remain classified
as impaired until they have demonstrated a history of payment
performance against their original contracted terms for at least
12 months, with the exception of permanent modifications. All
modified loans with terms over two years are considered to be
permanently impaired.
Collateral and other credit enhancements held
(Audited)
The tables below provide a quantification of the value
of fixed charges we hold over specific assets where we
have a history of enforcing, and are able to enforce,
collateral in satisfying a debt in the event of the borrower
failing to meet its contractual obligations, and where
the collateral is cash or can be realised by sale in an
established market. The collateral valuation excludes any
adjustments for obtaining and selling the collateral and, in
particular, loans shown as not collateralised or partially
collateralised may also benefit from other forms of credit
mitigants. UK and Hong Kong are shown, both within
regional figures and separately, due to the size of their
portfolios.
Residential mortgage loans including loan commitments by level of collateral
(Audited)
Europe Asia MENA
North
America
Latin
America Tota l UK
Hong
Kong
$m $m $m $m $m $m $m $m
Non-impaired loans and advances
Fully collateralised 128,113 100,102 2,144 41,567 1,869 273,795 122,221 61,784
LTV ratio:
–
less than 50% 70,851 59,212 595 12,369 710 143,737 68,362 42,589
–
51% to 75% 47,933 33,237 985 22,071 903 105,129 45,762 15,961
–
76% to 90% 8,322 6,522 535 5,502 222 21,103 7,584 2,254
–
91% to 100% 1,007 1,131 29 1,625 34 3,826 513 980
Partially collateralised:
–
greater than 100% LTV (A) 540 168 46 1,208 13 1,975 321 97
–
collateral value on A 434 155 37 1,147 11 1,784 221 95
128,653 100,270 2,190 42,775 1,882 275,770 122,542 61,881
Impaired loans and advances
Fully collateralised 1,407 222 44 6,713 109 8,495 1,191 46
LTV ratio:
–
less than 50% 518 105 18 1,247 90 1,978 469 42
–
51% to 75% 619 76 13 2,819 14 3,541 540 3
–
76% to 90% 183 34 81,811 42,040 133 1
–
91% to 100% 87 7 5 836 1936 49
–
Partially collateralised:
–
greater than 100% LTV (B) 178 8 18 628 1833 49
–
–
collateral value on B 160 6 13 547
–
726 36
–
1,585 230 62 7,341 110 9,328 1,240 46
At 31 December 2015 130,238 100,500 2,252 50,116 1,992 285,098 123,782 61,927