HSBC continues to lose mortgage market share

The Hongkong and Shanghai Banking Corp.’s New Zealand branch is continuing to lose market share in the mortgage market, although its December quarter disclosure document makes it appear worse than it is.

Tuesday, April 19th 2005, 11:29AM

by Jenny Ruth

That showed its residential mortgage book dropped to $2.2 billion from $2.88 billion at the end of December. That made it look as if its share of the mortgage market fell to 2.2% from just under 3% at the end of September.

HSBC NZ financial controller Hoshang Madon says that after the September quarter document was produced, his bank approached the Reserve Bank of New Zealand for clarification of how it should be reporting its mortgage book.

It had been including mortgages lent to loss attributing qualifying companies (LAQCs) as residential mortgages but the central bank said these loans should be 100% risk weighted rather than the 50% risk weighting normally allowed for residential mortgages.

LAQCs allowed residential property investors to offset any losses against their other income to reduce the amount of tax they are liable to pay.

Madon says $587 million of loans that it would previously have treated as residential mortgages are now reported in its "all other assets" category. That jumped from $2.11 billion at the end of September to $2.74 billion at the end of December.

If that $587 million is added back to HSBC’s mortgage book, its market share would have dropped only to 2.8%. The total mortgage market (excluding Superbank) grew $3.45 billion to $100.03 billion in the December quarter.

HSBC’s total assets dipped to $6.18 billion from $6.36 billion at the end of September.

HSBC has been losing market share since June 2003 when it bought AMP’s $1.8 billion mortgage book. At the end of June 2003, it reported its mortgage book was $3.02 billion.

The bank’s sharp drop in profit to just under $24 million for 2004 from $46.7 million for 2003 is also not the disaster it appears.

That’s because the December quarter of 2003 results were boosted by a $36.5 million write-back of provisions for bad and doubtful debts. That reflects the repayment of the Central North Island Forestry Partnership debt. In the December 2004 quarter, the bank wrote back just $786,000 in provisions for bad and doubtful debts.

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