HSBC 2008 Annual Report Download - page 211

209
Total personal lending
(Unaudited)
UK
Rest of
Europe US1
Rest of
North
America
Hong Kong,
Rest of
Asia-Pacific
and Latin
America Total
US$m US$m US$m US$m US$m US$m
At 31 December 2008
Residential mortgages ........................................ 78,346 8,921 80,946 17,437 57,687 243,337
Other personal lending ....................................... 29,274 24,991 89,562 7,589 45,474 196,890
– motor vehicle finance .................................. – 99 10,864 137 6,201 17,301
– credit cards .................................................. 11,215 1,695 46,972 1,469 13,426 74,777
– second lien mortgages ................................. 1,160 2 14,614 803 503 17,082
– other ............................................................. 16,899 23,195 17,112 5,180 25,344 87,730
Total personal lending ........................................ 107,620 33,912 170,508 25,026 103,161 440,227
At 31 December 2007
Residential mortgages ........................................ 85,356 10,309 98,928 20,065 54,410 269,068
Other personal lending ....................................... 43,044 29,840 100,408 11,161 47,313 231,766
– motor vehicle finance .................................. 71 156 13,266 1,865 7,563 22,921
– credit cards .................................................. 15,018 2,009 49,634 1,728 13,574 81,963
– second lien mortgages ................................. 1,930 – 17,590 1,256 748 21,524
– other ............................................................. 26,025 27,675 19,918 6,312 25,428 105,358
Total personal lending ........................................ 128,400 40,149 199,336 31,226 101,723 500,834
1 Includes residential mortgages of HSBC Bank USA and HSBC Finance.
The commentary that follows is on a constant
currency basis.
At 31 December 2008, total personal lending
was US$440 billion, a decline of 3 per cent from the
balance at 31 December 2007. In 2008, personal
lending accounted for 85 per cent of the Group’s
loan impairment charges and other credit risk
provisions. Within personal lending, total loan
impairment charges and other credit risk provisions
of US$21.2 billion were concentrated in North
America (US$16.1 billion) and, to a lesser extent, in
Latin America (US$2.1 billion) and Europe
(US$2.0 billion). These loan impairment charges
represented, respectively, 39 per cent, 5 per cent and
5 per cent of each region’s total Personal Financial
Services’ net operating income before loan
impairment charges and other credit risk provisions.
Total US personal lending at 31 December 2008
was 15 per cent less than at the end of 2007, at
US$171 billion, as HSBC’s strategy to run off its
existing portfolio and improve credit quality on new
originations took effect. Residential mortgage
balances fell by 18 per cent to US$81 billion, driven
by decisions taken in 2007 to end new correspondent
channel originations in Mortgage Services and limit
new originations in the consumer lending business
through tighter underwriting standards. Portfolio
run-off, charge-off of impaired loans and the sale of
US$8.2 billion of loans during 2008 from the US
real estate secured portfolios contributed to these
lower balances.
Other personal lending in the US fell by 11 per
cent to US$90 billion as a result of actions taken by
HSBC since 2007 to reduce risk in the portfolio,
including the elimination of guaranteed direct mail
loans to new customers, the discontinuance of
personal homeowner loans and a general tightening
of underwriting criteria. Card balances declined by
5 per cent to US$47 billion as HSBC reduced credit
lines, closed dormant accounts and curtailed
marketing expenditure, which together lowered
originations in line with HSBC’s reduced appetite
for risk in this segment at this time.
Motor vehicle finance loans in the US fell by
18 per cent to US$11 billion, again reflecting
reduced risk appetite and lower origination. In July,
the decision was taken to discontinue all new motor
vehicle loan originations from the dealer and direct-
to-consumer channels within the North America
vehicle finance business of HSBC Finance as
management determined that the business was sub-
scale and did not have sufficient market strength to
provide an acceptable level of risk-adjusted returns.
In the UK, gross loans and advances to personal
customers rose by 14 per cent to US$108 billion, due
to strong growth in residential mortgage lending
following successful campaigns during 2008 at
HSBC Bank and First Direct. Other personal lending