HSBC 2007 Annual Report Download - page 218

HSBC HOLDINGS PLC
Report of the Directors: The Management of Risk (continued)
Credit risk > Areas of special interest > Personal lending / US personal and mortgage lending
216
Areas of special interest
Personal lending
(Unaudited)
HSBC provides a broad range of secured and
unsecured personal lending products to meet
customer needs. Given the diverse nature of the
markets in which HSBC operates, the range is not
standardised in all countries but, along with the
distribution channels used, is tailored to meet the
demands of individual markets, while using
common global IT platforms wherever possible.
Personal lending includes advances to
customers for asset purchase, including residential
property and motor vehicles, where such lending is
typically secured on the assets to be acquired.
HSBC also offers loans secured on existing assets,
such as first and second liens on residential
property; unsecured lending products such as
overdrafts, credit cards and payroll loans; and debt
consolidation loans which may be secured or
unsecured.
Various underwriting controls are applied
before the loan is issued, and loss in the event of
delinquency is managed through collection and
customer management procedures. The expected
occurrence and degree of delinquency varies
according to the type of loan and the customer
segment. Delinquency levels tend to increase in the
course of normal portfolio ageing. As a result, loan
impairment charges usually relate to lending
originated in earlier accounting periods.
The commentary that follows is on a constant
currency basis.
At 31 December 2007, total personal lending
was US$501 billion, a rise of 3 per cent from
31 December 2006.
In 2007, loan impairment charges were
primarily in personal lending, representing 94 per
cent of the total charge. The three largest
components were Personal Financial Services in
North America (69 per cent), the UK (11 per cent)
and Latin America (9 per cent).
HSBC recorded strong growth in Latin
America, with gross loans and advances to
personal customers rising by 31 per cent to
US$22 billion. Residential mortgage lending in
the region increased by 18 per cent, while other
personal lending rose by 34 per cent.
In Mexico, HSBC’s other personal lending
balances grew by 41 per cent in 2007 to
US$5 billion, predominantly from growth in credit
card balances. In the same period, loan impairment
charges rose by US$574 million or 351 per cent,
driven by strong growth in loan balances, a
deterioration in credit quality and portfolio
seasoning.
The credit quality of the US personal lending
portfolio is discussed more fully below. In the UK,
credit conditions were relatively benign, with loan
impairment charges unchanged from 2006.
Total personal lending
(Unaudited)
At
31 December
2007
At
31 December
2006
At
31 December
2005
US$m US$m US$m
Total US personal lending
US Residential mortgages1 .......................................................................... 98,816 107,492 103,529
Motor vehicle finance ................................................................................. 13,266 13,146 12,792
MasterCard and Visa credit cards ............................................................... 32,223 29,269 26,795
Private label cards ....................................................................................... 17,411 16,645 15,488
Other personal lending ................................................................................ 37,620 41,214 35,545
199,336 207,766 194,149
Residential mortgages, excluding the US ....................................................... 170,252 157,845 135,017
Other personal lending, excluding the US ...................................................... 131,246 110,535 91,310
500,834 476,146 420,476
1 Includes residential mortgages of HSBC Bank USA and HSBC Finance.