HSBC 2009 Annual Report Download - page 185

183
Ratings analysis of assets held by HSBC’s SIVs and conduits
Solitaire
Other
SICs
Total
SICs
Total
multi-seller
conduits
Total
SIVs
US$bn
US$bn US$bn
US$bn
US$bn
S&P ratings at 31 December 2009
AAA ............................................................. 5.2 6.7 11.9 6.2 –
AA ................................................................ 3.0 4.1 7.1 1.3 –
A ................................................................... 0.8 6.0 6.8 1.8 –
BBB .............................................................. 0.7 0.8 1.5 0.5 –
BB ................................................................ 0.2 0.3 0.5 0.5 –
B ................................................................... 0.4 0.3 0.7 – –
CCC .............................................................. 1.0 1.0 2.0 – –
CC ................................................................ 0.3 0.4 0.7 – –
D ................................................................... 0.1 0.1 0.2 – –
Total investments ............................................ 11.7 19.7 31.4 10.3 –
Cash and other investments ............................ 1.1 0.3 1.4 0.6 –
12.8 20.0 32.8 10.9 –
S&P ratings at 31 December 2008
AAA ............................................................. 8.1 12.0 20.1 6.1 0.3
AA ................................................................ 0.7 1.4 2.1 1.8 –
A ................................................................... 1.0 4.7 5.7 1.6 –
BBB .............................................................. 0.8 1.0 1.8 1.2 –
BB ................................................................ 0.3 0.4 0.7 0.2 –
B ................................................................... 0.1 0.2 0.3 0.5 –
CCC .............................................................. 0.2 0.2 0.4 1.8 –
D ................................................................... – – – 0.3 –
Total investments ............................................ 11.2 19.9 31.1 13.5 0.3
Cash and other investments ............................ 0.9 0.3 1.2 0.4 0.1
12.1 20.2 32.3 13.9 0.4
The migration to lower ratings during 2009 is a
result of the performance of the underlying assets
being outside the expectations established at
inception of the original securitisations, and changes
to the ratings methodology of the principal rating
agencies.
At 31 December 2009, 6.8 per cent of the SICs’
exposures to sub-prime and US Alt-A mortgages,
which in aggregate amounted to US$0.4 billion,
remained AAA rated (2008: 62.7 per cent,
US$4.2 billion), while 30.5 per cent, which in
aggregate amounted to US$1.8 billion, remained
investment grade (2008: 94 per cent,
US$6.3 billion).
It should be noted that securities purchased by
SICs typically benefit from substantial transaction-
specific credit enhancements such as subordinated
tranches and/or excess spread, which absorb any
credit losses before they fall on the tranche held by
the SPE.
At 31 December 2009, the SIVs did not
hold any CP issued by SICs set up by HSBC
(2008: US$0.3 billion). As described above, by
31 December 2008 all the original assets held by
the SIVs had been transferred to the new SICs,
with the exception of residual cash balances.
Weighted average life of portfolios
Solitaire
Other
SICs
Total
SICs
Total
multi-seller
conduits
Total
SIVs
Weighted average life (years)
At 31 December 2009 .................................... 6.3 4.1 4.9 2.4 –
At 31 December 2008 ..................................... 5.8 3.9 4.6 1.6 –