HSBC 2015 Annual Report Download - page 411

HSBC HOLDINGS PLC
409
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Reasonably possible changes in key assumptions
Input Key assumptions Associated risks Reasonably possible change
Cash-generating unit
Retail Banking and
Wealth Management
– Europe
and Commercial
Banking
–
Europe
Cash flow
projections
• Level of interest rates;
• Competitors’ positions within
the market; and
• Level and change in
unemployment rates.
• Uncertain regulatory
environment; and
• Customer remediation and
regulatory actions.
• Management has determined
that a reasonably possible change
in any of the key assumptions
would not cause an impairment
to be recognised.
Global Private
Banking – Europe
Cash flow
projections
• Achievement of planned strategic
repositioning;
• Level of assets under
management;
• Return on assets;
• Central bank interest rate rises;
and
• Cost savings from recent
investment in new platforms.
• Challenges achieving strategic
repositioning;
• Deferral or non-occurrence of
forecast interest rate rises; and
• Slower than expected growth in
assets under management.
• Cash flow projections decrease
by 20%.
Discount
rate
• Discount rate used is a reasonable
estimate of a suitable market rate
for the profile of the business.
• External evidence arises to
suggest that the rate used is not
appropriate to the business.
• Discount rate increases by 60bps
based on observable broker
estimates for private banking
focused institutions.
Long-term
growth rates
• Business growth will reflect GDP
growth rates in the long term.
• Growth does not match GDP or
GDP forecasts fall.
• Real GDP growth does not
occur or is not reflected in
performance.
Global Banking and
Markets – Europe
Cash flow
projections
• Level of interest rates; and
• Recovery of European markets
over the forecast period.
• Deferral or non-occurrence of
forecast interest rate rises;
• Lower than expected growth in
key markets; and
• The impact of regulatory changes,
including the ring fencing of the
UK retail bank.
• Cash flow projections decrease
by 20%.
Discount
rate
• Discount rate used is a reasonable
estimate of a suitable market rate
for the profile of the business.
• External evidence arises to
suggest that the rate used is not
appropriate to the business.
• Discount rate increases by 110
basis points, based on the high
end of the range of broker
estimates for comparator
European banks with significant
investment banking operations.
Long-term
growth rates
• Business growth will reflect GDP
growth rates in the long term.
• Growth does not match GDP or
GDP forecasts fall.
• Real GDP growth does not
occur or is not reflected in
performance.
Global Banking and
Markets – North
America
Cash flow
projections
• Level of interest rates;
• Growth in NAFTA, China, and
other major trade corridors;
• Product and sales enhancements
to increase market share; and
• Increased collaboration with the
CMB business to capture further
opportunities from existing
clients.
• Deferral or non-occurrence of
forecast interest rate rises; and
• Lower than expected growth in
key markets.
• Cash flow projections decrease
by 20%.
Discount
rate
• Discount rate used is a reasonable
estimate of a suitable market rate
for the profile of the business.
• External evidence arises to
suggest that the rate used is not
appropriate to the business.
• Discount rate increases by 100
basis points, based on the high
end of the range of broker
estimates for comparator US
banks with significant investment
banking operations.
Long-term
growth rates
• Business growth will reflect GDP
growth rates in the long term.
• Growth does not match GDP or
GDP forecasts fall.
• Real GDP growth does not
occur or is not reflected in
performance.
Retail Banking and
Wealth Management
– Latin America
Cash flow
projections
• Growth in lending and deposit
volumes; and
• Credit quality of loan portfolios.
• Unfavourable economic
conditions; and
• Competitive pricing constraining
margins.
• Management has determined
that a reasonably possible change
in any of the key assumptions
would not cause an impairment
to be recognised.