HSBC 2007 Annual Report Download - page 209

207
Year ended 31 December 2007 compared
with year ended 31 December 2006
(Unaudited)
The following commentary analyses, on a constant
currency basis, the changes in lending noted in
the table above compared with the position at
31 December 2006. Loans and advances to personal,
corporate and commercial customers rose by 7 per
cent, and total gross loans and advances grew by
12 per cent. There was a marked change in the
distribution of net new lending in 2007 with personal
lending growing significantly slower than corporate
and commercial lending, primarily as a consequence
of curtailing loan growth in US consumer finance.
Total lending to personal customers remained
predominantly in North America (2007:
US$231 billion; 2006: US$232 billion), the UK
(2007: US$128 billion; 2006: US$131 billion)
and Hong Kong (2007: US$43 billion; 2006:
US$39 billion). These three regions comprised
80 per cent of total personal lending, a decline of
3 percentage points since 31 December 2006.
Residential mortgages fell marginally to
US$269 billion at 31 December 2007, 27 per cent
(2006: 30 per cent) of total loans and advances to
customers (including the finance sector and
settlement accounts). A reduction in the US
mortgage loan portfolio was partly offset by
increases in Europe, Hong Kong, Rest of Asia-
Pacific and Latin America.
In Europe, residential mortgage balances rose by
1 per cent to US$96 billion. In France, mortgage
lending grew by 11 per cent to US$6 billion, despite
increasing competition, due to strong customer
demand. In Turkey, strong growth of 13 per cent was
driven by the expansion of the branch network.
Mortgage lending in the UK was flat, with risk
appetite restricted as margins on mortgage lending
fell. There was also a shift in the portfolio towards
fixed-rate mortgages.
In Hong Kong, residential mortgage balances
rose by 3 per cent as a result of a buoyant economy.
In North America, residential mortgage balances
decreased by 6 per cent. In the US, the level of
mortgage lending stood at US$99 billion, a decline
of 8 per cent since 31 December 2006. Balances in
the mortgage services business fell by 27 per cent as
the strategy to run down the book of business
originated through correspondents was put into
effect. The rundown was carried out through
repayments in the normal course of business, as well
as the sale of loans to third party investors and the
cessation of all remaining origination following the
closure of the wholesale activities of Decision One.
The write-off of impaired loans also contributed
to the decline in residential mortgage balances.
Balances elsewhere in the consumer lending
business increased by 9 per cent. In the fourth
quarter of 2007, management took a further series
of actions to limit originations in the branch-based
consumer lending business in respect of mortgage
lending, which resulted in fewer new loans in the
quarter and will markedly limit growth in this area
for the foreseeable future. In Canada, mortgage
balances rose by 7 per cent, driven by the buoyant
Canadian residential property market and continued
expansion of the branch network.
Mortgage lending balances rose by 10 per cent
in Rest of Asia-Pacific, with increases in the Middle
East and Singapore partly offset by the sale of the
New Zealand mortgage loan portfolio in July 2007.
In Latin America, balances increased by 18 per
cent, driven by rises of 23 per cent and 31 per cent in
Mexico and Brazil, respectively.
Other personal lending increased by 7 per
cent to US$232 billion at 31 December 2007,
representing 23 per cent of total loans and advances
to customers, including the financial sector and
settlement accounts (2006: 24 per cent).
In Europe, other personal lending rose by 4 per
cent to US$73 billion. Strong growth in lending to
Private Banking clients in Switzerland, (rising by
50 per cent), a 42 per cent rise in Turkey and a 7 per
cent rise in France were partly offset by a 7 per cent
decline in the UK as HSBC curtailed growth through
tightened underwriting criteria. Also in the UK,
HSBC disposed of part of its non-core credit card
portfolio, principally the Marbles brand, at the end
of 2007.
In Hong Kong, other personal lending rose by
29 per cent to US$13 billion as HSBC launched a
series of credit card campaigns that consolidated the
Group’s position as market leader. Other unsecured
lending rose by 46 per cent.
In Rest of Asia-Pacific, other personal lending
increased by 19 per cent as branch expansion and
enhanced marketing activity led to higher loan
balances. Credit cards in circulation rose, with the
Middle East and India, in particular, producing
strong increases.
In North America, other personal lending
balances rose by 2 per cent. In the US, asset levels
remained broadly unchanged despite a significant
decline in second lien mortgage balances. Unsecured
personal lending in HSBC Finance fell, offset by a
rise at HSBC’s US retail bank and strong growth in
card balances from the momentum created by