RNS Number : 6798F
HSBC Holdings PLC
11 March 2020
 

 


Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees

The following disclosure provides a reconciliation by stage of the Group's gross carrying/nominal amount and allowances for loans and advances to banks and customers, including loan commitments and financial guarantees. Movements are calculated on a quarterly basis and therefore fully capture stage movements between quarters. If movements were calculated on a year-to-date basis they would only reflect the opening and closing position of the financial instrument.

The transfers of financial instruments represents the impact of stage transfers upon the gross carrying/nominal amount and associated allowance for ECL.

The net remeasurement of ECL arising from stage transfers represents the increase or decrease due to these transfers, for example, moving from a 12-month (stage 1) to a lifetime (stage 2) ECL measurement basis. Net remeasurement excludes the underlying customer risk rating ('CRR')/probability of default ('PD') movements of the financial instruments transferring stage. This is captured, along with other credit quality movements in the 'changes in risk parameters - credit quality' line item.

Changes in 'New financial assets originated or purchased', 'assets derecognised (including final repayments)' and 'changes to risk parameters - further lending/repayment' represent the impact from volume movements within the Group's lending portfolio.


Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees

(Audited)

 

Non-credit impaired

Credit impaired

 

 

Stage 1

Stage 2

Stage 3

POCI

Total

 

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2019

1,502,976

 

(1,449

)

95,104

 

(2,278

)

14,232

 

(5,135

)

334

 

(194

)

1,612,646

 

(9,056

)

Transfers of financial instruments:

(36,244

)

(543

)

31,063

 

1,134

 

5,181

 

(591

)

-

 

-

 

-

 

-

 

-  transfers from stage 1 to stage 2

(108,434

)

487

 

108,434

 

(487

)

-

 

-

 

-

 

-

 

-

 

-

 

-  transfers from stage 2 to stage 1

73,086

 

(1,044

)

(73,086

)

1,044

 

-

 

-

 

-

 

-

 

-

 

-

 

-  transfers to stage 3

(1,284

)

59

 

(5,022

)

665

 

6,306

 

(724

)

-

 

-

 

-

 

-

 

-  transfers from stage 3

388

 

(45

)

737

 

(88

)

(1,125

)

133

 

-

 

-

 

-

 

-

 

Net remeasurement of ECL arising from transfer of stage

-

 

669

 

-

 

(676

)

-

 

(114

)

-

 

-

 

-

 

(121

)

New financial assets originated or purchased

504,064

 

(534

)

-

 

-

 

-

 

-

 

135

 

(21

)

504,199

 

(555

)

Assets derecognised (including final repayments)

(352,961

)

112

 

(19,909

)

553

 

(2,712

)

656

 

(26

)

8

 

(375,608

)

1,329

 

Changes to risk parameters - further lending/repayment

(72,239

)

291

 

(2,560

)

67

 

402

 

(6

)

28

 

12

 

(74,369

)

364

 

Changes to risk parameters - credit quality

-

 

2

 

-

 

(1,208

)

-

 

(2,704

)

-

 

(51

)

-

 

(3,961

)

Changes to models used for ECL calculation

-

 

(6

)

-

 

4

 

-

 

14

 

-

 

-

 

-

 

12

 

Assets written off

-

 

-

 

-

 

-

 

(2,657

)

2,657

 

(140

)

140

 

(2,797

)

2,797

 

Credit-related modifications that resulted in derecognition

-

 

-

 

-

 

-

 

(268

)

125

 

-

 

-

 

(268

)

125

 

Foreign exchange

16,838

 

(9

)

1,201

 

(40

)

160

 

(31

)

1

 

1

 

18,200

 

(79

)

Others

(821

)

3

 

652

 

3

 

(3

)

8

 

13

 

6

 

(159

)

20

 

At 31 Dec 2019

1,561,613

 

(1,464

)

105,551

 

(2,441

)

14,335

 

(5,121

)

345

 

(99

)

1,681,844

 

(9,125

)

ECL income statement change for the period

 

534

 

 

(1,260

)

 

(2,154

)

 

(52

)

 

(2,932

)

Recoveries

 

 

 

 

 

 

 

 

 

361

 

Others

 

 

 

 

 

 

 

 

 

(20

)

Total ECL income statement change for the period

 

 

 

 

 

 

 

 

 

(2,591

)

 



 

 

At 31 Dec 2019

12 months ended  
31 Dec 2019

 

Gross carrying/nominal amount

Allowance for ECL

ECL charge

 

$m

$m

$m

As above

1,681,844

 

(9,125

)

(2,591

)

Other financial assets measured at amortised cost

615,179

 

(118

)

(26

)

Non-trading reverse purchase agreement commitments

53,093

 

-

 

-

 

Performance and other guarantees not considered for IFRS 9

-

 

-

 

(34

)

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement

2,350,116

 

(9,243

)

(2,651

)

Debt instruments measured at FVOCI

355,664

 

(166

)

(105

)

Total allowance for ECL/total income statement ECL change for the period

n/a

(9,409

)

(2,756

)

 


As shown in the previous table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees increased $69m during the period from $9,056m at 31 December 2018 to $9,125m at 31 December 2019.

This increase was primarily driven by:

•    $3,961m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages;

•    $121m relating to the net remeasurement impact of stage transfers; and

•    foreign exchange and other movements of $59m.

These decreases were partly offset by:

•    $2,797m of assets written off;


 

•    $1,138m relating to volume movements, which included the ECL allowance associated with new originations, assets derecognised and further lending/repayment;

•    $125m credit-related modifications that resulted in derecognitions; and

•    $12m changes to models used for ECL calculation.

The ECL charge for the period of $2,932m presented in the previous table consisted of $3,961m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stage and $121m relating to the net remeasurement impact of stage transfers. This was partly offset by $1,138m relating to underlying net book volume movements and $12m in changes to models used for ECL calculation.

Summary views of the movement in wholesale and personal lending are presented on pages 107 and 120.


Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including

loan commitments and financial guarantees1,2

(Audited)

 

Non-credit impaired

Credit impaired

Total

 

Stage 1

Stage 2

Stage 3

POCI

 

Gross exposure

Allowance/ provision for ECL

Gross exposure

Allowance/ provision for ECL

Gross exposure

Allowance/ provision for ECL

Gross exposure

Allowance/ provision for ECL

Gross exposure

Allowance/ provision for ECL

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2018

1,446,857

 

(1,469

)

102,032

 

(2,406

)

15,083

 

(5,722

)

1,042

 

(242

)

1,565,014

 

(9,839

)

Transfers of financial instruments:

(8,747

)

(685

)

3,582

 

1,185

 

5,165

 

(500

)

-

 

-

 

-

 

-

 

-  transfers from stage 1 to stage 2

(84,181

)

319

 

84,181

 

(319

)

-

 

-

 

-

 

-

 

-

 

-

 

-  transfers from stage 2 to stage 1

77,325

 

(999

)

(77,325

)

999

 

-

 

-

 

-

 

-

 

-

 

-

 

-  transfers to stage 3

(2,250

)

35

 

(4,439

)

607

 

6,689

 

(642

)

-

 

-

 

-

 

-

 

-  transfers from stage 3

359

 

(40

)

1,165

 

(102

)

(1,524

)

142

 

-

 

-

 

-

 

-

 

Net remeasurement of ECL arising from transfer of stage

-

 

620

 

-

 

(605

)

-

 

(103

)

-

 

-

 

-

 

(88

)

Net new lending and further lending/payments

126,868

 

(512

)

(16,162

)

564

 

(2,902

)

733

 

(587

)

42

 

107,217

 

827

 

Changes to risk parameters - credit quality

-

 

423

 

-

 

(1,087

)

-

 

(2,238

)

-

 

(51

)

-

 

(2,953

)

Changes to models used for ECL calculation

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Assets written off

-

 

-

 

-

 

-

 

(2,568

)

2,552

 

(1

)

1

 

(2,569

)

2,553

 

Foreign exchange

(52,911

)

76

 

(2,935

)

99

 

(636

)

232

 

(26

)

6

 

(56,508

)

413

 

Other

(9,091

)

98

 

8,587

 

(28

)

90

 

(89

)

(94

)

50

 

(508

)

31

 

At 31 Dec 2018

1,502,976

 

(1,449

)

95,104

 

(2,278

)

14,232

 

(5,135

)

334

 

(194

)

1,612,646

 

(9,056

)

ECL income statement change for the period

 

531

 

 

(1,128

)

 

(1,608

)

 

(9

)

 

(2,214

)

Recoveries

 

 

 

 

 

 

 

 

 

408

 

Others

 

 

 

 

 

 

 

 

 

(62

)

Total ECL income statement change for the period

 

 

 

 

 

 

 

 

 

(1,868

)

 

 

At 31 Dec 2018

12 months ended 31 Dec 2018

 

Gross carrying/nominal amount

Allowance for ECL

ECL charge

 

$m

$m

$m

As above

1,612,646

 

(9,056

)

(1,868

)

Other financial assets measured at amortised cost

582,917

 

(55

)

21

 

Non-trading reverse purchase agreement commitments

65,381

 

-

 

-

 

Performance and other guarantees not considered for IFRS 9

-

 

-

 

(25

)

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/ Summary consolidated income statement

2,260,944

 

(9,111

)

(1,872

)

Debt instruments measured at FVOCI

343,110

 

(84

)

105

 

Total allowance for ECL/total income statement ECL change for the period

n/a

(9,195

)

(1,767

)

1   The 31 December 2018 comparative 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers' disclosure presents 'New financial assets originated or purchased', 'Assets derecognised (including final repayments)' and 'Changes to risk parameters - further lending/repayments' under 'Net new lending and further lending/repayments'. To provide greater granularity, these amounts have been separately presented in the 31 December 2019 disclosure.

2   During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount for 31 December 2018 only. For further details, see page 86.



Credit quality

Credit quality of financial instruments

(Audited)

We assess the credit quality of all financial instruments that are subject to credit risk. The credit quality of financial instruments is a point-in-time assessment of PD, whereas stages 1 and 2 are determined based on relative deterioration of credit quality since initial recognition. Accordingly, for non-credit-impaired financial instruments, there is no direct relationship between the credit quality assessment and stages 1 and 2, although typically the lower credit quality bands exhibit a higher proportion in stage 2.

The five credit quality classifications each encompass a range of granular internal credit rating grades assigned to wholesale and personal lending businesses and the external ratings attributed by external agencies to debt securities, as shown in the table on page 85.



Distribution of financial instruments by credit quality at 31 December 2019

(Audited)

 

Gross carrying/notional amount

Allowance for ECL/other credit provisions

Net

 

Strong

Good

Satisfactory

Sub-standard

Credit impaired

Total

 

$m

$m

$m

$m

$m

$m

$m

$m

In-scope for IFRS 9

 

 

 

 

 

 

 

 

Loans and advances to customers held at amortised cost

524,889

 

258,402

 

228,485

 

20,007

 

13,692

 

1,045,475

 

(8,732

)

1,036,743

 

-  personal

354,461

 

45,037

 

27,636

 

2,286

 

4,851

 

434,271

 

(3,134

)

431,137

 

-  corporate and commercial

138,126

 

190,470

 

186,383

 

16,891

 

8,629

 

540,499

 

(5,438

)

535,061

 

-  non-bank financial institutions

32,302

 

22,895

 

14,466

 

830

 

212

 

70,705

 

(160

)

70,545

 

Loans and advances to banks held at amortised cost

60,636

 

5,329

 

1,859

 

1,395

 

-

 

69,219

 

(16

)

69,203

 

Cash and balances at central banks

151,788

 

1,398

 

915

 

-

 

-

 

154,101

 

(2

)

154,099

 

Items in the course of collection from other banks

4,935

 

18

 

3

 

-

 

-

 

4,956

 

-

 

4,956

 

Hong Kong Government certificates of indebtedness

38,380

 

-

 

-

 

-

 

-

 

38,380

 

-

 

38,380

 

Reverse repurchase agreements - non-trading

193,157

 

37,947

 

9,621

 

137

 

-

 

240,862

 

-

 

240,862

 

Financial investments

78,318

 

6,503

 

906

 

61

 

-

 

85,788

 

(53

)

85,735

 

Prepayments, accrued income and other assets

70,675

 

8,638

 

11,321

 

306

 

152

 

91,092

 

(63

)

91,029

 

-  endorsements and acceptances

1,133

 

4,651

 

4,196

 

230

 

4

 

10,214

 

(16

)

10,198

 

-  accrued income and other

69,542

 

3,987

 

7,125

 

76

 

148

 

80,878

 

(47

)

80,831

 

Debt instruments measured at  
fair value through other comprehensive income1

333,158

 

10,966

 

7,222

 

544

 

1

 

351,891

 

(166

)

351,725

 

Out-of-scope for IFRS 9

 

 

 

 

 

 

 

 

Trading assets

135,059

 

15,240

 

22,964

 

2,181

 

-

 

175,444

 

-

 

175,444

 

Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss

4,655

 

1,391

 

5,584

 

139

 

-

 

11,769

 

-

 

11,769

 

Derivatives

187,636

 

42,642

 

11,894

 

821

 

2

 

242,995

 

-

 

242,995

 

Total gross carrying amount on balance sheet

1,783,286

 

388,474

 

300,774

 

25,591

 

13,847

 

2,511,972

 

(9,032

)

2,502,940

 

Percentage of total credit quality

70.9%

15.5%

12.0%

1.0%

0.6%

100%

 

 

Loan and other credit-related commitments

369,424

 

146,988

 

77,499

 

5,338

 

780

 

600,029

 

(329

)

599,700

 

Financial guarantees

7,441

 

6,033

 

5,539

 

1,011

 

190

 

20,214

 

(48

)

20,166

 

In-scope: Irrevocable loan commitments and financial guarantees

376,865

 

153,021

 

83,038

 

6,349

 

970

 

620,243

 

(377

)

619,866

 

Loan and other credit-related commitments2

66,148

 

69,890

 

58,754

 

2,605

 

182

 

197,579

 

-

 

197,579

 

Performance and other guarantees

30,099

 

23,335

 

20,062

 

2,057

 

380

 

75,933

 

(132

)

75,801

 

Out-of-scope: Revocable loan commitments and non-financial guarantees

96,247

 

93,225

 

78,816

 

4,662

 

562

 

273,512

 

(132

)

273,380

 

 



 

Distribution of financial instruments by credit quality at 31 December 2018 (continued)

(Audited)

 

Gross carrying/notional amount

Allowance for ECL/other credit provisions

Net

 

Strong

Good

Satisfactory

Sub-

standard

Credit impaired

Total

 

$m

$m

$m

$m

$m

$m

$m

$m

In-scope for IFRS 9

 

 

 

 

 

 

 

 

Loans and advances to customers held at amortised cost

485,451

 

244,199

 

230,357

 

16,993

 

13,321

 

990,321

 

(8,625

)

981,696

 

-  personal

316,616

 

43,764

 

27,194

 

2,182

 

4,581

 

394,337

 

(2,947

)

391,390

 

-  corporate and commercial

140,387

 

181,984

 

189,357

 

14,339

 

8,510

 

534,577

 

(5,552

)

529,025

 

-  non-bank financial institutions

28,448

 

18,451

 

13,806

 

472

 

230

 

61,407

 

(126

)

61,281

 

Loans and advances to banks held at amortised cost

60,249

 

7,371

 

4,549

 

11

 

-

 

72,180

 

(13

)

72,167

 

Cash and balances at central banks

160,995

 

1,508

 

324

 

18

 

-

 

162,845

 

(2

)

162,843

 

Items in the course of collection from other banks

5,765

 

21

 

1

 

-

 

-

 

5,787

 

-

 

5,787

 

Hong Kong Government certificates of indebtedness

35,859

 

-

 

-

 

-

 

-

 

35,859

 

-

 

35,859

 

Reverse repurchase agreements - non-trading

200,774

 

29,423

 

12,607

 

-

 

-

 

242,804

 

-

 

242,804

 

Financial investments

56,031

 

5,703

 

949

 

1

 

-

 

62,684

 

(18

)

62,666

 

Prepayments, accrued income and other assets

55,424

 

8,069

 

9,138

 

181

 

126

 

72,938

 

(35

)

72,903

 

-  endorsements and acceptances

1,514

 

4,358

 

3,604

 

155

 

3

 

9,634

 

(11

)

9,623

 

-  accrued income and other

53,910

 

3,711

 

5,534

 

26

 

123

 

63,304

 

(24

)

63,280

 

Debt instruments measured at fair value through other comprehensive income1

 

319,632

 

12,454

 

7,210

 

2,558

 

12

 

341,866

 

(84

)

341,782

 

Out-of-scope for IFRS 9

 

 

 

 

 

 

 

 

Trading assets

139,484

 

18,888

 

16,991

 

1,871

 

-

 

177,234

 

-

 

177,234

 

Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss

6,079

 

2,163

 

6,683

 

9

 

-

 

14,934

 

-

 

14,934

 

Derivatives

169,121

 

31,225

 

6,813

 

625

 

41

 

207,825

 

-

 

207,825

 

Total gross carrying amount on balance sheet

1,694,864

 

361,024

 

295,622

 

22,267

 

13,500

 

2,387,277

 

(8,777

)

2,378,500

 

Percentage of total credit quality

71%

15.1%

12.4%

0.9%

0.6%

100%

 

 

Loan and other credit-related commitments

373,302

 

137,076

 

75,478

 

5,233

 

919

 

592,008

 

(325

)

591,683

 

Financial guarantees

9,716

 

7,400

 

5,505

 

597

 

300

 

23,518

 

(93

)

23,425

 

In-scope: Irrevocable loan commitments and financial guarantees

383,018

 

144,476

 

80,983

 

5,830

 

1,219

 

615,526

 

(418

)

615,108

 

Loan and other credit-related commitments2

188,258

 

-

 

-

 

-

 

-

 

188,258

 

-

 

188,258

 

Performance and other guarantees

26,679

 

25,743

 

16,790

 

1,869

 

403

 

71,484

 

(99

)

71,385

 

Out-of-scope: Revocable loan commitments and non-financial guarantees

214,937

 

25,743

 

16,790

 

1,869

 

403

 

259,742

 

(99

)

259,643

 

1   For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.

2   In 2018, revocable loan and other commitments, which are out of scope of IFRS 9, are presented within the 'Strong' classification.



 

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation

(Audited)

 

 

Gross carrying/notional amount

Allowance  for ECL

Net

 

 

Strong

Good

Satisfactory

Sub-
standard

Credit impaired

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

$m

$m

Loans and advances to customers at amortised cost

 

524,889

 

258,402

 

228,485

 

20,007

 

13,692

 

1,045,475

 

(8,732

)

1,036,743

 

-  stage 1

 

523,092

 

242,631

 

181,056

 

4,804

 

-

 

951,583

 

(1,297

)

950,286

 

-  stage 2

 

1,797

 

15,771

 

47,429

 

15,185

 

-

 

80,182

 

(2,284

)

77,898

 

-  stage 3

 

-

 

-

 

-

 

-

 

13,378

 

13,378

 

(5,052

)

8,326

 

-  POCI

 

-

 

-

 

-

 

18

 

314

 

332

 

(99

)

233

 

Loans and advances to banks at amortised cost

 

60,636

 

5,329

 

1,859

 

1,395

 

-

 

69,219

 

(16

)

69,203

 

-  stage 1

 

60,548

 

5,312

 

1,797

 

112

 

-

 

67,769

 

(14

)

67,755

 

-  stage 2

 

88

 

17

 

62

 

1,283

 

-

 

1,450

 

(2

)

1,448

 

-  stage 3

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  POCI

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Other financial assets measured at amortised cost

 

537,253

 

54,505

 

22,766

 

503

 

152

 

615,179

 

(118

)

615,061

 

-  stage 1

 

536,942

 

54,058

 

21,921

 

279

 

-

 

613,200

 

(38

)

613,162

 

-  stage 2

 

311

 

447

 

845

 

224

 

-

 

1,827

 

(38

)

1,789

 

-  stage 3

 

-

 

-

 

-

 

-

 

151

 

151

 

(42

)

109

 

-  POCI

 

-

 

-

 

-

 

-

 

1

 

1

 

-

 

1

 

Loan and other credit-related commitments

 

369,424

 

146,988

 

77,499

 

5,338

 

780

 

600,029

 

(329

)

599,700

 

-  stage 1

 

368,711

 

141,322

 

66,283

 

1,315

 

-

 

577,631

 

(137

)

577,494

 

-  stage 2

 

713

 

5,666

 

11,216

 

4,023

 

-

 

21,618

 

(133

)

21,485

 

-  stage 3

 

-

 

-

 

-

 

-

 

771

 

771

 

(59

)

712

 

-  POCI

 

-

 

-

 

-

 

-

 

9

 

9

 

-

 

9

 

Financial guarantees

 

7,441

 

6,033

 

5,539

 

1,011

 

190

 

20,214

 

(48

)

20,166

 

-  stage 1

 

7,400

 

5,746

 

4,200

 

338

 

-

 

17,684

 

(16

)

17,668

 

-  stage 2

 

41

 

287

 

1,339

 

673

 

-

 

2,340

 

(22

)

2,318

 

-  stage 3

 

-

 

-

 

-

 

-

 

186

 

186

 

(10

)

176

 

-  POCI

 

-

 

-

 

-

 

-

 

4

 

4

 

-

 

4

 

At 31 Dec 2019

 

1,499,643

 

471,257

 

336,148

 

28,254

 

14,814

 

2,350,116

 

(9,243

)

2,340,873

 

Debt instruments at FVOCI

1

 

 

 

 

 

 

 

 

-  stage 1

 

333,072

 

10,941

 

6,902

 

-

 

-

 

350,915

 

(39

)

350,876

 

-  stage 2

 

86

 

25

 

320

 

544

 

-

 

975

 

(127

)

848

 

-  stage 3

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  POCI

 

-

 

-

 

-

 

-

 

1

 

1

 

-

 

1

 

At 31 Dec 2019

 

333,158

 

10,966

 

7,222

 

544

 

1

 

351,891

 

(166

)

351,725

 

1   For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.

 



 

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation2

(continued)

(Audited)

 

 

Gross carrying/notional amount

 

 

 

 

Strong

Good

Satisfactory

Sub-standard

Credit impaired

Total

Allowance for ECL

 Net

 

Footnotes

$m

$m

$m

$m

$m

$m

$m

$m

Loans and advances to customers at amortised cost

 

485,451

 

244,199

 

230,357

 

16,993

 

13,321

 

990,321

 

(8,625

)

981,696

 

-  stage 1

 

483,170

 

232,004

 

187,773

 

5,446

 

-

 

908,393

 

(1,276

)

907,117

 

-  stage 2

 

2,281

 

12,195

 

42,584

 

11,521

 

-

 

68,581

 

(2,108

)

66,473

 

-  stage 3

 

-

 

-

 

-

 

-

 

13,023

 

13,023

 

(5,047

)

7,976

 

-  POCI

 

-

 

-

 

-

 

26

 

298

 

324

 

(194

)

130

 

Loans and advances to banks at amortised cost

 

60,249

 

7,371

 

4,549

 

11

 

-

 

72,180

 

(13

)

72,167

 

-  stage 1

 

60,199

 

7,250

 

4,413

 

11

 

-

 

71,873

 

(11

)

71,862

 

-  stage 2

 

50

 

121

 

136

 

-

 

-

 

307

 

(2

)

305

 

-  stage 3

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  POCI

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Other financial assets measured at amortised cost

 

514,848

 

44,724

 

23,019

 

200

 

126

 

582,917

 

(55

)

582,862

 

-  stage 1

 

514,525

 

44,339

 

22,184

 

70

 

-

 

581,118

 

(27

)

581,091

 

-  stage 2

 

323

 

385

 

835

 

130

 

-

 

1,673

 

(6

)

1,667

 

-  stage 3

 

-

 

-

 

-

 

-

 

126

 

126

 

(22

)

104

 

-  POCI

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Loan and other credit-related commitments

 

373,302

 

137,076

 

75,478

 

5,233

 

919

 

592,008

 

(325

)

591,683

 

-  stage 1

 

372,529

 

131,278

 

62,452

 

973

 

-

 

567,232

 

(143

)

567,089

 

-  stage 2

 

773

 

5,798

 

13,026

 

4,260

 

-

 

23,857

 

(139

)

23,718

 

-  stage 3

 

-

 

-

 

-

 

-

 

912

 

912

 

(43

)

869

 

-  POCI

 

-

 

-

 

-

 

-

 

7

 

7

 

-

 

7

 

Financial guarantees

 

9,716

 

7,400

 

5,505

 

597

 

300

 

23,518

 

(93

)

23,425

 

-  stage 1

 

9,582

 

6,863

 

4,231

 

158

 

-

 

20,834

 

(19

)

20,815

 

-  stage 2

 

134

 

537

 

1,274

 

439

 

-

 

2,384

 

(29

)

2,355

 

-  stage 3

 

-

 

-

 

-

 

-

 

297

 

297

 

(45

)

252

 

-  POCI

 

-

 

-

 

-

 

-

 

3

 

3

 

-

 

3

 

At 31 Dec 2018

 

1,443,566

 

440,770

 

338,908

 

23,034

 

14,666

 

2,260,944

 

(9,111

)

2,251,833

 

Debt instruments at FVOCI

1

-

 

 

 

 

 

 

 

 

-  stage 1

 

319,623

 

12,358

 

6,856

 

2,218

 

-

 

341,055

 

(33

)

341,022

 

-  stage 2

 

9

 

96

 

354

 

340

 

-

 

799

 

(50

)

749

 

-  stage 3

 

-

 

-

 

-

 

-

 

8

 

8

 

(1

)

7

 

-  POCI

 

-

 

-

 

-

 

-

 

4

 

4

 

-

 

4

 

At 31 Dec 2018

 

319,632

 

12,454

 

7,210

 

2,558

 

12

 

341,866

 

(84

)

341,782

 

1   For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.

2   During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.



Credit-impaired loans

(Audited)

We determine that a financial instrument is credit impaired and in stage 3 by considering relevant objective evidence, primarily whether:

•    contractual payments of either principal or interest are past due for more than 90 days;

•    there are other indications that the borrower is unlikely to pay, such as when a concession has been granted to the borrower for economic or legal reasons relating to the borrower's financial condition; and

•    the loan is otherwise considered to be in default. If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due, even where regulatory rules permit default to be defined based on 180 days past due. Therefore, the definitions of credit impaired and default are aligned as far as possible so that stage 3 represents all loans that are considered defaulted or otherwise credit impaired.


Renegotiated loans and forbearance

The following table shows the gross carrying amounts of the Group's holdings of renegotiated loans and advances to customers by industry sector and by stages.

 

 

 

 

A summary of our current policies and practices for renegotiated loans and forbearance is set out in 'Credit risk management' on page 84.

 

 

 

 

 

 

 

 

 

 



Renegotiated loans and advances to customers at amortised cost by stage allocation

 

Stage 1

Stage 2

Stage 3

POCI

Total

 

$m

$m

$m

$m

$m

Gross carrying amount

 

 

 

 

 

Personal

-

 

-

 

2,207

 

-

 

2,207

 

-  first lien residential mortgages

-

 

-

 

1,558

 

-

 

1,558

 

-  other personal lending

-

 

-

 

649

 

-

 

649

 

Wholesale

1,168

 

1,179

 

3,353

 

310

 

6,010

 

-  corporate and commercial

1,168

 

1,179

 

3,290

 

310

 

5,947

 

-  non-bank financial institutions

-

 

-

 

63

 

-

 

63

 

At 31 Dec 2019

1,168

 

1,179

 

5,560

 

310

 

8,217

 

Allowance for ECL

 

 

 

 

 

Personal

-

 

-

 

(397

)

-

 

(397

)

-  first lien residential mortgages

-

 

-

 

(181

)

-

 

(181

)

-  other personal lending

-

 

-

 

(216

)

-

 

(216

)

Wholesale

(13

)

(55

)

(1,349

)

(86

)

(1,503

)

-  corporate and commercial

(13

)

(55

)

(1,316

)

(86

)

(1,470

)

-  non-bank financial institutions

-

 

-

 

(33

)

-

 

(33

)

At 31 Dec 2019

(13

)

(55

)

(1,746

)

(86

)

(1,900

)

 

Gross carrying amount

 

 

 

 

 

Personal

-

 

-

 

2,248

 

-

 

2,248

 

-  first lien residential mortgages

-

 

-

 

1,641

 

-

 

1,641

 

-  other personal lending

-

 

-

 

607

 

-

 

607

 

Wholesale

1,532

 

1,193

 

3,845

 

270

 

6,840

 

-  corporate and commercial

1,517

 

1,193

 

3,789

 

270

 

6,769

 

-  non-bank financial institutions

15

 

-

 

56

 

-

 

71

 

At 31 Dec 2018

1,532

 

1,193

 

6,093

 

270

 

9,088

 

Allowance for ECL

 

 

 

 

 

Personal

-

 

-

 

(381

)

-

 

(381

)

-  first lien residential mortgages

-

 

-

 

(186

)

-

 

(186

)

-  other personal lending

-

 

-

 

(195

)

-

 

(195

)

Wholesale

(29

)

(49

)

(1,461

)

(146

)

(1,685

)

-  corporate and commercial

(29

)

(49

)

(1,438

)

(146

)

(1,662

)

-  non-bank financial institutions

-

 

-

 

(23

)

-

 

(23

)

At 31 Dec 2018

(29

)

(49

)

(1,842

)

(146

)

(2,066

)

 

Renegotiated loans and advances to customers by geographical region

 

 

 

 

 

 

 

Of which:

 

Europe

Asia

MENA

North America

Latin
America

Total

UK

Hong Kong

 

$m

$m

$m

$m

$m

$m

$m

$m

At 31 Dec 2019

4,182

 

838

 

1,805

 

1,185

 

207

 

8,217

 

3,438

 

277

 

At 31 Dec 2018

4,533

 

864

 

1,973

 

1,352

 

366

 

9,088

 

3,609

 

305

 

 




Wholesale lending


This section provides further details on the regions, countries, territories and products comprising wholesale loans and advances to customers and banks. Product granularity is also provided by stage with geographical data presented for loans and advances to customers, banks, other credit commitments, financial guarantees and similar contracts. Additionally, this section provides a reconciliation of the opening 1 January 2019 to 31 December 2019 closing gross carrying/nominal amounts and the associated allowance for ECL.

At 31 December 2019, wholesale lending for loans and advances to banks and customers of $680bn increased by $12.3bn since 
31 December 2018. This included favourable foreign exchange movements of $6.1bn.

Excluding foreign exchange movements, the total wholesale lending growth was driven by an $8.7bn increase in balances from non-bank financial institutions and $0.3bn in corporate and commercial balances. These were partly offset by a decrease in loans and advances to banks of $2.8bn. The primary drivers of the increase in balances from non-bank financial institutions were $3.4bn in Europe, notably $2.8bn in France, and $4.9bn in Asia. The allowance for ECL attributable to loans and advances to banks and customers of $5.6bn at 31 December 2019 decreased from $5.7bn at 31 December 2018.


 

 

 

 

 

 

 

 

 

 




Total wholesale lending for loans and advances to banks and customers by stage distribution

 

Gross carrying amount

Allowance for ECL

 

Stage 1

Stage 2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Corporate and commercial

472,253

 

59,599

 

8,315

 

332

 

540,499

 

(672

)

(920

)

(3,747

)

(99

)

(5,438

)

-  agriculture, forestry and fishing

5,416

 

1,000

 

278

 

2

 

6,696

 

(13

)

(29

)

(139

)

(1

)

(182

)

-  mining and quarrying

9,923

 

4,189

 

311

 

12

 

14,435

 

(22

)

(70

)

(122

)

(12

)

(226

)

-  manufacturing

88,138

 

14,525

 

1,581

 

136

 

104,380

 

(143

)

(211

)

(806

)

(50

)

(1,210

)

-  electricity, gas, steam and air-conditioning supply

13,479

 

1,386

 

175

 

-

 

15,040

 

(14

)

(41

)

(25

)

-

 

(80

)

-  water supply, sewerage, waste management and remediation

2,963

 

508

 

30

 

-

 

3,501

 

(6

)

(4

)

(18

)

-

 

(28

)

-  construction

10,520

 

3,883

 

852

 

32

 

15,287

 

(16

)

(49

)

(467

)

(32

)

(564

)

-  wholesale and retail trade, repair of motor vehicles and motorcycles

83,151

 

9,897

 

1,625

 

8

 

94,681

 

(111

)

(137

)

(934

)

(2

)

(1,184

)

-  transportation and storage

22,604

 

2,359

 

588

 

29

 

25,580

 

(42

)

(37

)

(158

)

-

 

(237

)

-  accommodation and food

20,109

 

4,284

 

262

 

1

 

24,656

 

(37

)

(46

)

(62

)

(1

)

(146

)

-  publishing, audiovisual and broadcasting

18,103

 

1,706

 

141

 

21

 

19,971

 

(30

)

(23

)

(33

)

(1

)

(87

)

-  real estate

122,972

 

6,450

 

1,329

 

1

 

130,752

 

(108

)

(97

)

(475

)

-

 

(680

)

-  professional, scientific and technical activities

21,085

 

2,687

 

350

 

-

 

24,122

 

(31

)

(33

)

(145

)

-

 

(209

)

-  administrative and support services

21,370

 

3,817

 

438

 

89

 

25,714

 

(33

)

(58

)

(179

)

-

 

(270

)

-  public administration and defence, compulsory social security

1,889

 

488

 

-

 

-

 

2,377

 

(1

)

(7

)

-

 

-

 

(8

)

-  education

1,700

 

184

 

16

 

-

 

1,900

 

(7

)

(5

)

(6

)

-

 

(18

)

-  health and care

3,543

 

811

 

111

 

-

 

4,465

 

(9

)

(20

)

(28

)

-

 

(57

)

-  arts, entertainment and recreation

2,537

 

257

 

30

 

-

 

2,824

 

(6

)

(8

)

(11

)

-

 

(25

)

-  other services

13,143

 

941

 

191

 

1

 

14,276

 

(35

)

(31

)

(133

)

-

 

(199

)

-  activities of households

725

 

66

 

-

 

-

 

791

 

-

 

-

 

-

 

-

 

-

 

-  extra-territorial organisations and bodies activities

2

 

-

 

-

 

-

 

2

 

-

 

-

 

-

 

-

 

-

 

-  government

8,159

 

147

 

7

 

-

 

8,313

 

(6

)

(2

)

(6

)

-

 

(14

)

-  asset-backed securities

722

 

14

 

-

 

-

 

736

 

(2

)

(12

)

-

 

-

 

(14

)

Non-bank financial institutions

65,661

 

4,832

 

212

 

-

 

70,705

 

(42

)

(28

)

(90

)

-

 

(160

)

Loans and advances to banks

67,769

 

1,450

 

-

 

-

 

69,219

 

(14

)

(2

)

-

 

-

 

(16

)

At 31 Dec 2019

605,683

 

65,881

 

8,527

 

332

 

680,423

 

(728

)

(950

)

(3,837

)

(99

)

(5,614

)

By geography

 

 

 

 

 

 

 

 

 

 

Europe

190,528

 

20,276

 

4,671

 

129

 

215,604

 

(318

)

(458

)

(1,578

)

(45

)

(2,399

)

-                      of which: UK

131,007

 

16,253

 

3,343

 

79

 

150,682

 

(252

)

(385

)

(989

)

(32

)

(1,658

)

Asia

308,305

 

32,287

 

1,419

 

148

 

342,159

 

(228

)

(253

)

(986

)

(38

)

(1,505

)

-                      of which: Hong Kong

182,501

 

23,735

 

673

 

48

 

206,957

 

(118

)

(172

)

(475

)

(28

)

(793

)

MENA

25,470

 

3,314

 

1,686

 

18

 

30,488

 

(55

)

(85

)

(946

)

(12

)

(1,098

)

North America

64,501

 

7,495

 

458

 

-

 

72,454

 

(45

)

(96

)

(141

)

-

 

(282

)

Latin America

16,879

 

2,509

 

293

 

37

 

19,718

 

(82

)

(58

)

(186

)

(4

)

(330

)

At 31 Dec 2019

605,683

 

65,881

 

8,527

 

332

 

680,423

 

(728

)

(950

)

(3,837

)

(99

)

(5,614

)

 

Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution1

 

Nominal amount

Allowance for ECL

 

Stage 1

Stage 2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Corporate and commercial

271,678

 

20,880

 

757

 

13

 

293,328

 

(132

)

(151

)

(68

)

-

 

(351

)

Financial

101,345

 

1,447

 

5

 

-

 

102,797

 

(7

)

(2

)

(1

)

-

 

(10

)

At 31 Dec 2019

373,023

 

22,327

 

762

 

13

 

396,125

 

(139

)

(153

)

(69

)

-

 

(361

)

By geography

 

 

 

 

 

 

 

 

 

 

Europe

190,604

 

7,852

 

645

 

13

 

199,114

 

(60

)

(43

)

(56

)

-

 

(159

)

-                      of which: UK

76,013

 

4,193

 

494

 

9

 

80,709

 

(48

)

(32

)

(31

)

-

 

(111

)

Asia

60,759

 

3,762

 

8

 

-

 

64,529

 

(43

)

(33

)

(4

)

-

 

(80

)

-                      of which: Hong Kong

27,047

 

2,114

 

5

 

-

 

29,166

 

(14

)

(23

)

(2

)

-

 

(39

)

MENA

5,690

 

621

 

31

 

-

 

6,342

 

(12

)

(13

)

(4

)

-

 

(29

)

North America

112,812

 

9,933

 

77

 

-

 

122,822

 

(22

)

(62

)

(5

)

-

 

(89

)

Latin America

3,158

 

159

 

1

 

-

 

3,318

 

(2

)

(2

)

-

 

-

 

(4

)

At 31 Dec 2019

373,023

 

22,327

 

762

 

13

 

396,125

 

(139

)

(153

)

(69

)

-

 

(361

)

1   Included in loans and other credit-related commitments and financial guarantees is $53bn relating to unsettled reverse repurchase agreements, which once drawn are classified as 'Reverse repurchase agreements - non-trading'.



 

Total wholesale lending for loans and advances to banks and customers by stage distribution1

 

Gross carrying amount

 

Allowance for ECL

 

 

Stage 1

Stage 2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Corporate and commercial

474,700

 

51,341

 

8,212

 

324

 

534,577

 

(698

)

(812

)

(3,848

)

(194

)

(5,552

)

-  agriculture, forestry and fishing

 

4,791

 

1,672

 

236

 

2

 

6,701

 

(15

)

(34

)

(117

)

(1

)

(167

)

-  mining and quarrying

 

11,892

 

1,919

 

359

 

2

 

14,172

 

(29

)

(51

)

(94

)

(2

)

(176

)

-  manufacturing

92,193

 

11,817

 

1,569

 

125

 

105,704

 

(132

)

(156

)

(791

)

(83

)

(1,162

)

-  electricity, gas, steam and air-conditioning supply

 

14,431

 

1,513

 

40

 

60

 

16,044

 

(18

)

(60

)

(15

)

(54

)

(147

)

-  water supply, sewerage, waste management and remediation

 

3,212

 

287

 

24

 

-

 

3,523

 

(5

)

(2

)

(17

)

-

 

(24

)

-  construction

12,577

 

1,458

 

1,168

 

51

 

15,254

 

(27

)

(41

)

(524

)

(44

)

(636

)

-  wholesale and retail trade, repair of motor vehicles and motorcycles

 

83,192

 

12,784

 

1,652

 

37

 

97,665

 

(115

)

(128

)

(968

)

(7

)

(1,218

)

-  transportation and storage

 

23,195

 

1,957

 

351

 

38

 

25,541

 

(37

)

(46

)

(82

)

(1

)

(166

)

-  accommodation and food

 

18,370

 

2,904

 

270

 

3

 

21,547

 

(43

)

(41

)

(83

)

(1

)

(168

)

-  publishing, audiovisual and broadcasting

 

19,529

 

1,453

 

189

 

1

 

21,172

 

(42

)

(16

)

(84

)

-

 

(142

)

-  real estate

115,615

 

6,502

 

1,115

 

1

 

123,233

 

(97

)

(80

)

(594

)

-

 

(771

)

-  professional, scientific and technical activities

 

19,567

 

2,656

 

350

 

-

 

22,573

 

(29

)

(29

)

(113

)

-

 

(171

)

-  administrative and support services

 

22,553

 

2,110

 

437

 

3

 

25,103

 

(41

)

(48

)

(166

)

(1

)

(256

)

-  public administration and defence, compulsory social security

 

1,425

 

30

 

8

 

-

 

1,463

 

(1

)

(3

)

(5

)

-

 

(9

)

-  education

1,585

 

230

 

14

 

-

 

1,829

 

(11

)

(7

)

(6

)

-

 

(24

)

-  health and care

3,558

 

609

 

141

 

-

 

4,308

 

(10

)

(16

)

(33

)

-

 

(59

)

-  arts, entertainment and recreation

 

4,244

 

758

 

39

 

-

 

5,041

 

(9

)

(9

)

(15

)

-

 

(33

)

-  other services

13,234

 

436

 

242

 

1

 

13,913

 

(31

)

(31

)

(140

)

-

 

(202

)

-  activities of households

 

770

 

59

 

1

 

-

 

830

 

-

 

-

 

-

 

-

 

-

 

-  extra-territorial organisations and bodies activities

 

49

 

3

 

7

 

-

 

59

 

-

 

-

 

(1

)

-

 

(1

)

-  government

7,905

 

168

 

-

 

-

 

8,073

 

(6

)

(1

)

-

 

-

 

(7

)

-  asset-backed securities

813

 

16

 

-

 

-

 

829

 

-

 

(13

)

-

 

-

 

(13

)

Non-bank financial institutions

59,012

 

2,165

 

230

 

-

 

61,407

 

(44

)

(31

)

(51

)

-

 

(126

)

Loans and advances to banks

71,873

 

307

 

-

 

-

 

72,180

 

(11

)

(2

)

-

 

-

 

(13

)

At 31 Dec 2018

 

605,585

 

53,813

 

8,442

 

324

 

668,164

 

(753

)

(845

)

(3,899

)

(194

)

(5,691

)

By geography

 

 

 

 

 

 

 

 

 

 

Europe

183,592

 

25,868

 

4,233

 

150

 

213,843

 

(366

)

(529

)

(1,598

)

(102

)

(2,595

)

- of which: UK

126,209

 

22,165

 

2,928

 

8

 

151,310

 

(313

)

(471

)

(998

)

-

 

(1,782

)

Asia

314,591

 

17,729

 

1,736

 

92

 

334,148

 

(179

)

(121

)

(1,040

)

(36

)

(1,376

)

- of which: Hong Kong

194,186

 

8,425

 

729

 

69

 

203,409

 

(99

)

(54

)

(413

)

(35

)

(601

)

MENA

25,684

 

2,974

 

1,769

 

53

 

30,480

 

(73

)

(77

)

(974

)

(46

)

(1,170

)

North America

62,631

 

6,928

 

314

 

-

 

69,873

 

(37

)

(107

)

(101

)

-

 

(245

)

Latin America

19,087

 

314

 

390

 

29

 

19,820

 

(98

)

(11

)

(186

)

(10

)

(305

)

At 31 Dec 2018

 

605,585

 

53,813

 

8,442

 

324

 

668,164

 

(753

)

(845

)

(3,899

)

(194

)

(5,691

)

1   During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.

Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution1,2

 

Nominal amount

Allowance for ECL

 

Stage 1

Stage 2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Corporate and commercial

264,550

 

23,026

 

791

 

10

 

288,377

 

(142

)

(161

)

(87

)

-

 

(390

)

Financial

117,413

 

1,452

 

6

 

-

 

118,871

 

(7

)

(6

)

(1

)

-

 

(14

)

At 31 Dec 2018

 

381,963

 

24,478

 

797

 

10

 

407,248

 

(149

)

(167

)

(88

)

-

 

(404

)

By geography

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Europe

201,024

 

11,794

 

614

 

10

 

213,442

 

(82

)

(66

)

(53

)

-

 

(201

)

- of which: UK

80,504

 

8,446

 

442

 

-

 

89,392

 

(69

)

(57

)

(39

)

-

 

(165

)

Asia

61,206

 

3,076

 

102

 

-

 

64,384

 

(39

)

(16

)

(28

)

-

 

(83

)

- of which: Hong Kong

27,022

 

1,115

 

89

 

-

 

28,226

 

(12

)

(2

)

(27

)

-

 

(41

)

MENA

5,304

 

732

 

18

 

-

 

6,054

 

(8

)

(10

)

(2

)

-

 

(20

)

North America

111,494

 

8,850

 

62

 

-

 

120,406

 

(17

)

(75

)

(4

)

-

 

(96

)

Latin America

2,935

 

26

 

1

 

-

 

2,962

 

(3

)

-

 

(1

)

-

 

(4

)

At 31 Dec 2018

 

381,963

 

24,478

 

797

 

10

 

407,248

 

(149

)

(167

)

(88

)

-

 

(404

)

1   Included in loans and other credit-related commitments and financial guarantees is $65bn relating to unsettled reverse repurchase agreements, which once drawn are classified as 'Reverse repurchase agreements - non-trading'.

2   During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.



 

Wholesale lending - reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and

customers including loan commitments and financial guarantees

 

(Audited)

 

Non-credit impaired

Credit impaired

 

 

Stage 1

Stage 2

Stage 3

POCI

Total

 

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2019

922,192

 

(902

)

78,266

 

(1,012

)

9,239

 

(3,987

)

334

 

(194

)

1,010,031

 

(6,095

)

Transfers of financial instruments

(31,493

)

(169

)

28,418

 

276

 

3,075

 

(107

)

-

 

-

 

-

 

-

 

Net remeasurement of ECL arising from transfer of stage

-

 

223

 

-

 

(268

)

-

 

(38

)

-

 

-

 

-

 

(83

)

Net new and further lending/ repayments

27,918

 

(134

)

(20,121

)

167

 

(1,552

)

369

 

137

 

(1

)

6,382

 

401

 

Change in risk parameters - credit quality

-

 

102

 

-

 

(193

)

-

 

(1,514

)

-

 

(51

)

-

 

(1,656

)

Changes to models used for ECL calculation

-

 

-

 

-

 

(56

)

-

 

-

 

-

 

-

 

-

 

(56

)

Assets written off

-

 

-

 

-

 

-

 

(1,312

)

1,312

 

(140

)

140

 

(1,452

)

1,452

 

Credit-related modifications that resulted in derecognition

-

 

-

 

-

 

-

 

(268

)

125

 

-

 

-

 

(268

)

125

 

Foreign exchange and other

7,035

 

13

 

1,606

 

(17

)

107

 

(66

)

14

 

7

 

8,762

 

(63

)

At 31 Dec 2019

925,652

 

(867

)

88,169

 

(1,103

)

9,289

 

(3,906

)

345

 

(99

)

1,023,455

 

(5,975

)

ECL income statement change for the period

 

191

 

 

(350

)

 

(1,183

)

 

(52

)

 

(1,394

)

Recoveries

 

 

 

 

 

 

 

 

 

47

 

Others

 

 

 

 

 

 

 

 

 

(24

)

Total ECL income statement change for the period

 

 

 

 

 

 

 

 

 

(1,371

)


As shown in the above table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees decreased $120m during the period from $6,095m at 31 December 2018 to $5,975m at 31 December 2019.

This decrease was primarily driven by:

•    $1,452m of assets written off;

•    $401m relating to volume movements, which included the ECL allowance associated with new originations, assets derecognised and further lending/repayments; and

•    $125m of credit-related modifications that resulted in derecognition.

These decreases were partly offset by increases of:

•    $1,656m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages;

•    $83m relating to the net remeasurement impact of stage transfers;

•    $56m changes to models used for ECL calculation; and

•    foreign exchange and other movements of $63m.

The ECL charge for the period of $1,394m presented in the above table consisted of $1,656m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stage and $83m relating to the net remeasurement impact of stage transfers. This was partly offset by $401m relating to underlying net book volume movements and $56m in changes to models used for ECL calculation.


 

Wholesale lending - reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and

customers including loan commitments and financial guarantees1

 

(Audited)

 

Non-credit impaired

Credit impaired

 

 

Stage 1

Stage 2

Stage 3

POCI

Total

 

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

 

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2018

897,529

 

(873

)

84,354

 

(1,249

)

10,209

 

(4,410

)

1,042

 

(242

)

993,134

 

(6,774

)

Transfers of financial instruments

(4,477

)

(274

)

1,535

 

386

 

2,942

 

(112

)

-

 

-

 

-

 

-

 

Net remeasurement of ECL arising from transfer of stage

-

 

262

 

-

 

(231

)

-

 

(92

)

-

 

-

 

-

 

(61

)

Net new and further lending/repayments

74,107

 

(271

)

(13,709

)

342

 

(2,414

)

406

 

(587

)

42

 

57,397

 

519

 

Changes to risk parameters - credit quality

-

 

157

 

-

 

(301

)

-

 

(1,041

)

-

 

(51

)

-

 

(1,236

)

Assets written off

-

 

-

 

-

 

-

 

(1,182

)

1,172

 

(1

)

1

 

(1,183

)

1,173

 

Foreign exchange and other

(44,967

)

97

 

6,086

 

41

 

(316

)

90

 

(120

)

56

 

(39,317

)

284

 

At 31 Dec 2018

922,192

 

(902

)

78,266

 

(1,012

)

9,239

 

(3,987

)

334

 

(194

)

1,010,031

 

(6,095

)

ECL income statement change for the period

 

148

 

 

(190

)

 

(727

)

 

(9

)

 

(778

)

Recoveries

 

 

 

 

 

 

 

 

 

118

 

Others

 

 

 

 

 

 

 

 

 

(69

)

Total ECL income statement change for the period

 

 

 

 

 

 

 

 

 

(729

)

1   During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount for 31 December 2018 only. For further details, see page 86.




Wholesale lending - distribution of financial instruments to which the impairment requirements of IFRS 9 are applied by credit quality

 

Gross carrying/nominal amount

Allowance for ECL

Net

 

Strong

Good

Satisfactory

Sub-standard

Credit impaired

Total

 

$m

$m

$m

$m

$m

$m

$m

$m

By geography

 

 

 

 

 

 

 

 

Europe

57,340

69,427

74,143

9,895

4,799

215,604

(2,399

)

213,205

 

of which: UK

35,838

53,046

51,355

7,023

3,420

150,682

(1,658

)

149,024

 

Asia

145,450

106,313

86,685

2,158

1,553

342,159

(1,505

)

340,654

 

of which: Hong Kong

82,053

67,541

55,379

1,263

721

206,957

(793

)

206,164

 

MENA

12,036

6,003

9,307

1,439

1,703

30,488

(1,098

)

29,390

 

North America

12,319

31,496

24,860

3,320

459

72,454

(282

)

72,172

 

Latin America

3,919

5,455

7,713

2,304

327

19,718

(330

)

19,388

 

At 31 Dec 2019

231,064

218,694

202,708

19,116

8,841

680,423

(5,614

)

674,809

 

Percentage of total credit quality

34.0%

32.1%

29.8%

2.8%

1.3%

100.0%

 

 

 

By geography

 

 

 

 

 

 

 

 

Europe

60,145

62,098

79,466

7,752

4,382

213,843

(2,595

)

211,248

 

of which: UK

39,840

46,396

56,974

5,164

2,936

151,310

(1,782

)

149,528

 

Asia

143,864

100,437

86,065

1,977

1,805

334,148

(1,376

)

332,772

 

of which: Hong Kong

82,854

63,564

55,357

837

797

203,409

(601

)

202,808

 

MENA

10,393

7,905

9,173

1,186

1,823

30,480

(1,170

)

29,310

 

North America

10,952

31,278

24,708

2,621

314

69,873

(245

)

69,628

 

Latin America

3,730

6,088

8,300

1,286

416

19,820

(305

)

19,515

 

At 31 Dec 2018

229,084

207,806

207,712

14,822

8,740

668,164

(5,691

)

662,473

 

Percentage of total credit quality

34.3%

31.1%

31.1%

2.2%

1.3%

100.0%

 

 

Our risk rating system facilitates the internal ratings-based approach under the Basel framework adopted by the Group to support calculation of our minimum credit regulatory capital requirement. The credit quality classifications can be found on page 85.



 

Wholesale lending - credit risk profile by obligor grade for loans and advances at amortised cost

 

 

Gross carrying amount

Allowance for ECL

 

 

 

Basel one-year PD range

Stage

1

Stage

2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

ECL coverage

Mapped external rating

 

%

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

%

 

Corporate and commercial

 

472,253

 

59,599

 

8,315

 

332

 

540,499

 

(672

)

(920

)

(3,747

)

(99

)

(5,438

)

1.0

 

 

- CRR 1

0.000 to 0.053

44,234

 

18

 

-

 

-

 

44,252

 

(7

)

-

 

-

 

-

 

(7

)

-

 

AA- and above

- CRR 2

0.054 to 0.169

92,861

 

1,013

 

-

 

-

 

93,874

 

(20

)

(10

)

-

 

-

 

(30

)

-

 

A+ to A-

- CRR 3

0.170 to 0.740

178,662

 

11,808

 

-

 

-

 

190,470

 

(164

)

(91

)

-

 

-

 

(255

)

0.1

 

BBB+ to BBB-

- CRR 4

0.741 to 1.927

105,708

 

17,829

 

-

 

-

 

123,537

 

(244

)

(151

)

-

 

-

 

(395

)

0.3

 

BB+ to BB-

- CRR 5

1.928 to 4.914

46,423

 

16,423

 

-

 

-

 

62,846

 

(190

)

(218

)

-

 

-

 

(408

)

0.6

 

BB- to B

- CRR 6

4.915 to 8.860

3,323

 

7,592

 

-

 

15

 

10,930

 

(33

)

(141

)

-

 

-

 

(174

)

1.6

 

B-

- CRR 7

8.861 to 15.000

795

 

3,067

 

-

 

3

 

3,865

 

(11

)

(172

)

-

 

-

 

(183

)

4.7

 

CCC+

- CRR 8

15.001 to 99.999

247

 

1,849

 

-

 

-

 

2,096

 

(3

)

(137

)

-

 

-

 

(140

)

6.7

 

CCC to C

- CRR 9/10

100.000

 

-

 

-

 

8,315

 

314

 

8,629

 

-

 

-

 

(3,747

)

(99

)

(3,846

)

44.6

 

D

Non-bank financial institutions

 

65,661

 

4,832

 

212

 

-

 

70,705

 

(42

)

(28

)

(90

)

-

 

(160

)

0.2

 

 

- CRR 1

0.000 to 0.053

16,616

 

-

 

-

 

-

 

16,616

 

(1

)

-

 

-

 

-

 

(1

)

-

 

AA- and above

- CRR 2

0.054 to 0.169

15,630

 

56

 

-

 

-

 

15,686

 

(4

)

-

 

-

 

-

 

(4

)

-

 

A+ to A-

- CRR 3

0.170 to 0.740

21,562

 

1,333

 

-

 

-

 

22,895

 

(12

)

(4

)

-

 

-

 

(16

)

0.1

 

BBB+ to BBB-

- CRR 4

0.741 to 1.927

7,535

 

1,169

 

-

 

-

 

8,704

 

(12

)

(7

)

-

 

-

 

(19

)

0.2

 

BB+ to BB-

- CRR 5

1.928 to 4.914

4,024

 

1,738

 

-

 

-

 

5,762

 

(12

)

(11

)

-

 

-

 

(23

)

0.4

 

BB- to B

- CRR 6

4.915 to 8.860

280

 

517

 

-

 

-

 

797

 

(1

)

(4

)

-

 

-

 

(5

)

0.6

 

B-

- CRR 7

8.861 to 15.000

12

 

7

 

-

 

-

 

19

 

-

 

-

 

-

 

-

 

-

 

-

 

CCC+

- CRR 8

15.001 to 99.999

2

 

12

 

-

 

-

 

14

 

-

 

(2

)

-

 

-

 

(2

)

14.3

 

CCC to C

- CRR 9/10

100.000

 

-

 

-

 

212

 

-

 

212

 

-

 

-

 

(90

)

-

 

(90

)

42.5

 

D

Banks

 

67,769

 

1,450

 

-

 

-

 

69,219

 

(14

)

(2

)

-

 

-

 

(16

)

-

 

 

- CRR 1

0.000 to 0.053

49,858

 

21

 

-

 

-

 

49,879

 

(2

)

-

 

-

 

-

 

(2

)

-

 

AA- and above

- CRR 2

0.054 to 0.169

10,689

 

68

 

-

 

-

 

10,757

 

(7

)

-

 

-

 

-

 

(7

)

0.1

 

A+ to A-

- CRR 3

0.170 to 0.740

5,312

 

17

 

-

 

-

 

5,329

 

(2

)

-

 

-

 

-

 

(2

)

-

 

BBB+ to BBB-

- CRR 4

0.741 to 1.927

1,725

 

31

 

-

 

-

 

1,756

 

(1

)

(1

)

-

 

-

 

(2

)

0.1

 

BB+ to BB-

- CRR 5

1.928 to 4.914

71

 

32

 

-

 

-

 

103

 

-

 

-

 

-

 

-

 

-

 

-

 

BB- to B

- CRR 6

4.915 to 8.860

113

 

2

 

-

 

-

 

115

 

(2

)

-

 

-

 

-

 

(2

)

1.7

 

B-

- CRR 7

8.861 to 15.000

1

 

1

 

-

 

-

 

2

 

-

 

-

 

-

 

-

 

-

 

-

 

CCC+

- CRR 8

15.001 to 99.999

-

 

1,278

 

-

 

-

 

1,278

 

-

 

(1

)

-

 

-

 

(1

)

0.1

 

CCC to C

- CRR 9/10

100.000

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

D

At 31 Dec 2019

 

605,683

 

65,881

 

8,527

 

332

 

680,423

 

(728

)

(950

)

(3,837

)

(99

)

(5,614

)

0.8

 

 

 



 

Wholesale lending - credit risk profile by obligor grade for loans and advances at amortised cost1 (continued)

 

Basel one-year PD range

Gross carrying amount

Allowance for ECL

ECL coverage

Mapped external rating

 

Stage

1

Stage

2

Stage 3

POCI

Total

Stage

1

Stage

2

Stage 3

POCI

Total

 

%

$m

$m

$m

$m

$m

 

$m

$m

$m

$m

$m

%

 

Corporate and

commercial

 

474,700

 

51,341

 

8,212

 

324

 

534,577

 

(698

)

(812

)

(3,848

)

(194

)

(5,552

)

1.0

 

 

- CRR 1

0.000 to 0.053

45,401

 

67

 

-

 

-

 

45,468

 

(4

)

(2

)

-

 

-

 

(6

)

-

 

AA- and above

- CRR 2

0.054 to 0.169

93,266

 

1,653

 

-

 

-

 

94,919

 

(17

)

(4

)

-

 

-

 

(21

)

-

 

A+ to A-

- CRR 3

0.170 to 0.740

172,496

 

9,487

 

-

 

-

 

181,983

 

(162

)

(85

)

-

 

-

 

(247

)

0.1

 

BBB+ to BBB-

- CRR 4

0.741 to 1.927

111,949

 

14,352

 

-

 

-

 

126,301

 

(231

)

(114

)

-

 

-

 

(345

)

0.3

 

BB+ to BB-

- CRR 5

1.928 to 4.914

46,396

 

16,661

 

-

 

-

 

63,057

 

(209

)

(252

)

-

 

-

 

(461

)

0.7

 

BB- to B

- CRR 6

4.915 to 8.860

3,662

 

4,544

 

-

 

22

 

8,228

 

(41

)

(103

)

-

 

-

 

(144

)

1.8

 

B-

- CRR 7

8.861 to 15.000

1,228

 

2,882

 

-

 

4

 

4,114

 

(22

)

(147

)

-

 

-

 

(169

)

4.1

 

CCC+

- CRR 8

15.001 to 99.999

302

 

1,695

 

-

 

-

 

1,997

 

(12

)

(105

)

-

 

-

 

(117

)

5.9

 

CCC to C

- CRR 9/10

100.000

 

-

 

-

 

8,212

 

298

 

8,510

 

-

 

-

 

(3,848

)

(194

)

(4,042

)

47.5

 

D

Non-bank financial institutions

 

59,012

 

2,165

 

230

 

-

 

61,407

 

(44

)

(31

)

(51

)

-

 

(126

)

0.2

 

 

- CRR 1

0.000 to 0.053

13,256

 

-

 

-

 

-

 

13,256

 

(1

)

-

 

-

 

-

 

(1

)

-

 

AA- and above

- CRR 2

0.054 to 0.169

15,172

 

20

 

-

 

-

 

15,192

 

(2

)

-

 

-

 

-

 

(2

)

-

 

A+ to A-

- CRR 3

0.170 to 0.740

17,950

 

501

 

-

 

-

 

18,451

 

(13

)

(1

)

-

 

-

 

(14

)

0.1

 

BBB+ to BBB-

- CRR 4

0.741 to 1.927

7,521

 

798

 

-

 

-

 

8,319

 

(10

)

(2

)

-

 

-

 

(12

)

0.1

 

BB+ to BB-

- CRR 5

1.928 to 4.914

4,882

 

606

 

-

 

-

 

5,488

 

(14

)

(5

)

-

 

-

 

(19

)

0.3

 

BB- to B

- CRR 6

4.915 to 8.860

61

 

133

 

-

 

-

 

194

 

-

 

(2

)

-

 

-

 

(2

)

1.0

 

B-

- CRR 7

8.861 to 15.000

169

 

23

 

-

 

-

 

192

 

(4

)

(1

)

-

 

-

 

(5

)

2.6

 

CCC+

- CRR 8

15.001 to 99.999

1

 

84

 

-

 

-

 

85

 

-

 

(20

)

-

 

-

 

(20

)

23.5

 

CCC to C

- CRR 9/10

100.000

 

-

 

-

 

230

 

-

 

230

 

-

 

-

 

(51

)

-

 

(51

)

22.2

 

D

Banks

 

71,873

 

307

 

-

 

-

 

72,180

 

(11

)

(2

)

-

 

-

 

(13

)

-

 

 

- CRR 1

0.000 to 0.053

47,680

 

32

 

-

 

-

 

47,712

 

(3

)

-

 

-

 

-

 

(3

)

-

 

AA- and above

- CRR 2

0.054 to 0.169

12,519

 

18

 

-

 

-

 

12,537

 

(2

)

-

 

-

 

-

 

(2

)

-

 

A+ to A-

- CRR 3

0.170 to 0.740

7,250

 

121

 

-

 

-

 

7,371

 

(3

)

(1

)

-

 

-

 

(4

)

0.1

 

BBB+ to BBB-

- CRR 4

0.741 to 1.927

4,032

 

118

 

-

 

-

 

4,150

 

(3

)

(1

)

-

 

-

 

(4

)

0.1

 

BB+ to BB-

- CRR 5

1.928 to 4.914

381

 

18

 

-

 

-

 

399

 

-

 

-

 

-

 

-

 

-

 

-

 

BB- to B

- CRR 6

4.915 to 8.860

8

 

-

 

-

 

-

 

8

 

-

 

-

 

-

 

-

 

-

 

-

 

B-

- CRR 7

8.861 to 15.000

1

 

-

 

-

 

-

 

1

 

-

 

-

 

-

 

-

 

-

 

-

 

CCC+

- CRR 8

15.001 to 99.999

2

 

-

 

-

 

-

 

2

 

-

 

-

 

-

 

-

 

-

 

-

 

CCC to C

- CRR 9/10

100.000

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

D

At 31 Dec 2018

 

605,585

 

53,813

 

8,442

 

324

 

668,164

 

(753

)

(845

)

(3,899

)

(194

)

(5,691

)

0.9

 

 

1   During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

Commercial real estate lending includes the financing of corporate, institutional and high net worth customers who are investing primarily in income-producing assets and, to a lesser extent, in their construction and development. The portfolio is globally diversified with larger concentrations in Hong Kong, the UK and the US.

Our global exposure is centred largely on cities with economic, political or cultural significance. In more developed markets, our exposure mainly comprises the financing of investment assets, the

redevelopment of existing stock and the augmentation of both commercial and residential markets to support economic and population growth. In less-developed commercial real estate markets, our exposures comprise lending for development assets on relatively short tenors with a particular focus on supporting larger, better capitalised developers involved in residential construction or assets supporting economic expansion.


Commercial real estate lending grew $7.2bn, including foreign exchange movements, mainly in Hong Kong and, to a lesser extent, within Canada.


Commercial real estate lending

 

 

 

 

 

 

 

Of which:

 

Europe

Asia

MENA

   North   America

Latin America

Total

UK

Hong Kong

 

$m

$m

$m

$m

$m

$m

$m

$m

Gross loans and advances

 

 

 

 

 

 

 

 

Stage 1

25,017

 

76,832

 

1,507

 

10,938

 

1,653

 

115,947

 

17,953

 

60,632

 

Stage 2

3,988

 

2,673

 

18

 

508

 

41

 

7,228

 

2,953

 

1,696

 

Stage 3

1,115

 

21

 

208

 

33

 

27

 

1,404

 

948

 

17

 

POCI

1

 

-

 

-

 

-

 

-

 

1

 

-

 

-

 

At 31 Dec 2019

30,121

 

79,526

 

1,733

 

11,479

 

1,721

 

124,580

 

21,854

 

62,345

 

-  of which: renegotiated loans

788

 

-

 

195

 

-

 

-

 

983

 

782

 

-

 

Allowance for ECL

(372

)

(78

)

(170

)

(17

)

(7

)

(644

)

(305

)

(40

)

 

Commercial real estate lending1 (continued)

 

 

 

 

 

 

 

Of which:

 

Europe

Asia

MENA

North   America

Latin    America

Total

UK

Hong Kong

 

$m

$m

$m

$m

$m

$m

$m

$m

Gross loans and advances

 

 

 

 

 

 

 

 

Stage 1

26,265

 

70,769

 

1,607

 

9,129

 

1,796

 

109,566

 

19,624

 

55,872

 

Stage 2

2,406

 

3,176

 

120

 

677

 

13

 

6,392

 

1,809

 

2,032

 

Stage 3

1,022

 

16

 

209

 

43

 

118

 

1,408

 

673

 

12

 

POCI

-

 

-

 

-

 

-

 

14

 

14

 

-

 

-

 

At 31 Dec 2018

29,693

 

73,961

 

1,936

 

9,849

 

1,941

 

117,380

 

22,106

 

57,916

 

-  of which: renegotiated loans

944

 

1

 

186

 

1

 

-

 

1,132

 

816

 

-

 

Allowance for ECL

(364

)

(59

)

(171

)

(9

)

(52

)

(655

)

(282

)

(33

)

1   During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.



Refinance risk in commercial real estate

Commercial real estate lending tends to require the repayment of a significant proportion of the principal at maturity. Typically, a customer will arrange repayment through the acquisition of a new

loan to settle the existing debt. Refinance risk is the risk that a customer, being unable to repay the debt on maturity, fails to refinance it at commercial rates. We monitor our commercial real estate portfolio closely, assessing indicators for signs of potential issues with refinancing.



Commercial real estate gross loans and advances maturity analysis

 

 

 

 

 

 

 

Of which:

 

Europe

Asia

MENA

North America

Latin America

Total

UK

Hong Kong

 

$m

$m

$m

$m

$m

$m

$m

$m

On demand, overdrafts or revolving

 

 

 

 

 

 

 

 

< 1 year

13,808

 

21,625

 

816

 

5,905

 

135

 

42,289

 

11,775

 

16,937

 

1-2 years

6,197

 

17,638

 

142

 

1,548

 

107

 

25,632

 

5,274

 

13,776

 

2-5 years

7,797

 

35,557

 

509

 

3,511

 

1,332

 

48,706

 

4,347

 

27,860

 

> 5 years

2,319

 

4,706

 

266

 

515

 

147

 

7,953

 

458

 

3,772

 

At 31 Dec 2019

30,121

 

79,526

 

1,733

 

11,479

 

1,721

 

124,580

 

21,854

 

62,345

 

 

On demand, overdrafts or revolving

 

 

 

 

 

 

 

 

< 1 year

13,790

 

22,100

 

896

 

4,942

 

427

 

42,155

 

11,305

 

18,094

 

1-2 years

5,850

 

13,174

 

305

 

1,949

 

117

 

21,395

 

5,153

 

9,120

 

2-5 years

7,257

 

32,894

 

417

 

2,152

 

1,053

 

43,773

 

5,232

 

26,061

 

> 5 years

2,796

 

5,793

 

318

 

806

 

344

 

10,057

 

416

 

4,641

 

At 31 Dec 2018

29,693

 

73,961

 

1,936

 

9,849

 

1,941

 

117,380

 

22,106

 

57,916

 



Collateral and other credit enhancements

(Audited)

Although collateral can be an important mitigant of credit risk, it is the Group's practice to lend on the basis of the customer's ability to meet their obligations out of cash flow resources rather than placing primary reliance on collateral and other credit risk enhancements. Depending on the customer's standing and the type of product, facilities may be provided without any collateral or other credit enhancements. For other lending, a charge over collateral is obtained and considered in determining the credit decision and pricing. In the event of default, the Group may utilise the collateral as a source of repayment.

Depending on its form, collateral can have a significant financial effect in mitigating our exposure to credit risk. Where there is sufficient collateral, an expected credit loss is not recognised. This is the case for reverse repurchase agreements and for certain loans and advances to customers where the loan to value ('LTV') is very low.

Mitigants may include a charge on borrowers' specific assets, such as real estate or financial instruments. Other credit risk mitigants include short positions in securities and financial assets held as part of linked insurance/investment contracts where the risk is predominantly borne by the policyholder. Additionally, risk may be managed by employing other types of collateral and credit risk enhancements, such as second charges, other liens and unsupported guarantees. Guarantees are normally taken from corporates and export credit agencies. Corporates would normally provide guarantees as part of a parent/subsidiary relationship and span a number of credit grades. The export credit agencies will normally be investment grade.

Certain credit mitigants are used strategically in portfolio management activities. While single name concentrations arise in portfolios managed by Global Banking and Corporate Banking, it is only in Global Banking that their size requires the use of portfolio level credit mitigants. Across Global Banking, risk limits and utilisations, maturity profiles and risk quality are monitored and managed proactively. This process is key to the setting of risk appetite for these larger, more complex, geographically distributed customer groups. While the principal form of risk management continues to be at the point of exposure origination, through the lending decision-making process, Global Banking also utilises loan sales and credit default swap ('CDS') hedges to manage concentrations and reduce risk. These transactions are the responsibility of a dedicated Global Banking portfolio management team. Hedging activity is carried out within agreed credit parameters, and is subject to market risk limits and a robust governance structure. Where applicable, CDSs are entered into directly with a central clearing house counterparty. Otherwise our exposure to CDS protection providers is diversified among mainly banking counterparties with strong credit ratings.

CDS mitigants are held at portfolio level and are not included in the expected loss calculations. CDS mitigants are not reported in the following tables.

Collateral on loans and advances

Collateral held is analysed separately for commercial real estate and for other corporate, commercial and financial (non-bank) lending. The following tables include off-balance sheet loan commitments, primarily undrawn credit lines.

The collateral measured in the following tables consists of fixed first charges on real estate, and charges over cash and marketable financial instruments. The values in the tables represent the expected market value on an open market basis. No adjustment has been made to the collateral for any expected costs of recovery. Marketable securities are measured at their fair value.

Other types of collateral such as unsupported guarantees and floating charges over the assets of a customer's business are not measured in the following tables. While such mitigants have value, often providing rights in insolvency, their assignable value is not sufficiently certain and they are therefore assigned no value for disclosure purposes.

The LTV ratios presented are calculated by directly associating loans and advances with the collateral that individually and uniquely supports each facility. When collateral assets are shared by multiple loans and advances, whether specifically or, more generally, by way of an all monies charge, the collateral value is pro-rated across the loans and advances protected by the collateral.

For credit-impaired loans, the collateral values cannot be directly compared with impairment allowances recognised. The LTV figures use open market values with no adjustments. Impairment allowances are calculated on a different basis, by considering other cash flows and adjusting collateral values for costs of realising collateral as explained further on page 244.

Commercial real estate loans and advances

The value of commercial real estate collateral is determined by using a combination of external and internal valuations and physical inspections. For CRR 1-7, local valuation policies determine the frequency of review on the basis of local market conditions because of the complexity of valuing collateral for commercial real estate. For CRR 8-10, almost all collateral would have been revalued within the last three years.

In Hong Kong, market practice is typically for lending to major property companies to be either secured by guarantees or unsecured. In Europe, facilities of a working capital nature are generally not secured by a first fixed charge, and are therefore disclosed as not collateralised.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Wholesale lending - commercial real estate loans and advances including loan commitments by level of collateral for key

countries/territories (by stage)

(Audited)

 

 

 

Of which:

 

Total

UK

Hong Kong

US

 

Gross carrying/nominal amount

ECL coverage

Gross carrying/nominal amount

ECL coverage

Gross carrying/nominal amount

ECL coverage

Gross carrying/nominal amount

ECL coverage

 

$m

%

$m

%

$m

%

$m

%

Stage 1

 

 

 

 

 

 

 

 

Not collateralised

61,820

 

0.1

 

7,266

 

0.1

 

32,478

 

-

 

541

 

-

 

Fully collateralised

89,319

 

0.1

 

18,535

 

-

 

41,798

 

-

 

4,722

 

-

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

46,318

 

0.1

 

7,018

 

0.1

 

28,776

 

-

 

1,703

 

0.1

 

-  51% to 75%

32,583

 

0.1

 

9,349

 

-

 

10,815

 

0.1

 

2,854

 

-

 

-  76% to 90%

5,018

 

0.1

 

1,649

 

0.1

 

1,436

 

0.1

 

96

 

-

 

-  91% to 100%

5,400

 

0.2

 

519

 

-

 

771

 

-

 

69

 

-

 

Partially collateralised (A):

6,563

 

0.2

 

682

 

-

 

1,627

 

0.1

 

-

 

-

 

-  collateral value on A

3,602

 

 

535

 

 

1,142

 

 

-

 

 

Total

157,702

 

0.1

 

26,483

 

0.1

 

75,903

 

-

 

5,263

 

-

 

Stage 2

 

 

 

 

 

 

 

 

Not collateralised

3,040

 

1.2

 

1,857

 

1.2

 

440

 

0.2

 

-

 

-

 

Fully collateralised

5,184

 

1.1

 

1,419

 

1.2

 

1,501

 

0.6

 

354

 

1.4

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

2,167

 

1.1

 

615

 

1.8

 

955

 

0.3

 

62

 

-

 

-  51% to 75%

1,986

 

0.9

 

712

 

0.6

 

497

 

1.0

 

292

 

1.4

 

-  76% to 90%

333

 

2.1

 

16

 

6.3

 

29

 

-

 

-

 

-

 

-  91% to 100%

698

 

1.1

 

76

 

1.3

 

20

 

-

 

-

 

-

 

Partially collateralised (B):

500

 

0.6

 

296

 

0.3

 

42

 

-

 

-

 

-

 

-  collateral value on B

203

 

 

56

 

 

25

 

 

-

 

 

Total

8,724

 

1.1

 

3,572

 

1.1

 

1,983

 

0.5

 

354

 

-

 

Stage 3

 

 

 

 

 

 

 

 

Not collateralised

315

 

57.8

 

66

 

92.4

 

-

 

-

 

-

 

-

 

Fully collateralised

557

 

14.9

 

404

 

12.9

 

17

 

11.8

 

-

 

-

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

87

 

16.1

 

42

 

7.1

 

6

 

16.7

 

-

 

-

 

-  51% to 75%

90

 

7.8

 

69

 

4.3

 

10

 

-

 

-

 

-

 

-  76% to 90%

89

 

15.7

 

72

 

4.2

 

-

 

-

 

-

 

-

 

-  91% to 100%

291

 

16.5

 

221

 

19.5

 

1

 

-

 

-

 

-

 

Partially collateralised (C):

773

 

41.5

 

507

 

27.8

 

-

 

-

 

-

 

-

 

-  collateral value on C

380

 

 

166

 

 

-

 

 

-

 

 

Total

1,645

 

35.6

 

977

 

26.0

 

17

 

11.8

 

-

 

-

 

POCI

 

 

 

 

 

 

 

 

Not collateralised

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Fully collateralised

1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  51% to 75%

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  76% to 90%

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  91% to 100%

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Partially collateralised (D):

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  collateral value on D

-

 

 

-

 

 

-

 

 

-

 

 

Total

1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

At 31 Dec 2019

168,072

 

0.5

 

31,032

 

1.0

 

77,903

 

0.1

 

5,617

 

0.1

 

 



 

Wholesale lending - commercial real estate loans and advances including loan commitments by level of collateral for key

countries/territories (by stage)1 (continued)

 

 

 

 

Of which:

 

Total

UK

Hong Kong

US

 

Gross carrying/nominal amount

ECL

coverage

Gross carrying/nominal amount

ECL

coverage

Gross carrying/nominal amount

ECL

coverage

Gross carrying/nominal amount

ECL

coverage

 

$m

%

$m

%

$m

%

$m

%

Stage 1

 

 

 

 

 

 

 

 

Not collateralised

61,486

 

0.1

 

9,920

 

0.2

 

31,224

 

-

 

-

 

-

 

Fully collateralised

86,960

 

0.1

 

17,196

 

0.1

 

39,174

 

-

 

4,862

 

-

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

46,650

 

0.1

 

7,673

 

0.1

 

25,870

 

-

 

3,463

 

-

 

-  51% to 75%

29,384

 

0.1

 

7,937

 

0.1

 

10,452

 

0.1

 

787

 

-

 

-  76% to 90%

5,167

 

0.1

 

1,038

 

-

 

1,168

 

0.1

 

519

 

-

 

-  91% to 100%

5,759

 

0.2

 

548

 

0.2

 

1,684

 

0.1

 

93

 

-

 

Partially collateralised (A):

6,101

 

0.1

 

487

 

0.2

 

2,130

 

-

 

-

 

-

 

-  collateral value on A

3,735

 

 

285

 

 

1,401

 

 

-

 

 

Total

154,547

 

0.1

 

27,603

 

0.1

 

72,528

 

-

 

4,862

 

-

 

Stage 2

 

 

 

 

 

 

 

 

Not collateralised

2,886

 

0.9

 

1,083

 

1.0

 

1,140

 

0.2

 

-

 

-

 

Fully collateralised

5,309

 

1.1

 

1,352

 

2.6

 

1,576

 

0.4

 

439

 

0.5

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

2,372

 

0.9

 

727

 

1.9

 

795

 

0.4

 

303

 

0.7

-  51% to 75%

1,667

 

0.7

 

567

 

0.7

 

505

 

0.4

 

7

 

-

 

-  76% to 90%

363

 

5.0

 

34

 

44.1

 

29

 

-

 

129

 

-

 

-  91% to 100%

907

 

1.0

 

24

 

8.3

 

247

 

-

 

-

 

-

 

Partially collateralised (B):

289

 

1.4

 

52

 

5.8

 

15

 

-

 

-

 

-

 

-  collateral value on B

156

 

 

20

 

 

5

 

 

-

 

 

Total

8,484

 

1.1

 

2,487

 

2.0

 

2,731

 

0.3

 

439

 

0.5

Stage 3

 

 

 

 

 

 

 

 

Not collateralised

338

 

57.1

 

61

 

85.2

 

-

 

-

 

-

 

-

 

Fully collateralised

606

 

12.7

 

433

 

9.2

 

12

 

-

 

-

 

-

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

412

 

10.0

 

304

 

9.2

 

2

 

-

 

-

 

-

 

-  51% to 75%

88

 

27.3

 

58

 

6.9

 

10

 

-

 

-

 

-

 

-  76% to 90%

38

 

2.6

 

35

 

5.7

 

-

 

-

 

-

 

-

 

-  91% to 100%

68

 

16.2

 

36

 

16.7

 

-

 

-

 

-

 

-

 

Partially collateralised (C):

474

 

56.5

 

261

 

42.9

 

-

 

-

 

-

 

-

 

-  collateral value on C

321

 

 

137

 

 

-

 

 

-

 

 

Total

1,418

 

37.9

 

755

 

27.0

 

12

 

-

 

-

 

-

 

POCI

 

 

 

 

 

 

 

 

Not collateralised

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Fully collateralised

15

 

53.3

 

-

 

-

 

-

 

-

 

-

 

-

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

13

 

61.5

 

-

 

-

 

-

 

-

 

-

 

-

 

-  51% to 75%

2

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  76% to 90%

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  91% to 100%

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

Partially collateralised (D):

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-  collateral value on D

-

 

 

-

 

 

-

 

 

-

 

 

Total

15

 

53.3

 

-

 

-

 

-

 

-

 

-

 

-

 

At 31 Dec 2018

164,464

 

0.5

 

30,845

 

0.9

 

75,271

 

-

 

5,301

 

0.1

1    During the period, the Group has re-presented the UK wholesale lending stage 1 and stage 2 amount. For further details, see page 86.

 



 

Wholesale lending - commercial real estate loans and advances including loan commitments by level of collateral for key

countries/territories

(Audited)

 

 

 

Of which:

 

Total

UK

Hong Kong

US

 

Gross carrying/nominal amount

ECL coverage

Gross carrying/nominal amount

ECL coverage

Gross carrying/nominal amount

ECL coverage

Gross carrying/nominal amount

ECL coverage

 

$m

%

$m

%

$m

%

$m

%

Rated CRR/PD1 to 7

 

 

 

 

 

 

 

 

Not collateralised

64,850

 

0.1

 

9,119

 

0.3

 

32,918

 

-

 

541

 

-

 

Fully collateralised

94,299

 

0.1

 

19,833

 

0.1

 

43,299

 

0.1

 

5,021

 

0.1

 

Partially collateralised (A):

7,052

 

0.2

 

971

 

0.1

 

1,669

 

0.1

 

-

 

-

 

-  collateral value on A

3,796

 

 

586

 

 

1,167

 

 

-

 

 

Total

166,201

 

0.1

 

29,923

 

0.1

 

77,886

 

-

 

5,562

 

0.1

 

Rated CRR/PD8

 

 

 

 

 

 

 

 

Not collateralised

10

 

50.0

 

4

 

100.0

 

-

 

-

 

-

 

-

 

Fully collateralised

204

 

4.9

 

121

 

5.0

 

-

 

-

 

55

 

3.6

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

47

 

8.5

 

27

 

14.8

 

-

 

-

 

13

 

-

 

-  51% to 75%

120

 

3.3

 

68

 

1.5

 

-

 

-

 

42

 

4.8

 

-  76% to 90%

25

 

4.0

 

15

 

6.7

 

-

 

-

 

-

 

-

 

-  91% to 100%

12

 

8.3

 

11

 

-

 

-

 

-

 

-

 

-

 

Partially collateralised (B):

11

 

-

 

7

 

-

 

-

 

-

 

-

 

-

 

-  collateral value on B

9

 

 

5

 

 

-

 

 

-

 

 

Total

225

 

6.7

 

132

 

7.6

 

-

 

-

 

55

 

3.6

 

Rated CRR/PD9 to 10

 

 

 

 

 

 

 

 

Not collateralised

315

 

57.8

 

66

 

92.4

 

-

 

-

 

-

 

-

 

Fully collateralised

557

 

14.9

 

404

 

12.9

 

17

 

11.8

 

-

 

-

 

LTV ratio:

 

 

 

 

 

 

 

 

-  less than 50%

87

 

16.1

 

42

 

7.1

 

6

 

16.7

 

-

 

-

 

-  51% to 75%

90

 

7.8

 

69

 

4.3

 

10

 

-

 

-

 

-

 

-  76% to 90%

89

 

15.7

 

72

 

4.2

 

-

 

-

 

-

 

-

 

-  91% to 100%

291

 

16.5

 

221

 

19.5

 

1

 

100.0

 

-

 

-

 

Partially collateralised (C):

774

 

41.6

 

507

 

27.8

 

-

 

-

 

-

 

-

 

-  collateral value on C

380

 

 

166

 

 

-

 

 

-

 

 

Total

1,646

 

35.7

 

977

 

26.0

 

17

 

11.8

 

-

 

-

 

At 31 Dec 2019

168,072

 

0.5

 

31,032

 

1.0

 

77,903

 

0.1

 

5,617

 

0.1

 

 

Rated CRR/PD1 to 7

 

 

 

 

 

 

 

 

Not collateralised

64,324

 

0.1

 

11,001

 

0.2

 

32,364

 

-

 

-

 

-

 

Fully collateralised

91,791

 

0.1

 

18,112

 

0.2

 

40,747

 

0.1

 

5,282

 

0.1

 

Partially collateralised (A):

6,377

 

0.2