HSBC's home loan pricing strategy grows book

HSBC's home loan pricing strategy grows book

Mortgage Rates

HSBC's September quarter general disclosure statement (GDS) shows its mortgage book grew by $46.1 million to $986 million in the three months after increasing $5 million in the June quarter.

These are the first two quarters of growth HSBC has recorded since mid-2003 when its mortgage book was $3.02 billion, just after it bought AMP's mortgage book.

The AMP mortgage book was later sold to the government's Kiwibank in mid-2007 which reduced HSBC's mortgage book to $1.38 billion at September 2007.

Glenn Tonks, HSBC's private clients manager, says his bank's current strategy is one of "back to the future," reviving its policy of targeting more affluent customers (those earning more than $120,000 a year) who are more likely to travel regularly and can take advantage of HSBC's worldwide presence.

"Where we add value is if you're doing business or travelling on a regular basis," Tonks says.

The AMP book had included lower-earning customers who don't fit HSBC's niche market and had consumed a lot of the bank's resources, he says.

HSBC has been ramping up its mortgage marketing effort since April this year and since September has been offering the lowest fixed-rate mortgages in the New Zealand market - its customers have to have a minimum of $500,000 in home loans or $100,000 in savings and investments.

"We expect the mortgage book growth will be in double digits by December 31," he says.

Tonks says that campaign ends this week but HSBC is looking at a number of campaigns in the new year which will also be based on "market-leading interest rates."

HSBC has a particularly proportion of mortgages with loan-to-valuation ratios (LVRs) above 80% - these fell to 4.9% of its total book at September 30 from 4.9% three months earlier and 7.5% at September 30 last year.

HSBC's net profit fell 5.6% to $11.6 million in the September quarter as operating expenses rose slightly and net interest income fell slightly. Net profit for the nine months ended September was up 1.5% at $39 million.

Charges against profit for bad loans fell 9% to $2.3 million in the September quarter and by 5% to $6.5 million in the nine months ended September.

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