Annual Financial Report - 29 of 56 | RNS | Ticker

Annual Financial Report - 29 of 56

RNS Announcement

RNS Number : 6307S

HSBC Holdings PLC

18 March 2016

Notional contract amounts and fair values of derivatives by product type

	2015			2014
	Notional	Fair value		Notional	Fair value
	amount	Assets	Liabilities	amount	Assets	Liabilities
	$m	$m	$m	$m	$m	$m

Foreign exchange	5,690,354	96,341	95,598	5,573,415	97,312	95,759
- exchange traded	195,612	167	76	81,785	229	369
- central counterparty cleared OTC	29,263	406	443	18,567	321	349
- non-central counterparty cleared OTC	5,465,479	95,768	95,079	5,473,063	96,762	95,041

Interest rate	14,675,036	279,154	271,367	22,328,518	473,243	468,152
- exchange traded	1,259,888	49	8	1,432,333	112	161
- central counterparty cleared OTC	8,774,674	117,877	117,695	15,039,001	261,880	264,509
- non-central counterparty cleared OTC	4,640,474	161,228	153,664	5,857,184	211,251	203,482

Equity	501,834	8,732	10,383	568,932	11,694	13,654
- exchange traded	265,129	1,888	2,601	289,140	2,318	3,201
- non-central counterparty cleared OTC	236,705	6,844	7,782	279,792	9,376	10,453

Credit	463,344	6,961	6,884	550,197	9,340	10,061
- central counterparty cleared OTC	90,863	1,779	2,069	126,115	1,999	2,111
- non-central counterparty cleared OTC	372,481	5,182	4,815	424,082	7,341	7,950

Commodity and other	51,683	3,148	2,699	77,565	3,884	3,508
- exchange traded	8,136	38	-	7,015	80	23
- non-central counterparty cleared OTC	43,547	3,110	2,699	70,550	3,804	3,485


Total OTC derivatives	19,653,486	392,194	384,246	27,288,354	592,735	587,379
- total OTC derivatives cleared by central counterparties	8,894,800	120,062	120,207	15,183,683	264,200	266,968
- total OTC derivatives not cleared by central counterparties	10,758,686	272,132	264,039	12,104,671	328,535	320,411

Total exchange traded derivatives	1,728,765	2,142	2,685	1,810,273	2,739	3,755

Gross	21,382,251	394,336	386,931	29,098,627	595,473	591,134

Offset		(105,860)	(105,860)		(250,465)	(250,465)

Total at 31 December		288,476	281,071		345,008	340,669

The purposes for which HSBC uses derivatives are described in Note 16 on the Financial Statements.

The International Swaps and Derivatives Association ('ISDA') Master Agreement is our preferred agreement for documenting derivatives activity. It provides the contractual framework within which dealing activity across a full range of OTC products is conducted, and contractually binds both parties to apply close-out netting across all outstanding transactions covered by an agreement if either party defaults or another pre-agreed termination event occurs. It is common, and our preferred practice, for the parties to execute a Credit Support Annex ('CSA') in conjunction with the ISDA Master Agreement. Under a CSA, collateral is passed between the parties to mitigate the counterparty risk inherent in outstanding positions.

We manage the counterparty exposure arising from market risk on our OTC derivative contracts by using collateral agreements with counterparties and netting agreements. Currently, we do not actively manage our general OTC derivative counterparty exposure in the credit markets, although we may manage individual exposures in certain circumstances.

We place strict policy restrictions on collateral types and as a consequence the types of collateral received and pledged are, by value, highly liquid and of a strong quality, being predominantly cash.

Where a collateral type is required to be approved outside the collateral policy (which includes collateral that includes wrong way risks), a submission to one of three regional Documentation Approval Committees ('DAC's) for approval is required. These DACs require the participation and sign-off of senior representatives from regional Markets Chief Operating Officers, Legal and Risk.

The majority of our CSAs are with financial institutional clients.

As a consequence of our policy, the type of agreement we enter into is predominately ISDA CSAs, the majority of which are written under English law. The table below provides a breakdown of OTC collateral agreements by agreement type:

OTC collateral agreements by type

		Number of agreements

ISDA CSA (English law)		2,670
ISDA CSA (New York law)		1,702
ISDA CSA (Japanese law)		17
French Master Agreement and CSA equivalent¹⁴		223
German Master Agreement and CSA equivalent¹⁵		93
Others		395

At 31 December 2015		5,100

For footnotes, see page 191.

See page 122 and Note 32 on the Financial Statements for details regarding legally enforceable right of offset in the event of counterparty default and collateral received in respect of derivatives.

Reverse repos - non-trading by geographical region

The amount of non-trading reverse repos include transactions with customers and banks and is set out below.

Reverse repos - non-trading by geographical region

(Audited)

	Europe	Asia	MENA	North America	Latin America	Total
	$m	$m	$m	$m	$m	$m

With customers	28,366	5,650	-	40,316	-	74,332
With banks	15,824	21,804	779	32,034	1,482	71,923

At 31 December 2015	44,190	27,454	779	72,350	1,482	146,255

With customers	25,841	5,409	-	35,060	-	66,310
With banks	34,748	22,813	19	29,008	8,815	95,403

At 31 December 2014	60,589	28,222	19	64,068	8,815	161,713

Personal lending

We provide a broad range of secured and unsecured personal lending products to meet customer needs. Personal lending includes advances to customers for asset purchases such as residential property where the
loans are secured by the assets being acquired. We also offer loans secured on existing assets, such as first liens on residential property, and unsecured lending products such as overdrafts, credit cards and payroll loans.

Total personal lending

	Europe	Asia	MENA	North America	Latin America	Total
	$m	$m	$m	$m	$m	$m

First lien residential mortgages (A)	125,544	94,606	2,258	50,117	1,986	274,511

Of which:
- interest only (including offset)	40,906	936	-	180	-	42,022
- affordability including ARMs	356	3,966	-	17,041	-	21,363

Other personal lending (B)	44,982	38,101	4,447	8,069	3,972	99,571
- other	32,862	27,682	3,147	3,284	1,816	68,791
- credit cards	12,115	10,189	929	996	1,780	26,009
- second lien residential mortgages	-	33	2	3,762	-	3,797
- motor vehicle finance	5	197	369	27	376	974


Total gross loans at 31 December 2015 (C)	170,526	132,707	6,705	58,186	5,958	374,082

Impairment allowances on personal lending
First lien residential mortgages (a)	278	29	24	991	22	1,344
Other personal lending (b)	667	227	214	241	186	1,535
- other	401	104	180	31	80	796
- credit cards	265	122	29	30	102	548
- second lien residential mortgages	-	-	-	180	-	180
- motor vehicle finance	1	1	5	-	4	11


Total impairment allowances at 31 December 2015 (c)	945	256	238	1,232	208	2,879

	%	%	%	%	%	%

(a) as a percentage of A	0.2	0.0	1.1	2.0	1.1	0.5
(b) as a percentage of B	1.5	0.6	4.8	3.0	4.7	1.5
(c) as a percentage of C	0.6	0.2	3.5	2.1	3.5	0.8

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	1	2	5	-	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 quality of our mortgage portfolio remained high, the LTV ratio on new lending was 57.8% compared with an average of 42.6% for the overall portfolio.

Exposure to UK interest-only mortgage loans

Interest-only mortgage products made up $40bn of total UK mortgage lending, including $16bn of offset mortgages in First Direct and $1.7bn of endowment mortgages.

The following information is presented for HSBC Bank plc's UK interest-only mortgage loans with balances of $18bn at the end of 2015. $0.2bn of interest-only mortgages matured during 2015. Of these, 2,636 loans with total balances of $0.1bn were repaid in full, 164 loans with balances of $0.03bn have agreed future repayment plans and 550 loans with balances of $0.1bn are subject to ongoing individual assessments.

The profile of expiring UK interest-only loans was as follows:

UK interest-only mortgage loans

		$m

2015 expired interest-only mortgage loans		266
Interest-only mortgage loans by maturity
- 2016		314
- 2017		384
- 2018		723
- 2019		801
- 2020		805
- 2021-2025		3,997
- Post 2025		10,390

Total at 31 December 2015		17,680

Other personal lending

Reported other personal lending balances declined by $7.5bn during the year, mainly due to adverse foreign exchange movements of $5.8bn and the Brazilian reclassification of $5.5bn. The reduction was offset by the growth in other personal lending in Hong Kong.

The commentary that follows is on a constant currency basis, while tables are presented on a reported basis.

Excluding the Brazilian reclassification, other personal lending increased by $4bn in 2015. This was driven by strong growth in personal loans and overdrafts in Hong Kong ($1.5bn), other unsecured personal lending portfolio in UK ($0.7bn) and other personal lending in France ($0.6bn). In Mexico, other unsecured personal lending grew by $0.6bn mainly in payroll and personal loans as a result of various sales and credit initiatives. In addition, we reclassified a total of $1.8bn of loans in Malaysia and India, and $0.4bn in the UAE, from residential mortgages to other personal lending following a review of the supporting collateral.

HSBC Finance

HSBC Finance US Consumer and Mortgage Lending - residential mortgages¹⁶

	2015	2014
	$m	$m
Residential mortgages:
- first lien	17,157	21,915
Other personal lending:
- second lien	2,089	2,509

Total (A) at 31 December	19,246	24,424

Impairment allowances	986	1,679
- as a percentage of A	5.1%	6.9%

For footnote, see page 191.

Mortgage lending balances in HSBC Finance declined by $5.2bn or 21% during 2015. In addition to the continued loan sales in the CML portfolio, we transferred a further
$2.4bn to 'Assets held for sale' during the year, and these loans were sold in May, August and November 2015.

There was a decrease in impairment allowances reflecting reduced levels of delinquency, and lower levels of both new impaired loans and loan balances outstanding as a result of continued liquidation of the portfolio.

Among the first and second lien residential mortgages in our CML portfolio, two months and over delinquent balances halved to $1.2bn during 2015.

At 31 December 2015, renegotiated real estate secured accounts in HSBC Finance represented 91% (2014: 93%) of North America's total renegotiated loans. $5.1bn of renegotiated real estate secured loans was classified as impaired (2014: $7.6bn).

HSBC Bank USA

In HSBC Bank USA, mortgage balances grew by $1.1bn to $18bn at 31 December 2015 as we continued to implement our strategy to grow the HSBC Premier and Advance customer base. We continued to sell all agency-eligible new originations in the secondary market.

Trends in two months and over contractual delinquency in the US

	2015	2014
	$m	$m
In personal lending in the US
First lien residential mortgages	1,954	3,271
- Consumer and Mortgage Lending	1,049	2,210
- other mortgage lending	905	1,061

Second lien residential mortgages	161	216
- Consumer and Mortgage Lending	106	154
- other mortgage lending	55	62

Credit card	16	17
Personal non-credit card	3	7

Total at 31 December	2,134	3,511

	%	%
As a percentage of the equivalent loans and receivables balances
First lien residential mortgages	5.7	8.6
Second lien residential mortgages	4.4	5.0
Credit card	2.3	2.4
Personal non-credit card	0.7	1.4

Total at 31 December	5.4	8.1

Gross loan portfolio of HSBC Finance real estate secured balances

	Re-aged ¹⁷	Modified and re-aged	Modified	Total renegotiated loans	Total non- renegotiated loans		Total gross loans	Total impairment allowances	Impairment allowances/ gross loans
	$m	$m	$m	$m		$m	$m	$m	%

At 31 December 2015	4,858	5,257	519	10,634		8,612	19,246	986	5.1
At 31 December 2014	6,637	6,581	587	13,805		10,619	24,424	1,679	6.9

For footnote, see page 191.

Number of renegotiated real estate secured accounts remaining in HSBC Finance's portfolio

	Number of renegotiated loans (000s)				Total number of loans (000s)
	Re-aged	Modified and re-aged	Modified	Total	Total number of loans (000s)

At 31 December 2015	66	54	6	126	240
At 31 December 2014	85	64	6	155	297

HSBC Finance loan modifications and re-age programmes

HSBC Finance maintains loan modification and re‑age ('loan renegotiation') programmes in order to manage customer relationships, improve collection opportunities and, if possible, avoid foreclosure.

Qualifying criteria

For an account to qualify for renegotiation it must meet certain criteria, and HSBC Finance retains the right to decline a renegotiation.

Renegotiated real estate secured loans are not eligible for a subsequent renegotiation for six or 12 months depending upon the action, with a maximum of five renegotiations permitted within a five-year period. Borrowers must be approved for a modification and, to activate it, must generally make two minimum qualifying monthly payments within 60 days. In certain circumstances where the debt has been restructured in bankruptcy proceedings, fewer or no payments may be required. Real estate secured loans involving a bankruptcy and accounts whose borrowers are subject to a Chapter 13 plan filed with a bankruptcy court generally may be considered current upon receipt of one qualifying payment, while accounts whose borrowers have filed for Chapter 7 bankruptcy protection may be re-aged upon receipt of a signed reaffirmation agreement. In addition, any account may be re-aged without receipt of a payment in certain special circumstances (for example, in the event of a natural disaster or a hardship programme).

Within the constraints of our Group credit policy, we allow for multiple renegotiations under certain circumstances. Consequently, a significant proportion of loans included in the table above have undergone multiple re-ages or modifications. In this regard, multiple modifications have remained consistent at 70% to 75% of total modifications.

The accounts that received second or subsequent renegotiations during the year do not appear in the statistics presented. These statistics treat a loan as an addition to the volume of renegotiated loans on its first renegotiation only.

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	Total	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	8	1,811	4	2,040	133	1
- 91% to 100%	87	7	5	836	1	936	49	-

Partially collateralised:
- greater than 100% LTV (B)	178	8	18	628	1	833	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

Residential mortgage loans including loan commitments by level of collateral (continued)

	Europe	Asia	MENA	North America	Latin America	Total	UK	Hong Kong
	$m	$m	$m	$m	$m	$m	$m	$m
Non-impaired loans and advances
Fully collateralised	135,875	99,257	2,431	43,317	3,759	284,639	130,333	57,703
LTV ratio:
- less than 50%	66,075	60,315	1,324	14,003	1,454	143,171	63,533	42,894
- 51% to 75%	56,178	31,142	856	20,872	1,777	110,825	54,095	12,135
- 76% to 90%	11,856	6,906	212	5,994	480	25,448	11,141	2,298
- 91% to 100%	1,766	894	39	2,448	48	5,195	1,564	376

Partially collateralised:
- greater than 100% LTV (C)	537	99	60	2,209	167	3,072	388	-
- collateral value on C	532	81	44	1,999	24	2,680	415	-


	136,412	99,356	2,491	45,526	3,926	287,711	130,721	57,703
Impaired loans and advances
Fully collateralised	906	256	122	8,618	154	10,056	781	48
LTV ratio:
- less than 50%	232	130	53	1,291	103	1,809	197	45
- 51% to 75%	417	90	29	3,462	35	4,033	376	3
- 76% to 90%	163	32	19	2,471	10	2,695	131	-
- 91% to 100%	94	4	21	1,394	6	1,519	77	-

Partially collateralised:
- greater than 100% LTV (D)	55	7	31	1,395	2	1,490	44	-
- collateral value on D	40	5	23	1,181	1	1,250	30	-


	961	263	153	10,013	156	11,546	825	48

At 31 December 2014	137,373	99,619	2,644	55,539	4,082	299,257	131,546	57,751

Supplementary information

Gross loans and advances by industry sector over five years

	2015	Currency translation adjustment¹⁸	Movement	2014	2013	2012	2011
	$m	$m	$m	$m	$m	$m	$m

Personal	374,082	(20,232)	760	393,554	410,728	415,093	393,625
- first lien residential mortgages	274,511	(13,697)	1,684	286,524	299,875	301,862	278,963
- other personal³	99,571	(6,535)	(924)	107,030	110,853	113,231	114,662

Corporate and commercial	499,513	(30,496)	(12,616)	542,625	545,981	517,120	478,064
- manufacturing	95,858	(8,043)	(3,085)	106,986	113,850	112,149	96,054
- international trade and services	159,019	(10,148)	(11,624)	180,791	184,668	169,389	152,709
- commercial real estate	67,926	(3,483)	(1,884)	73,293	74,846	76,760	73,941
- other property-related	53,464	(1,256)	2,333	52,387	44,832	40,532	39,539
- government	7,455	(354)	1,666	6,143	7,277	10,785	11,079
- other commercial⁴	115,791	(7,212)	(22)	123,025	120,508	107,505	104,742

Financial	150,833	(9,577)	(2,606)	163,016	170,627	164,013	184,035
- non-bank financial institutions	60,414	(2,210)	11,806	50,818	50,523	46,871	44,832
- banks	90,419	(7,367)	(14,412)	112,198	120,104	117,142	139,203


Total gross loans and advances	1,024,428	(60,305)	(14,462)	1,099,195	1,127,336	1,096,226	1,055,724
	23,758
Impaired loans and advances to customers	23,758	(1,868)	(3,657)	29,283	36,428	38,671	41,584

Impairment allowances on loans and advances to customers	9,555	(1,189)	(1,593)	12,337	15,143	16,112	17,511

Loan impairment charge	3,592	(682)	219	4,055	6,048	8,160	11,505
- new allowances net of allowance releases	4,400	(821)	211	5,010	7,344	9,306	12,931
- recoveries	(808)	139	8	(955)	(1,296)	(1,146)	(1,426)

For footnotes, see page 191.

The personal lending currency effect on gross loans and advances of $20bn was made up as follows: Europe $10bn, Asia $4.2bn, Latin America $2.5bn and North America $3.3bn. The wholesale lending currency effect on gross loans and advances of $40bn was made up as follows: Europe $17bn, Asia $8.7bn, Latin America $11bn, North America $2.7bn and Middle East and North Africa $0.7bn.

In the following two tables, negative percentage numbers are favourable, positive numbers are unfavourable.

Reconciliation of reported and constant currency impaired loans, allowances and charges by geographical region

	31 December 2014 as reported	Currency translation adjustment¹⁸	31 December 2014 at 31 December 2015 exchange rates	Movement - constant currency basis	31 December 2015 as reported	Reported change	Constant currency change
	$m	$m	$m	$m	$m	%	%
Impaired loans
Europe	10,242	(748)	9,494	183	9,677	(5.5)	1.9
Asia	2,048	(118)	1,930	445	2,375	16.0	23.1
Middle East and North Africa	1,981	(19)	1,962	(196)	1,766	(10.9)	(10.0)
North America	11,694	(71)	11,623	(2,693)	8,930	(23.6)	(23.2)
Latin America	3,365	(913)	2,452	(1,422)	1,030	(69.4)	(58.0)

	29,330	(1,869)	27,461	(3,683)	23,778	(18.9)	(13.4)

Impairment allowances
Europe	4,455	(364)	4,091	(222)	3,869	(13.2)	(5.4)
Asia	1,356	(64)	1,292	233	1,525	12.5	18.0
Middle East and North Africa	1,406	(11)	1,395	23	1,418	0.9	1.6
North America	2,640	(51)	2,589	(548)	2,041	(22.7)	(21.2)
Latin America	2,529	(702)	1,827	(1,107)	720	(71.5)	(60.6)

	12,386	(1,192)	11,194	(1,621)	9,573	(22.7)	(14.5)

Loan impairment charge
Europe	1,079	(134)	945	(236)	709	(34.3)	(25.0)
Asia	644	(27)	617	64	681	5.7	10.4
Middle East and North Africa	(1)	(1)	(2)	301	299	-	-
North America	300	(10)	290	179	469	56.3	61.7
Latin America	2,033	(510)	1,523	(89)	1,434	(29.5)	(5.8)

	4,055	(682)	3,373	219	3,592	(11.4)	6.5

For footnote, see page 191.

Reconciliation of reported and constant currency loan impairment charges to the income statement

	31 December 2014 as reported	Currency translation adjustment¹⁸	31 December 2014 at 31 December 2015 exchange rates	Movement - constant currency basis	31 December 2015 as reported	Reported change	Constant currency change
	$m	$m	$m	$m	$m	%	%
Loan impairment charge
Europe	1,079	(134)	945	(236)	709	(34.3)	(25.0)
- new allowances	2,445	(303)	2,142	(97)	2,045	(16.4)	(4.5)
- releases	(1,062)	140	(922)	(26)	(948)	(10.7)	2.8
- recoveries	(304)	29	(275)	(113)	(388)	27.6	41.1

Asia	644	(27)	617	64	681	5.7	10.4
- new allowances	1,115	(61)	1,054	224	1,278	14.6	21.3
- releases	(318)	21	(297)	(135)	(432)	35.8	45.5
- recoveries	(153)	13	(140)	(25)	(165)	7.8	17.9

Middle East and North Africa	(1)	(1)	(2)	301	299	-	-
- new allowances	355	(7)	348	144	492	38.6	41.4
- releases	(314)	6	(308)	148	(160)	(49.0)	(48.1)
- recoveries	(42)	-	(42)	9	(33)	(21.4)	(21.4)

North America	300	(10)	290	179	469	56.3	61.7
- new allowances	908	(20)	888	(157)	731	(19.5)	(17.7)
- releases	(493)	8	(485)	299	(186)	(62.3)	(61.6)
- recoveries	(115)	2	(113)	37	(76)	(33.9)	(32.7)

Latin America	2,033	(510)	1,523	(89)	1,434	(29.5)	(5.8)
- new allowances	2,707	(674)	2,033	(239)	1,794	(33.7)	(11.8)
- releases	(333)	69	(264)	50	(214)	(35.7)	(18.9)
- recoveries	(341)	95	(246)	100	(146)	(57.2)	(40.7)


Total	4,055	(682)	3,373	219	3,592	(11.4)	6.5
- new allowances	7,530	(1,065)	6,465	(125)	6,340	(15.8)	(1.9)
- releases	(2,520)	244	(2,276)	336	(1,940)	(23.0)	(14.8)
- recoveries	(955)	139	(816)	8	(808)	(15.4)	(1.0)

For footnote, see page 191.

Loan impairment charges by industry sector over five years

	2015	2014	2013	2012	2011
	$m	$m	$m	$m	$m

Loan impairment charge/(release)
Personal	1,834	1,803	3,196	5,362	9,318
Corporate and commercial	1,769	2,256	2,974	2,802	2,114
Financial	(11)	(4)	(122)	(4)	73

Year ended 31 December	3,592	4,055	6,048	8,160	11,505

Charge for impairment losses as a percentage of average gross loans and advances to customers

	2015	2014	2013	2012	2011
	%	%	%	%	%

New allowances net of allowance releases	0.48	0.53	0.81	1.00	1.34
Recoveries	(0.09)	(0.10)	(0.14)	(0.12)	(0.15)

Total charge for impairment losses	0.39	0.43	0.67	0.88	1.19

Amount written off net of recoveries	0.37	0.58	0.59	0.93	1.14

Movement in impairment allowances over five years

	2015	2014	2013	2012	2011
	$m	$m	$m	$m	$m

Impairment allowances at 1 January	12,386	15,201	16,169	17,636	20,241

Amounts written off	(4,194)	(6,379)	(6,655)	(9,812)	(12,480)
- personal	(2,707)	(3,733)	(4,367)	(6,905)	(10,431)
- corporate and commercial	(1,473)	(2,425)	(2,229)	(2,677)	(2,009)
- financial	(14)	(221)	(59)	(230)	(40)

Recoveries of amounts written off in previous years	808	955	1,296	1,146	1,426
- personal	681	818	1,097	966	1,175
- corporate and commercial	124	128	198	172	242
- financial	3	9	1	8	9

Loan impairment charge	3,592	4,055	6,048	8,160	11,505
Exchange and other movements¹¹	(3,019)	(1,446)	(1,657)	(961)	(3,056)

Impairment allowances at 31 December	9,573	12,386	15,201	16,169	17,636

Impairment allowances
- individually assessed	5,420	6,244	7,130	6,629	6,662
- collectively assessed	4,153	6,142	8,071	9,540	10,974

Impairment allowances at 31 December	9,573	12,386	15,201	16,169	17,636

	%	%	%	%	%
Amount written off net of recoveries as a percentage of average gross loans and advances to customers	0.4	0.6	0.6	1.0	1.2

For footnote, see page 191.

Gross loans and advances to customers by country

	First lien residential mortgages $m	Other personal³ $m	Property- related $m	Commercial, international trade and other $m	Total $m

Europe	125,544	44,982	33,579	191,807	395,912
UK	117,346	20,797	25,700	149,327	313,170
France	3,606	12,130	6,070	20,380	42,186
Germany	4	203	347	7,941	8,495
Switzerland	511	8,045	224	834	9,614
Other	4,077	3,807	1,238	13,325	22,447

Asia	94,606	38,101	67,577	157,616	357,900
Hong Kong	60,943	24,389	50,825	80,609	216,766
Australia	9,297	726	1,592	6,448	18,063
India	1,248	431	637	5,728	8,044
Indonesia	56	346	71	4,965	5,438
Mainland China	5,716	1,645	6,185	23,703	37,249
Malaysia	2,792	3,113	1,993	4,947	12,845
Singapore	7,743	5,392	3,334	11,021	27,490
Taiwan	3,866	629	126	5,291	9,912
Other	2,945	1,430	2,814	14,904	22,093

Middle East and North Africa (excluding Saudi Arabia)	2,258	4,447	2,598	21,991	31,294
Egypt	1	549	104	2,097	2,751
UAE	1,854	2,286	1,833	14,199	20,172
Other	403	1,612	661	5,695	8,371

North America	50,117	8,069	16,014	56,690	130,890
US	34,382	4,813	11,435	42,439	93,069
Canada	14,418	3,029	4,315	13,490	35,252
Other	1,317	227	264	761	2,569

Latin America	1,986	3,972	1,622	10,433	18,013
Mexico	1,881	2,828	1,498	7,844	14,051
Other	105	1,144	124	2,589	3,962


At 31 December 2015	274,511	99,571	121,390	438,537	934,009

Europe	131,000	47,531	35,313	200,313	414,157
UK	123,239	21,023	25,927	156,577	326,766
France	2,914	12,820	7,341	21,834	44,909
Germany	6	212	304	7,275	7,797
Switzerland	298	8,149	225	614	9,286
Other	4,543	5,327	1,516	14,013	25,399

Asia	93,147	36,368	70,057	164,739	364,311
Hong Kong	56,656	22,891	52,208	82,362	214,117
Australia	9,154	815	2,130	6,360	18,459
India	1,235	285	613	5,099	7,232
Indonesia	64	469	202	5,476	6,211
Mainland China	4,238	1,981	6,606	24,875	37,700
Malaysia	5,201	1,750	1,988	5,217	14,156
Singapore	9,521	5,878	4,210	11,951	31,560
Taiwan	3,920	626	118	7,057	11,721
Other	3,158	1,673	1,982	16,342	23,155

Middle East and North Africa (excluding Saudi Arabia)	2,647	3,924	2,246	21,633	30,450
Egypt	1	510	98	2,272	2,881
UAE	2,263	1,782	1,545	13,814	19,404
Other	383	1,632	603	5,547	8,165

North America	55,577	9,823	15,492	51,535	132,427
US	37,937	5,482	11,461	38,632	93,512
Canada	16,236	4,085	3,708	11,825	35,854
Other	1,404	256	323	1,078	3,061

Latin America	4,153	9,384	2,572	29,543	45,652
Mexico	1,967	2,642	1,336	9,503	15,448
Other	2,186	6,742	1,236	20,040	30,204
Included in Other: Brazil	2,067	5,531	1,077	16,814	25,489


At 31 December 2014	286,524	107,030	125,680	467,763	986,997

For footnote, see page 191.

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END

ACSUWAVRNKAOAAR

RNS metadata

Title: Annual Financial Report - 29 of 56
Time: 16:43:02
Date: 18 Mar 2016
Category: Results
ID: 6307S