Tesco 2013 Annual Report Download - page 116

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112 Tesco PLC Annual Report and Financial Statements 2013
Notes to the Group financial statements
Note 22 Financial risk factors continued
Credit quality of loans and advances
As at 25 February 2012
Retail
unsecured
lending
£m
Retail
mortgage
lending
£m
Retail
instalment
lending†
£m
Total
£m
Past due and defaulted
Less than 90 days past due 27 – – 27
90–179 days past due 45 – – 45
180 days plus past due 81 – – 81
Past due but not defaulted
0–29 days past due 50 – 1 51
30–59 days past due 14 – – 14
60–119 days past due 10 – – 10
Neither past due nor defaulted
Low risk* 4,202 –247 4,449
High risk** 159 – – 159
Total 4,588 –248 4,836
* Low risk is defined as an asset with a probability of default of less than 10%.
** High risk is defined as an asset with a probability of default of 10% or more.
† Prior year retail instalment lending of £248m was classified as trade and other receivables.
During the year ended 28 February 2013 there was a change to the methodology by which the Group measures credit risk in relation to outstanding
loan balances. The new methodology is considered to provide a more appropriate disclosure for reporting and monitoring purposes. The Group has
prepared a prior year comparator using this new methodology.
The credit risk exposure from off balance sheet items, mainly undrawn credit card facilities and mortgage offers, was £8.5bn (2012: £7.4bn).
Insurance risk
Tesco Bank is indirectly exposed to insurance risks through its ownership of 49.9% of Tesco Underwriting Limited (‘TU’), an authorised insurance
company. Since late 2010 the majority of new business policies for Home and Motor Insurance products sold by Tesco Bank have been underwritten
by TU. The key insurance risks within TU relate to Underwriting Risk and specifically the potential fora major weather event to generate significant
claims on Home insurance or on Motor insurance the cost of settling bodily injury claims. Exposure tothis risk is actively managed within TU with
close monitoring of performance metrics and the use of reinsurance to limit TU’s exposure above predetermined limits.
During the year the relationship with RBS Insurance was terminated and the Group has no exposure to insurance risk arising from this
historic relationship.
Note 23 Customer deposits and deposits by banks
2013
£m
2012
£m
Customer deposits 6,000 5,387
Deposits by banks 15 78
6,015 5,465
Included above is £677m (2012: £300m) non-current customer deposits and £6m (2012: £nil) non-current deposits by banks.