HSBC's mortgage book growth stalls

HSBC's plans to re-grow its mortgage book stalled in the December quarter although its profitability grew strongly, largely as a result of growth in fees and commission income.

Thursday, March 31st 2011, 7:59PM

by Jenny Ruth

HSBC's December quarter general disclosure statement (GDS) shows its mortgage book shrank by $4.1 million to $981.4 million in the three months. It had growth by 46.1 million in the September quarter and by $5 million in the June quarter, the first two quarters of growth the bank had recorded since mid-2003 when its mortgage book was $3.02 billion.

"As a result of the current economic climate, many individuals are prudently reducing debt levels and this is no different for our high net worth customer base," says HSBC's head of personal financial services John Barclay.

"However, the overall trend for 2010 was upward and our mortgage book is still growing - particularly with the announcement of our new mortgage campaign for 2011," Barclay says.

Of HSBC's total mortgage portfolio, 96.1% had loan-to-valuation ratios (LVRs) of 80% or less at December 31, up from 95.3% at September 30, while those with LVRs above 90% eased to just 1% of the portfolio from 1.8% three months earlier.

HSBC generally targets more affluent customers who travel regularly and can take advantage of its worldwide presence.

The bank's net profit for the three months jumped 39.7% to $17.2 million, bringing net profit for the 2010 year to $56.2 million up 10.8% on 2009.

That's despite net interest income easing 9.3% to $21.9 million in the quarter and falling 8.1% to $89.5 million for the year.

By contrast, other operating income, largely fees and commissions, jumped to $19.5 million in the quarter from $7.1 million in the year-earlier quarter. For the year, other operating income nearly doubled to $47.9 million.

The bottom line was dragged down by a $4.6 million charge against profit for impaired loans for the quarter compared with a $0.4 million credit in the year-earlier quarter. For the year, charges against profit for impaired loans rose to $11.1 million from $6.5 million in 2009.

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