HSBC 2011 Annual Report Download - page 106

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Credit risk > In 2011 / Credit exposure
104
Credit risk
Credit risk in 2011 .......................................................... 104
Credit exposure ............................................................... 105
Areas of special interest .................................................. 112
Wholesale lending ...................................................... 112
Personal lending ........................................................ 119
US personal lending ................................................... 124
Credit quality of financial instruments ........................... 126
Past due but not impaired gross financial
instruments ............................................................. 128
Renegotiated loans and forbearance ......................... 129
Impaired loans disclosure .......................................... 133
Impairment of loans and advances ................................. 134
Collateral ......................................................................... 144
Securitisation exposures and other structured products ... 149
Credit risk is the risk of financial loss if a
customer or counterparty fails to meet a
payment obligation under a contract. It
arises principally from direct lending, trade
finance and leasing business, but also from
off-balance sheet products such as
guarantees and derivatives, and from the
Group’s holdings of debt and other securities.
Credit risk generates the largest regulatory
capital requirement of the risks we incur.
• Total gross loans and advances
decreased by 2% to US$1,139bn
reflecting the reclassification of assets to
held for sale.
• Balance sheet exposure to the sovereign
and agency debt of Greece, Ireland,
Italy, Portugal and Spain was US$4.7bn
at 31 December 2011.
We have amended our presentation of impaired loans
as described on page 133. Other than that, there were
no material changes to our policies and practices for
the management of credit risk in 2011.
A summary of our current policies and
p
ractices regarding credit risk is provided in
the Appendix to Risk on page 188.
Credit risk in 2011
(Unaudited)
Exposure, impairment allowances and charges
(Audited)
2011 2010
US$bn US$bn
At 31 December
Total gross loans and advances (A) .. 1,139.1 1,186.9
Impairment allowances ................... 17.6 20.2
– as a percentage of A ................ 1.55% 1.70%
Year ended 31 December
Impairment charges1 ....................... 11.5 13.5
For footnote, see page 185.
Loan impairment charges and other credit risk
provisions
(Audited)
2011 2010
US$m US$m
At 31 December .............................. 12,127 14,039
% %
Personal ........................................... 77 80
Corporate and commercial .............. 17 16
Financial .......................................... 1 1
Impairment of available-for-sale
debt securities ............................. 5 3
of which: Greek Government...... 2 –
100 100
In 2011, loans and advances to customers continued
to represent the Group’s most significant exposure to
credit risk. At 31 December 2011, total gross loans
and advances were US$1,139bn, a decrease of 2%
on a constant currency basis compared with
31 December 2010. The decline reflected the
reclassification to assets held for sale of balances
relating to the pending sale of our US Card and
Retail Services business and 195 branches in upstate
New York. For further detail on assets held for sale
see page 105.
During 2011, we reduced our exposure to
sovereigns and banks in the peripheral European
countries. We also reduced our exposure to risk from
sovereign and financial institution counterparty
positions across the broader eurozone and from
specific financial institutions in other countries. At
31 December 2011, our on-balance sheet exposure to
the sovereign and agency debt of Greece, Ireland,
Italy, Portugal and Spain was US$4.7bn. In 2011, we
recognised an impairment charge of US$212m in
respect of Greek sovereign and agency exposures
classified as available for sale. Our sovereign
exposures to Ireland, Italy, Portugal, and Spain are
not considered to be impaired at 31 December 2011.