HSBC 2009 Annual Report Download - page 262

HSBC HOLDINGS PLC
Report of the Directors: Risk (continued)
Market risk > HSBC Holdings // Residual value risk
260
HSBC Holdings’ principal exposure to changes
in its net interest income from movements in interest
rates arises on short-term cash balances, floating rate
loans advanced to subsidiaries and fixed rate debt
capital securities in issue which have been swapped
to floating rate.
The interest rate sensitivities tabulated above are
illustrative only and are based on simplified scenarios.
The figures represent the effect of pro forma
movements in net interest income based on the
projected yield curve scenarios, HSBC Holdings’
current interest rate risk profile and assumed changes
to that profile during the next five years. Changes to
assumptions concerning the risk profile over the next
five years can have a significant impact on the net
interest income sensitivity for that period. The figures
do not take into account the effect of actions that could
be taken to mitigate this interest rate risk, however.
The projected decrease in HSBC Holdings’
sensitivity to moves in interest rates is mainly due to
the placing of funds received as a result of the rights
issue at short tenors.
Interest repricing gap table
The interest rate risk on the fixed-rate securities
issued by HSBC Holdings is not included within the
Group VAR but is managed on a repricing gap basis.
The interest rate repricing gap table below analyses
the full term structure of interest rate mismatches
within HSBC Holdings’ balance sheet. The year on
year decrease in the negative net interest rate gap in
the up to 1 year time bucket is due to funds received
as a result of the rights issue being invested in short-
term liquid assets.
Repricing gap analysis of HSBC Holdings
(Audited)
Tota l
Up to
1 year
1-5 years 5-10 years
More than
10 years
Non-
interest
bearing
US$m US$m US$m US$m US$m US$m
At 31 December 2009
Cash at bank and in hand:
– balances with HSBC undertakings ............ 224 224 – – – –
Derivatives .......................................................... 2,981 – – – – 2,981
Loans and advances to HSBC undertakings ...... 23,212 16,980 3,084 – 1,896 1,252
Financial investments ......................................... 2,455 – – 300 1,610 545
Investments in subsidiaries ................................. 86,247 1,866 1,217 – 875 82,289
Other assets ......................................................... 674 – – – – 674
Total assets .......................................................... 115,793 19,070 4,301 300 4,381 87,741
Amounts owed to HSBC undertakings .............. (3,711) (2,898) – – – (813)
Financial liabilities designated at fair values ..... (16,909) – (6,108) (5,017) (5,015) (769)
Derivatives .......................................................... (362) – – – – (362)
Debt securities in issue ....................................... (2,839) – (1,784) – (1,055) –
Other liabilities ................................................... (1,257) – – – – (1,257)
Subordinated liabilities ....................................... (14,406) (2,850) (865) (3,117) (7,382) (192)
Total equity ......................................................... (75,876) – – – (3,650) (72,226)
Other non-interest bearing liabilities .................. (433) – – – – (433)
Total liabilities and equity .................................. (115,793) (5,748) (8,757) (8,134) (17,102) (76,052)
Off-balance sheet items attracting interest rate
sensitivity ........................................................ – (15,302) 6,275 6,306 4,051 (1,330)
Net interest rate risk gap ..................................... – (1,980) 1,819 (1,528) (8,670) 10,359
Cumulative interest rate gap ............................... – (1,980) (161) (1,689) (10,359) –