HSBC Cuts US Portfolio by $9 Billion in H109

HSBC Holdings (HBC) continued to unwind its US mortgage operations in in the first half of 2009 (H109). The firm posted $5bn pretax profit in H109, down 51% from H108, despite heavy losses of $3.7bn in its North American segment. Since it began to run down its US personal financial services including mortgage operations in Q107, HSBC has reduced its consumer finance portfolio by $34bn to $91bn — by 27% in total — and by $9bn in H109 alone. The business segment saw a pre-tax loss of $2.9bn in H109. The firm said its customers saw fewer opportunities for refinancing, which slowed the rate of run-off in the mortgage portfolio in H109. But HSBC continues to service mortgages and even modified 69,000 real estate consumer loans with an aggregate balance of $9.8bn in H109. “We are satisfied with the progress achieved on our run-off business at this point,” HSBC said in the 2009 interim results. “The majority of our customers continue to meet their obligations and dollar delinquency stabilized in the first half of the year. Loan impairment charges increased at a lower rate than we expected… [which] was driven by early action in prior years to reduce exposure to higher risk segments, tight management of accounts and collections, lower loan balances and the impact of government stimulus programs.” Beneficial, HSBC’s US mortgage branch, shut its doors and will take no new applications, but remains operational from a servicing standpoint. HSBC late last year confirmed it would cut several hundred US jobs as part of an exit from wholesale/correspondent mortgage lending. HSBC maintained a strong presence in UK mortgage lending, however, committing £6.7bn (US$11.3bn) in new mortgage originations in H109. In Hong Kong, the firm also maintained a presence in new mortgage lending, with its market share increasing to 32% in June, while loan impairment charges remained very low. Write to Diana Golobay. Disclaimer: The author held no relevant investments at the time this story was published.