HSBC tightens grip on UK mortgage market
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HSBC has reported pre-tax profits of $7.1bn (£4.7bn) for 2009, and has grown its market share of net new mortgage lending to 11%.
The bank had a 9.5% share of new mortgage business as at June 2009.
HSBC’s annual results show pre-tax profit is down at the bank by 24% compared to the $9.3bn profit recorded for 2008.
But underlying pre-tax profit, excluding write-downs, actually rose 56% from $4.7bn to $13.3bn.
HSBC made available £15bn of new mortgage lending last year, compared to £12.8bn in gross lending in 2008.
Net lending for the bank hit £8.98bn in 2009, from £10.1bn in 2008, and with the average LTV on new business at less than 55%.
A spokesman for HSBC says: “This makes us the second largest net new lender in to the market last year, after Royal Bank of Scotland, but larger than Santander, Lloyds Banking Group and Barclays.”
Loan impairment charges rose to $26.5bn, from $24.9bn in 2008.
Michael Geoghegan, group chief executive at HSBC, says: “In the UK, recession tightened its grip on the economy.
“While the downturn lasted longer than in many other developed markets, low interest rates and quantitative easing helped to moderate its impact for borrowers.
“However, the low interest rate environment also negatively affected our deposit spreads.
“HSBC continued to support its customers through this challenging period.”
Geoghegan says the bank makes no apology for managing its balance sheet conservatively.
He says the bank’s philosophy has always been to take deposits first and then lend, but admits the current low interest rate environment will be painful in the short-term for the bank.
He adds: “But I am confident that the liquidity this gives us will prove to be one of our strongest advantages during the next stage of the economic cycle, as new opportunities to grow revenues emerge and a more normal interest rate environment returns.”
In January HSBC moved its head office to Hong Kong, which the bank says reflects the changing shape of HSBC’s business.
HSBC raised £12.5bn via a rights issue last March, and has reported a pre-tax profit for each of the three years since the onset of the financial crisis.
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Readers' comments (3)
Paul Shephard | 1 Mar 2010 11:44 am
Its a pity they do not deal with brokers,both customers and brokers would all benefit if they did
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Michael White CEO emailmortgages | 1 Mar 2010 12:25 pm
Mr Geoghegan states that “HSBC continued to support its customers through this challenging period” I might suggest this comment was made with some degree of narrative license. Simple fact is managing the balance sheet comes first on the list of priorities, which to be fair he does seemingly acknowledge.
Notwithstanding, it is certainly a good time to be a relatively liquid mortgage lender. Average LTV of 55% with very wide margins that would suggest product pricing for risk has never been so good.
Of course the legacy of yesteryear remains in the shape of rising loan impairment charges, but these should fall dramatically with this quality of mortgage asset being originated.
It is hoped from an intermediary perspective and consumer for that matter the economy will gather pace to the point where the supply of mortgage finance has a more competitive edge then at present. There is certainly room for maneuver on rates to attract business albeit at lower margins.
The first early indications of lenders actually competing with each other has begun in the last 4 weeks. Of course from a funding perspective, 2, 3 & 5 year money being at record lows helps.
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Avenue & Co Private Finance | 2 Mar 2010 8:10 am
HSBC have set the example that many other lenders are now following - that is you don't need brokers to distribute products, you just need to offer the most competitive deals in the marketplace, a loyal customer base, along with good advertising.
HSBC will continue to take share as the leading lenders continue to suffer with bad loan provisions and therefore cannot price as competitvely as lenders like HSBC.
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