HSBC 2012 Annual Report Download - page 152

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Credit risk > Personal lending
150
rental. Almost all lending was originated through our
own sales force, and the self-certification of income
was not permitted. The majority of our mortgage
lending in the UK was to existing customers who
held current or savings accounts with HSBC. The
average LTV ratio for new business was 59% during
December 2012, while loan impairment charges and
delinquency levels in our UK mortgage book
remained stable, aided by the continued low levels
of interest rates.
Interest-only mortgage products in the UK
totalled US$50bn or 39% of the UK mortgage
portfolio, US$23bn or (47%) of which related to the
first direct offset product where customers may
adopt a capital repayment profile or make significant
regular or one-off repayments, but are able to redraw
additional funds within the agreed limit.
Our affordability underwriting criteria for
interest-only products are consistent with those
for equivalent capital repayment mortgages, and
such products are typically originated at more
conservative LTV ratios. We monitor specific risk
characteristics within the interest-only portfolio,
such as current LTV ratio, age at expiry, current
income levels and credit bureau scores. There
are currently no concentrations of higher risk
characteristics that cause the interest-only portfolio
to be considered as carrying unduly high credit
risk, and delinquency and impairment charges
remain low, demonstrating similar performance
characteristics to our capital repayment products.
We run contact programmes to ensure we build an
informed relationship with customers whereby they
receive the appropriate support in meeting the final
repayment of principal and understand the
alternative repayment options available.
In Hong Kong, mortgage lending was US$52bn,
an increase of 11% compared with the end of 2011.
The quality of our mortgage book was strong with
loan impairment charges at very low levels. The
average LTV ratio on new mortgage lending was
48% and the average LTV for the overall portfolio
was 32%.
Mortgage balances in Rest of Asia-Pacific grew
by 10% to US$37bn, mainly in Singapore, mainland
China, Australia and Malaysia reflecting the
continued strength of property markets and
expansion of our distribution networks.
Mortgage lending in the US
(Unaudited)
In the US, total mortgage lending balances were
US$55bn at 31 December 2012, a decline of
7% compared with the end of 2011. Overall, US
mortgage lending represented 13% of our total
personal lending and 18% of our total mortgage
lending, compared with 15% and 20%, respectively,
at 31 December 2011.
HSBC Finance
At 31 December 2012, mortgage lending balances
at HSBC Finance were US$39bn, a decline of 12%
compared with the end of 2011 due to the continued
run-off of the CML portfolio.
Our CML portfolio continued to be affected
by high unemployment levels and a housing market
that is slow to recover. In addition, our loan
modification programmes, which are designed
to manage customer relationships, improve cash
collections and avoid foreclosure, contributed to
slower loan repayment rates.
HSBC Finance US CML6 – residential mortgages
(Unaudited)
At 31 December
2012 2011
US$m US$m
Residential mortgages
First lien ....................................... 35,092 39,608
Second lien ................................... 3,651 4,520
Total (A) ...................................... 38,743 44,128
Impairment allowances ................ 4,480 5,088
– as a percentage of (A) ........... 11.6% 11.5%
For footnote, see page 249.
HSBC Bank USA
In HSBC Bank USA, we continued to sell a
substantial portion of new originations to the
secondary market as a means of managing our
interest rate risk and improving structural liquidity.
Mortgage lending balances of US$17bn at
31 December 2012 remained broadly unchanged
compared with the end of 2011, despite an increase
in first lien residential mortgages, driven by
increased origination to our Premier customers
including higher balances of adjustable-rate
mortgages. This was offset by a decline in other
mortgages.