HSBC – Digital Finance Analytics (DFA) Blog

HBSC To Partner With REA Group’s Smartline.

HSBC Australia has confirmed its third broker partnership with REA Group’s Smartline.

HSBC’s products will be available from this month, including Home Value which is available at 3.64% p.a. (comparison rate 3.66% p.a.*) for owner occupied loans paying principal and interest.

In addition, qualifying Smartline customers will have access to HSBC Premier, the bank’s premium banking and wealth management service.

HSBC Australia returned to the broking space with Aussie Home Loans in 2017 and announced its second broker partnership with Mortgage Choice, in January of this year.

Speaking to Australian Broker, Alice Del Vecchio, the bank’s head of mortgages and third party distribution, said, “We hand-picked Smartline because they are a great fit for us.

“They are an extremely compliant business and they work to the highest global standards, but beyond that they also have a really good franchise model. The teams there are long term and the average tenure is 10 to 12 years, so you have some really long term, established brokers who know the market and know their stuff. They really appreciate having the opportunity to bring a brand like ours on board and the value and opportunity it can bring,” she continued.

Smartline has arranged mortgages for more than 275,000 home owners and has a nationwide network of 400 brokers. HSBC joins more than 30 lenders on the aggregator’s panel.

Sam Boer, CEO of Smartline said, “HSBC is a well-recognised global brand with a comprehensive range of home loans that will help us meet the needs of our customers. We take pride in the longevity of our customer relationships and the strength of our customer service, and we believe this partnership is a great fit.”

Slowdown in house prices to continue: HSBC

From Australian Broker.

Economists from HSBC have joined calls that Australia’s house market boom is reaching an end, predicting a moderation in house price growth to single digits in the coming quarters.

In the bank’s most recent Downunder Digest, Australian housing: Cooling Not Crashing, chief economist Paul Bloxham and economist David Smith write that slowdowns in the Sydney and Melbourne housing markets will continue to weigh in on national house price growth for the next few quarters.

“[We] retain our forecast that national housing pricing growth will slow from the double-digit rates of recent years to 3-6% in 2018,” the economists said.

They expect house price growth to be between 2-4% in Sydney and 7-9% in Melbourne for the upcoming year. In other cities, low single digit rates are expected.

Bloxham and Smith attribute cooler property markets in Sydney and Melbourne to increased housing supply through greater volumes of apartment construction, tighter prudential lending regulations, and a crackdown on foreign investors both locally and within China.

HSBC does not expect a sharp decline in house prices however, with a hard landing only caused by an unexpected shock from overseas or a steep rise in Australia’s unemployment rate.

Sudden changes from within the country are also off the table, the economists predicted.

“Although we see the RBA beginning to lift its policy rate in 2018, we expect only a slow pace of cash rate tightening and some relaxation of current tight prudential settings as the housing market cools.”

Overall, past upward trends of house price growth have been more boom than bubble, they wrote.

Australian housing `bubble’ fears overblown, HSBC economist says

From Mortgage Professional Australia.

(Bloomberg) — Soaring home prices in Australia’s biggest cities are driven by strong demand and a lack of supply, rather than indicating a “bubble,” according to HSBC chief economist Paul Bloxham.

“At a national level, a key reason for rising housing prices has been housing under-supply,” Bloxham wrote in a research note on Thursday. “This also suggests that a significant fall in Australian housing prices, as occurred in the U.S. and Spain during the global financial crisis, is unlikely.”

Five years of red-hot growth have left prices in Sydney and Melbourne up 80% and 60% since mid-2012, fueling bubble concerns. In June, Moody’s Investors Service cut the long-term credit ratings of the major banks, saying surging home prices, rising household debt and sluggish wage growth pose a threat to the lenders.

Bloxham, a former staffer at the Reserve Bank of Australia, said that “fundamental factors” largely explain the price boom and, “as a result, we do not judge it to be a bubble.”

Demand for housing in Melbourne and Sydney has been supported by domestic and international migration, foreign investment and a lack of new supply, he said. Price increases have been much smaller in places such as Perth, where demand has been weaker amid the waning of a mining boom.

APRA has gradually been ratcheting up restrictions on riskier loans and in recent months the big lenders have all raised interest rates charged on interest-only loans. Bloxham said he believes these regulatory measures will help cool the market, along with lower demand from overseas and increased supply.

HSBC to offer loans through Aussie

From Australian broker.

HSBC has announced a return to the Australian mortgage broking space after a 10-year absence, partnering with Aussie Home Loans.

Alice Del Vecchio, Head of Mortgages and Third Party Distribution, HSBC Australia said,“We’re excited to partner with Aussie. Aussie has a strong network of brokers and is a well regarded member of the broking industry.

“Our mortgage book has grown significantly over the past few years and now we’re ready to stretch it beyond the geography of our branch network with mortgage brokers. HSBC has a range of competitive products that we believe will be well-received by customers and brokers,” she added.

Chief Executive of Aussie, Mr James Symond said “Our link with the HSBC brand in Australia brings together two leading brands focused on delivering greater competition to the home loan market, backed by premium customer service.

“Our HSBC partnership will now provide Aussie’s customers with a greater choice of mortgage products, while giving our brokers access to consumers attracted to the strong HSBC offering, the majority of whom are high-net worth”, he added.”

HSBC To Make Broker Channel Comeback

From Australian Broker.

HSBC has announced it is returning to the broker channel in April 2017, ten years after exiting the third party mortgage distribution sector and selling its broker-originated loan book to RESIMAC, according to the Australian Financial Review (AFR).

The news comes as a surprise to some, given the bank’s ten year hiatus, but less so for others, given HSBC has been missing out on a big piece of the home loan pie for the last ten years, with mortgage brokers now writing over 53% of all home loans in Australia.

In her role as head of Mortgages, HSBC’s Alice Del Vecchio is steering the bank’s re-entrance into the third party distribution network, after six years in mortgages at HSBC and a previous role as the national head of mortgages at Aussie.

HSBC has already deployed existing staff to the emerging third party division, the AFR has reported, and it is also hiring business development managers ahead of the April launch date.

HSBC made the news in 2015 when it scaled back its lending to property investors in the wake of APRA’s decision to apply growth caps on investor lending at the end of 2014.

The bank ultimately stopped lending to new to bank property investors, however having decreased its investment loan book by $470 million over the past 12 months, HSBC now appears to be relaxing its clampdown and focusing on growth through distribution.

APRA’s latest lending data shows HSBC’s loan book to be valued at $10.2 billion, with over 50% of this attributed to owner occupiers ($5.5 billion). $4.7 billion is attributed to investors. To put this into perspective, Citigroup has $7.1 billion in housing loans and ING Direct has $39.4 billion.

HSBC recently announced the opening of a private bank in Australia aimed at wealthy customers whose companies already use the corporate or retail bank.

HSBC’s local boss Tony Cripps said this move illustrated the lender’s focus on Australia as a “priority growth market,” according to the AFR.

HSBC opens private bank in Australia

From InvestorDaily.

HSBC has announced plans to open an Australian office offering private banking services to high net-worth individuals and family offices.

The opening of the new office is part of a move to expand the bank’s presence in the Asia-Pacific region, said HSBC Australia chief executive Tony Cripps.

“Australia is a priority growth market for HSBC, and having a private bank office here will complement and enhance our existing retail, commercial and investment banking businesses,” he said.

“We anticipate significant growth from being able to offer a comprehensive private banking experience to both new and existing customers.”

Families and individuals with more than $10 million in investible assets will have access to a number of HSBC’s services, the bank said, including discretionary investment management, equities and fixed income products, derivatives and more traditional banking services.

HSBC Australia head of private banking Hayden Matthews will lead the private banking business in Australia, and will work closely with the Singapore and Hong Kong offices, the bank said.

“HSBC has achieved strong growth in Australia over the past five years, and private banking is a natural step to continue building our business and meeting our customers’ needs,” Mr Cripps said.

Limited Upside, Potential Downside from HSBC’s Pivot – Fitch

HSBC’s plan to redeploy resources to Asia, shrink its investment bank, and cut costs is unlikely to have a positive rating effect while being potentially negative over the long run, says Fitch Ratings. In particular, how HSBC manages its significant planned growth in China and south-east Asia could hurt the ratings if this leads to a higher overall risk profile and concentration.

The plan, announced as part of an Investor Update on 9 June, reinforces an earlier strategic plan from 2011 which was first updated in 2013 and focuses on several key themes. These include a regional focus on Asia and China, and operating a diversified universal banking model with three divisions of equal weight – Retail Banking and Wealth Management, Commercial Banking, and Global Banking and Market. Financial targets remain unchanged, including a return- on- equity target of above 10% based on a CET1 ratio of 12%-13% – both figures were adjusted earlier in the year.

The announced cost and capital reallocations would only provide a positive credit and ratings effect if HSBC outperforms on the execution of its strategy and at the same time boosts capitalisation significantly. In terms of maximising efficiencies, HSBC plans up to 25,000 job cuts – mainly from reducing back-office functions and through the use of digital technologies and automation. The cost savings will be reinvested, with the overall cost base remaining stable at USD32bn.

Positive factors are the plans to reduce a combined USD140bn in risk-weighted assets (RWAs) in the investment banking division through quicker reduction of legacy assets, selling assets that no longer meet their cost of capital, and focusing on transaction banking-type businesses and multi-product and multi-country relationships However, we view this as a natural extension of ongoing efforts to scale back investments that have become overly capital intensive.

HSBC confirmed that it would also exit Turkey and reduce its operations in Brazil to only a small presence, while holding on to its Mexican business. The capital released from the sales in Turkey and Brazil will be used mainly to finance growth in Asia, enhance transaction banking and building key trade hubs for example in places like Germany. HSBC has already retreated from several dozen retail markets since 2011, including India, Russia, Colombia, Thailand and South Korea. The bank is targeting an increase in investments of USD180bn-230bn in RWAs in the Pearl River Delta (PRD) in southern China and ASEAN countries, which will also involve quadrupling the PRD workforce over the medium term.

Extracting more value from its global network and from increasing the share of international client revenues – which it quantified at USD22bn or 40% of revenues in 2014 – would be positive for HSBC, but there are few details as yet as to how this will be measured and accomplished. In this regard, the bank emphasised that maintaining a substantial US presence is most critical for its transaction banking operations which generated revenue of USD16bn in in 2014.