TIDM57HB
RNS Number : 0780A
Hongkong & Shanghai Banking Corp Ld
21 March 2017
7 Trading assets
2016 2015
HK$m HK$m
Treasury and other eligible bills
...........................................................................
................. 91,908 43,607
Debt securities
...........................................................................
.......................................... 180,501 178,358
Equity shares
...........................................................................
............................................ 71,915 44,775
Other(1)
...........................................................................
...................................................... 27,310 35,886
------------------ ------------------
371,634 302,626
------------------ ------------------
1 'Other' trading assets primarily include settlement accounts with banks and customers.
2016 2015
------------------------------ ------------------------------
Treasury
Treasury and
and other other
eligible Debt Equity eligible Debt Equity
bills securities shares bills securities shares
HK$m HK$m HK$m HK$m HK$m HK$m
Issued by
* central governments and central banks 91,908 133,422 - 43,607 124,962 -
- other public
sector entities
...... - 2,421 - - 8,115 -
- banks
...................................... - 21,708 13,675 - 22,095 5,806
- corporate
entities .................... - 22,950 58,240 - 23,186 38,969
91,908 180,501 71,915 43,607 178,358 44,775
--------- ---------- ------- --------- ---------- -------
Listed.....................................
..... 1,576 130,085 71,299 2,164 122,934 44,093
Unlisted...................................
... 90,332 50,416 616 41,443 55,424 682
--------- ---------- ------- --------- ---------- -------
91,908 180,501 71,915 43,607 178,358 44,775
--------- ---------- ------- --------- ---------- -------
8 Derivatives
Use of derivatives
The group transacts derivatives for three primary purposes: to
create risk management solutions for clients, to manage the
portfolio risk arising from client business, and to manage and
hedge the group's own risks. Derivatives (except for derivatives
which are designated as effective hedging instruments) are held for
trading. Within the held for trading classification are two types
of derivative instruments: those used in sales and trading
activities, and those used for risk management purposes but which
for various reasons do not meet the qualifying criteria for hedge
accounting. The second category includes derivatives managed in
conjunction with financial instruments designated at fair value.
These activities are described more fully below.
The group's derivative activities give rise to significant open
positions in portfolios of derivatives. These positions are managed
constantly to ensure that they remain within acceptable risk
levels. When entering into derivative transactions, the group
employs the same credit risk management framework to assess and
approve potential credit exposures that it uses for traditional
lending.
8 Derivatives (continued)
Contract amounts and fair values of assets and liabilities by
class of derivatives
The notional contract amounts of derivatives held for trading
purposes indicate the nominal value of transactions outstanding at
the balance sheet date; they do not represent amounts at risk.
2016 2015
--------------------------------- ---------------------------------
Contract Contract
amounts Assets Liabilities amounts Assets Liabilities
HK$m HK$m HK$m HK$m HK$m HK$m
Trading derivatives
Exchange rate
contracts ................. 18,076,732 363,707 350,787 16,125,677 246,202 231,885
---------- -------- ----------- ---------- -------- -----------
- spot, forward
and future............... 13,577,599 217,748 201,955 11,665,620 122,743 117,563
- swaps
.....................................
..... 3,390,162 130,488 132,717 3,392,883 109,227 99,997
- options purchased
....................... 554,632 14,071 1,039 515,299 14,054 131
- options written
........................... 554,339 1,400 15,076 551,875 178 14,194
Interest rate
contracts .................... 18,861,627 150,198 150,582 15,974,328 136,697 135,827
- forward and
future........................ 1,877,788 243 204 1,146,748 183 244
- swaps
.....................................
..... 16,567,560 147,051 147,313 14,514,463 133,907 132,784
- options purchased
....................... 105,767 1,352 147 54,662 1,226 48
- options written
........................... 156,612 69 1,522 52,728 70 1,832
- other
.....................................
...... 153,900 1,483 1,396 205,727 1,311 919
---------- -------- ----------- ---------- -------- -----------
Equity derivatives
........................... 604,504 22,350 24,653 712,028 27,815 31,330
Credit derivatives
............................ 474,160 2,431 2,437 432,544 2,800 2,790
Commodity and
other ..................... 140,339 4,529 4,208 95,216 5,920 5,675
Total held for
trading ..................... 38,157,362 543,215 532,667 33,339,793 419,434 407,507
---------- -------- ----------- ---------- -------- -----------
Trading derivatives
managed in conjunction
with financial
instruments designated
at fair value
Interest rate
contracts .................... 9,568 65 8 7,342 60 10
9,568 65 8 7,342 60 10
---------- -------- ----------- ---------- -------- -----------
Cash flow hedging
derivatives
Exchange rate
contracts ................. 140,665 6,570 1,322 118,323 1,511 994
Interest rate
contracts .................... 46,049 22 247 66,684 171 127
---------- -------- ----------- ---------- -------- -----------
186,714 6,592 1,569 185,007 1,682 1,121
---------- -------- ----------- ---------- -------- -----------
Fair value hedging
derivatives
Interest rate
contracts .................... 262,940 2,534 813 217,391 415 1,417
---------- -------- ----------- ---------- -------- -----------
Gross total derivatives
.................... 38,616,584 552,406 535,057 33,749,533 421,591 410,055
Netting
.....................................
...... - (72,599) (72,599) - (40,636) (40,636)
---------- -------- ----------- ---------- -------- -----------
Total
.....................................
......... 38,616,584 479,807 462,458 33,749,533 380,955 369,419
---------- -------- ----------- ---------- -------- -----------
a Trading derivatives
Most of the group's derivative transactions relate to sales and
trading activities. Sales activities include the structuring and
marketing of derivative products to customers to enable them to
take, transfer, modify or reduce current or expected risks. Trading
activities include market-making and risk management.
b Hedging derivatives
The group uses derivatives (principally interest rate and
currency swaps) for hedging purposes in the management of its own
asset and liability portfolios and structural positions. This
enables the group to optimise the overall costs to the group of
accessing debt capital markets, and to mitigate the market risk
which would otherwise arise from structural imbalances in the
maturity and other profiles of its assets and liabilities.
The accounting treatment of hedging transactions varies
according to the nature of the instrument hedged and the type of
hedging transaction. Derivatives may qualify as hedges for
accounting purposes if they are fair value hedges, cash flow
hedges, or hedges of net investments in foreign operations.
8 Derivatives (continued)
Fair value hedges
The group's fair value hedges principally consist of interest
rate swaps that are used to protect against changes in the fair
value of fixed-rate long-term financial instruments due to
movements in market interest rates.
Cash flow hedges
The group's cash flow hedges consist principally of interest
rate and currency swaps that are used to protect against exposures
to variability in future interest and principal cash flows on
non-trading assets and liabilities which bear interest at variable
rates or which are expected to be re-funded or reinvested in the
future. The amounts and timing of future cash flows, representing
both principal and interest flows, are projected for each portfolio
of financial assets and liabilities on the basis of their
contractual terms and other relevant factors, including estimates
of prepayments and defaults. The aggregate principal balances and
interest cash flows across all portfolios over time form the basis
for identifying gains and losses on the effective portions of
derivatives designated as cash flow hedges of forecast
transactions.
Amount transferred to the income statement in respect of cash
flow hedges included a gain of HK$2,286m (2015: HK$181m gain) taken
to "Net interest income" and a loss of HK$341m (2015: HK$1,182m
gain) taken to "Net trading income". The group does not have any
qualifying cash flow hedges that involve non-financial assets or
non-financial liabilities (2015: none).
The gains and losses on ineffective portions of such derivatives
are recognised immediately in "Net trading income". During the year
to 31 December 2016, an insignificant amount was recognised due to
hedge ineffectiveness and termination of forecast transactions
(2015: insignificant amount).
The schedule of forecast principal balances on which the
expected interest cash flows arise as at 31 December 2016 is as
follows:
More than 5 years
3 or less
months but more
3 months but less than
than 1
or less year 1 year
HK$m HK$m HK$m
At 31 December 2016
Cash inflows from assets
............................
.................... 92,356 135,219 82,205
Cash outflows from
liabilities
............................
............. (6,329) (6,329) (5,695)
--------------------------- --------------------------- -------------------------
Net cash inflows
............................
............................
.... 86,027 128,890 76,510
--------------------------- --------------------------- -------------------------
At 31 December 2015
Cash inflows from assets
............................
.................... 103,693 123,920 65,679
Cash outflows from
liabilities
............................
............. (12,960) (22,468) (11,525)
--------------------------- --------------------------- -------------------------
Net cash inflows
............................
............................
.... 90,733 101,452 54,154
--------------------------- --------------------------- -------------------------
Derivatives valued using models with unobservable inputs
Any initial gain or loss on financial instruments where the
valuation is dependent on unobservable parameters is deferred over
the life of the contract or until the instrument is redeemed,
transferred or sold or the fair value becomes observable. All
derivatives that are part of qualifying hedging relationships have
valuations based on observable market parameters.
The aggregate unobservable inception profit yet to be recognised
in the income statement is immaterial.
9 Financial assets designated at fair value
2016 2015
HK$m HK$m
Treasury and other eligible bills
.....................................................................................
..... 418 1,070
Debt securities
.....................................................................................
.............................. 17,435 17,755
Equity shares
.....................................................................................
................................ 88,163 80,270
106,016 99,095
-------------------- ------
2016 2015
------------------------------ ------------------------------
Treasury
Treasury and
and other other
eligible Debt Equity eligible Debt Equity
bills securities shares bills securities shares
HK$m HK$m HK$m HK$m HK$m HK$m
Issued by
* central governments and central banks
................................... 418 446 - 1,070 646 -
- other public
sector entities
...... - 1,332 - - 993 -
- banks
...................................... - 8,121 2,840 - 8,433 2,501
- corporate
entities .................... - 7,536 85,323 - 7,683 77,769
418 17,435 88,163 1,070 17,755 80,270
--------- ---------- ------- --------- ---------- -------
Listed.....................................
..... - 9,055 44,996 - 9,588 38,126
Unlisted...................................
... 418 8,380 43,167 1,070 8,167 42,144
--------- ---------- ------- --------- ---------- -------
418 17,435 88,163 1,070 17,755 80,270
--------- ---------- ------- --------- ---------- -------
10 Loans and advances to customers
a Loans and advances to customers
2016 2015
HK$m HK$m
Gross loans and advances to customers
.......................................................................... 2,846,806 2,773,819
Impairment allowances (note 11(a))
.............................................................................. (12,692) (11,529)
--------- ---------
2,834,114 2,762,290
--------- ---------
10 Loans and advances to customers (continued)
b Analysis of loans and advances to customers based on categories used by the HSBC Group
The following analysis of loans and advances to customers is
based on the categories used by the HSBC Group, including the
group, to manage associated risks.
Rest of
Hong Kong Asia-Pacific Total
2016 HK$m HK$m HK$m
Residential mortgages(1)
..............................................
........................ 492,989 267,619 760,608
Credit card advances
..............................................
........................... 58,289 22,665 80,954
Other personal
..............................................
................................... 132,171 70,947 203,118
-------------------- -------------------- ---------------------
Total personal
..............................................
.................................... 683,449 361,231 1,044,680
-------------------- -------------------- ---------------------
Commercial, industrial and
international trade
.................................. 428,035 384,227 812,262
Commercial real estate
..............................................
....................... 198,579 55,786 254,365
Other property-related lending
..............................................
........... 221,919 69,911 291,830
Government
..............................................
....................................... 20,230 2,405 22,635
Other commercial
..............................................
.............................. 136,729 132,944 269,673
-------------------- -------------------- ---------------------
Total corporate and commercial
..............................................
........ 1,005,492 645,273 1,650,765
-------------------- -------------------- ---------------------
Non-bank financial institutions
..............................................
.......... 103,311 45,611 148,922
Settlement accounts
..............................................
........................... 1,337 1,102 2,439
-------------------- -------------------- ---------------------
Total financial
..............................................
................................... 104,648 46,713 151,361
-------------------- -------------------- ---------------------
Gross loans and advances
to customers
............................................. 1,793,589 1,053,217 2,846,806
Individually assessed impairment
allowances
..................................... (2,960) (5,099) (8,059)
Collectively assessed impairment
allowances
.................................... (1,959) (2,674) (4,633)
-------------------- -------------------- ---------------------
Net loans and advances to
customers
..............................................
.. 1,788,670 1,045,444 2,834,114
-------------------- -------------------- ---------------------
2015
Residential mortgages(1)
..............................................
........................ 472,324 260,901 733,225
Credit card advances
..............................................
........................... 56,791 22,180 78,971
Other personal
..............................................
................................... 132,234 84,092 216,326
-------------------- -------------------- ---------------------
Total personal
..............................................
.................................... 661,349 367,173 1,028,522
-------------------- -------------------- ---------------------
Commercial, industrial and
international trade
.................................. 419,589 405,594 825,183
Commercial real estate
..............................................
....................... 186,463 64,420 250,883
Other property-related lending
..............................................
........... 207,448 65,412 272,860
Government
..............................................
....................................... 6,292 2,484 8,776
Other commercial
..............................................
.............................. 133,718 145,632 279,350
-------------------- -------------------- ---------------------
Total corporate and commercial
..............................................
........ 953,510 683,542 1,637,052
-------------------- -------------------- ---------------------
Non-bank financial institutions
..............................................
.......... 64,050 42,414 106,464
Settlement accounts
..............................................
........................... 1,099 682 1,781
-------------------- -------------------- ---------------------
Total financial
..............................................
................................... 65,149 43,096 108,245
-------------------- -------------------- ---------------------
Gross loans and advances
to customers
............................................. 1,680,008 1,093,811 2,773,819
Individually assessed impairment
allowances
..................................... (2,165) (4,875) (7,040)
Collectively assessed impairment
allowances
.................................... (1,979) (2,510) (4,489)
-------------------- -------------------- ---------------------
Net loans and advances to
customers
..............................................
.. 1,675,864 1,086,426 2,762,290
-------------------- -------------------- ---------------------
1 Residential mortgages include Hong Kong Government Home
Ownership Scheme loans of HK$30,215m (2015: HK$27,702m).
The geographical information shown above has been classified by
the location of the principal operations of the subsidiary and by
the location of the branch responsible for advancing the funds.
10 Loans and advances to customers (continued)
c Loans and advances to customers include equipment leased to
customers under finance leases and hire purchase contracts having
the characteristics of finance leases
2016 2015
---------------------------- ----------------------------
Present Present
value value
of the Unearned Total of the Unearned Total
minimum future minimum minimum future minimum
lease finance lease lease finance lease
payments income payments payments income payments
HK$m HK$m HK$m HK$m HK$m HK$m
Amounts receivable
- Within one
year ................. 2,151 677 2,828 2,494 687 3,181
* After one year but within five years
........................... 7,764 1,951 9,715 8,152 1,893 10,045
- After five
years .................. 18,296 3,346 21,642 17,999 3,014 21,013
-------- -------- -------- -------- -------- --------
28,211 5,974 34,185 28,645 5,594 34,239
-------- -------- -------- --------
Impairment allowances........... (28) (26)
-------- --------
Net investment
in finance leases
and hire purchase
contracts 28,183 28,619
-------- --------
11 Impairment allowances against loans and advances to
customers
a Movement in impairment allowances on loans and advances to customers
Individually Collectively
assessed assessed
allowances allowances Total
2016 HK$m HK$m HK$m
At 1 January
...........................................................................
........... 7,040 4,489 11,529
Amounts written off
.......................................................................... (2,334) (2,694) (5,028)
Recoveries of loans and
advances written off in
previous years .......... 277 881 1,158
Net charge to income statement
(note 2(g)) ...................................... 3,380 2,065 5,445
Unwinding of discount of
loan impairment ........................................ (310) (58) (368)
Exchange and other adjustments
........................................................ 6 (50) (44)
------------ ------------ -------
At 31 December (note 10(a))
............................................................ 8,059 4,633 12,692
------------ ------------ -------
2015
At 1 January
............................................................................
.......... 6,299 4,221 10,520
Amounts written off
.......................................................................... (1,505) (3,109) (4,614)
Recoveries of loans and
advances written off in
previous years .......... 305 978 1,283
Net charge to income statement
(note 2(g)) ...................................... 2,316 2,656 4,972
Unwinding of discount of
loan impairment ........................................ (210) (67) (277)
Exchange and other adjustments
........................................................ (165) (190) (355)
------------ ------------ -------
At 31 December (note 10(a))
............................................................ 7,040 4,489 11,529
------------ ------------ -------
11 Impairment allowances against loans and advances to customers
(continued)
b Impairment allowances on loans and advances to customers
Impaired loans and advances to customers are those loans and
advances where objective evidence exists that full repayment of
principal or interest is considered unlikely. Individually assessed
allowances are made after taking into account the value of
collateral in respect of such loans and advances.
The geographical information shown below has been classified by
the location of the principal operations of the subsidiary and by
the location of the branch responsible for advancing the funds.
Rest
of
Hong Asia-Pacific Total
Kong
HK$m HK$m HK$m
At 31 December 2016
Gross loans and advances
to customers
Individually assessed impaired
gross loans and advances
................... 6,808 10,731 17,539
Collectively assessed
..............................................................
......... 1,786,781 1,042,486 2,829,267
-------------- ---------------- ---------------
- Impaired loans and advances
........................................................ 720 1,119 1,839
- Non-impaired loans and
advances ................................................ 1,786,061 1,041,367 2,827,428
-------------- ---------------- ---------------
Total gross loans and advances
to customers ................................... 1,793,589 1,053,217 2,846,806
-------------- ---------------- ---------------
Impairment allowances
..............................................................
. (4,919) (7,773) (12,692)
- Individually assessed
..............................................................
..... (2,960) (5,099) (8,059)
- Collectively assessed
..............................................................
..... (1,959) (2,674) (4,633)
-------------- ---------------- ---------------
Net loans and advances
..............................................................
...... 1,788,670 1,045,444 2,834,114
-------------- ---------------- ---------------
Fair value of collateral
which has been taken into
account in respect of individually
assessed impaired loans
and advances to
customers....................................................
...................... 3,258 5,488 8,746
Individually assessed impaired
gross loans and advances
as a percentage of gross
loans and advances to customers
............ 0.4% 1.0% 0.6%
Total allowances as a percentage
of total gross loans and
advances .. 0.3% 0.7% 0.4%
At 31 December 2015
Gross loans and advances
to customers
Individually assessed impaired
gross loans and advances
................... 5,781 11,005 16,786
Collectively assessed
..............................................................
.......... 1,674,227 1,082,806 2,757,033
-------------- ---------------- ---------------
- Impaired loans and advances
........................................................ 728 889 1,617
- Non-impaired loans and
advances ................................................ 1,673,499 1,081,917 2,755,416
-------------- ---------------- ---------------
Total gross loans and advances
to customers ................................... 1,680,008 1,093,811 2,773,819
-------------- ---------------- ---------------
Impairment allowances
..............................................................
...... (4,144) (7,385) (11,529)
-------------- ---------------- ---------------
- Individually assessed
..............................................................
..... (2,165) (4,875) (7,040)
- Collectively assessed
..............................................................
..... (1,979) (2,510) (4,489)
-------------- ---------------- ---------------
Net loans and advances
..............................................................
...... 1,675,864 1,086,426 2,762,290
-------------- ---------------- ---------------
Fair value of collateral
which has been taken into
account in respect of individually
assessed impaired loans
and advances to
customers....................................................
...................... 2,360 5,153 7,513
Individually assessed impaired
gross loans and advances
as a percentage of gross
loans and advances to customers
............ 0.3% 1.0% 0.6%
Total allowances as a percentage
of total gross loans and
advances .. 0.2% 0.7% 0.4%
12 Financial investments
2016 2015
HK$m HK$m
Available-for-sale
- treasury and other eligible bills
........................................................................................ 688,369 691,636
- debt securities(1)
.............................................................................................
................... 877,504 786,746
- equity shares
.............................................................................................
...................... 8,711 9,065
--------- ---------
1,574,584 1,487,447
Held-to-maturity
- debt securities(2)
.............................................................................................
................... 260,767 228,599
--------- ---------
1,835,351 1,716,046
--------- ---------
1 Included certificates of deposit of HK$66,462m
(2015:HK$76,037m).
2 Included certificates of deposit of HK$7,763m
(2015:HK$12,601m).
a Available-for-sale
2016 2015
------------------------------ ------------------------------
Treasury
Treasury and
and other other
eligible Debt Equity eligible Debt Equity
bills securities shares bills securities shares
HK$m HK$m HK$m HK$m HK$m HK$m
Issued by
* central governments and central banks 688,369 599,854 - 691,636 574,173 -
- other public
sector entities
..... - 89,280 - - 72,658 -
- banks
..................................... - 146,584 4,820 - 98,417 4,651
- corporate
entities .................. - 41,786 3,891 - 41,498 4,414
--------- ---------- ------- --------- ---------- -------
688,369 877,504 8,711 691,636 786,746 9,065
--------- ---------- ------- --------- ---------- -------
Listed
....................................... 42,746 647,552 3,344 29,841 548,039 3,810
Unlisted
.................................... 645,623 229,952 5,367 661,795 238,707 5,255
--------- ---------- ------- --------- ---------- -------
688,369 877,504 8,711 691,636 786,746 9,065
--------- ---------- ------- --------- ---------- -------
b Held-to-maturity
2016 2015
---------------------- ----------------------
Book value Fair value Book value Fair value
HK$m HK$m HK$m HK$m
Issued by
- central governments
and central banks
.............. 6,845 7,383 5,907 6,584
- other public sector
entities ................................ 27,546 27,729 25,676 26,851
- banks
.............................................................
.... 87,709 88,857 90,955 93,945
- corporate entities
.............................................. 138,667 138,420 106,061 108,540
---------- ---------- ---------- ----------
260,767 262,389 228,599 235,920
---------- ---------- ---------- ----------
Listed
.............................................................
....... 95,668 95,694 74,128 75,846
Unlisted
.............................................................
... 165,099 166,695 154,471 160,074
---------- ---------- ---------- ----------
260,767 262,389 228,599 235,920
---------- ---------- ---------- ----------
13 Assets pledged, assets transferred and collateral
received
Financial assets pledged as collateral
2016 2015
HK$m HK$m
Treasury bills, debt securities,
equities and deposits ................................................................. 206,526 118,762
---------------- -------
The above table shows assets where a charge has been granted to
secure liabilities on a legal and contractual basis. These
transactions are conducted under terms that are usual and customary
to collateralised transactions including, where relevant, standard
securities lending, repurchase agreements and derivative
margining.
Hong Kong currency notes in circulation are secured by the
deposit of funds in respect of which the Hong Kong Government
certificates of indebtedness are held.
Transferred financial assets not qualifying for full
derecognition and associated financial liabilities
2016 2015
-------------------------- --------------------------
Carrying Carrying Carrying Carrying
amount amount amount amount
of of of of
transferred associated transferred associated
assets liabilities assets liabilities
HK$m HK$m HK$m HK$m
Repurchase agreements
............................................ 61,738 21,851 16,039 14,830
Securities lending
agreements ................................... 3,506 - 1,658 1
65,244 21,851 17,697 14,831
------------ ------------ ------------ ------------
The financial assets shown above include amounts transferred to
third parties that do not qualify for derecognition, notably debt
securities held by counterparties as collateral under repurchase
agreements. As the substance of these transactions is secured
borrowings, the collateral assets continue to be recognised in full
and the related liabilities, reflecting the group's obligation to
repurchase the transferred assets for a fixed price at a future
date, are also recognised on the balance sheet. As a result of
these transactions, the group is unable to use, sell or pledge the
transferred assets for the duration of the transactions. The group
remains exposed to interest rate risk, credit risk and market risk
on these pledged instruments. The counterparty's recourse is not
limited to the transferred assets.
Collateral accepted as security for assets
2016 2015
HK$m HK$m
Fair value of the collateral permitted
to sell or repledge in the absence
of default ................... 531,561 369,184
Fair value of collateral actually
sold or repledged .................................................................... 86,287 56,451
These transactions are conducted under terms that are usual and
customary to standard securities borrowing and reverse repurchase
agreements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSLLFVLVIILFID
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March 21, 2017 07:54 ET (11:54 GMT)
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