HSBC posts December quarter loss and 30% annual profit drop to NZ$39.4 mln after big jump in provisions for impairments on commercial loans

By Gareth Vaughan

HSBC New Zealand, which last month strenuously denied a Financial Times story suggesting its parent planned to sell or shut its New Zealand operations, has sunk to a NZ$3.6 million December quarter loss after a big increase in provisions for loan impairment.

HSBC's latest General Disclosure Statement (GDS) shows the bank's annual profit after tax fell NZ$16.8 million, or 30%, to NZ$39.4 million in 2011 from NZ$56.2 million in 2010.  It was HSBC NZ's lowest annual profit after tax since 2007 when it made NZ$35.9 million.

The drop came as operating income fell NZ$6.6 million, or 4%, to NZ$143.2 million and operating expenses climbed NZ$6.2 million, or 11%, to NZ$63.7 million. Meanwhile, annual provisions for loan impairment jumped by NZ$13.4 million to NZ$24.5 million. Almost all - NZ$23.3 million - of HSBC's annual provisions came in the December quarter, pushing the bank to a NZ$3.6 million quarterly loss, compared with a NZ$17.2 million profit in the three months to December 31, 2010 when the bank booked provisions for loan impairments of just NZ$4.6 million.

Hit taken from commercial loans

Asked by where the big rise in loan impairments had come from, an HSBC NZ spokeswoman said: "There have been a small number of exposures within our commercial portfolio requiring an increase in our specific provision for loan impairment."

The GDS comes hot on the heels of a receiver's report suggesting HSBC faces a "significant shortfall" on NZ$8.6 million it's owed by Criterion Group after tipping the furniture maker into receivership in January. And last August Allied Farmers said it would write-off in full its NZ$3.63 million carrying value for Matarangi Beach Estates Ltd, acquired as part of its December 2009 debt-for-equity swap with defunct property lender Hanover Finance, with HSBC as first secured creditor facing a "significant loss."

HSBC's December 2011 quarter net interest income fell NZ$2.1 million, or 10%, to NZ$19.7 million, operating income fell NZ$9 million, or 20%, to NZ$35.4 million, and operating expenses rose NZ$1.99 million, or 13%, to NZ$17 million.

HSBC New Zealand is technically the New Zealand operations of the Hong Kong-based Hongkong and Shanghai Banking Corporation Limited. In March the Financial Times reported the HSBC group was set to consider the sale or closure of seven Asian retail businesses from Pakistan to New Zealand, where it had decided to no longer focus investment. However, a spokeswoman for HSBC NZ said the group wasn't exiting any Asia-Pacific market.

Meanwhile, the GDS shows HSBC's advances to customers rose NZ$216.9 million in the December quarter to NZ$3.431 billion, despite an NZ$11 million drop in home loans to NZ$1.004 billion. Customer deposits rose NZ$268.1 million to NZ$3.09 billion.

Total assets rose NZ$9 million to NZ$4.939 billion and total liabilities increased NZ$11.8 million to NZ$4.922 billion.

The HSBC group is regarded by the Basel Committee on Banking Supervisions as one of the world's 29 systemically important financial institutions.

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I wonder how much bonus was originally paid for writing this string of crappy loans?

How safe if Kiwibank then? The other Australian/NZ banks featured but not Kiwibank:

Well.....Bollard is doing "living wills" which is supposed to allow a bank to close its debt/savings arm but keep its current accounts usable so ppl get to eat, its due this year? september?  The answer is I think everyone should have at least 2 Internet capable bank accounts with different banks as a minimum, the fact that we have a 2 hour capability to move money now (or shortly) should be taken advantage of IMHO.
Kiwibank has an intrinsic but un-proven? backstop of the Govn......but
Looking at how the ratings agencies missed the GFC, and the periloious state caused by private debt you have to wonder if the rating is in any way meaningful.
For instance I think TSB has a fairly low rating compared to the OZ 4 as its considered small....however when you think outside the square a bit, consider that the sub-prime cds's were are considered AAA because they were finely sliced...yet there was a common failure point, the GFC...So for me I look at the big 4 and then TSB and I wonder if its international exposure (as an example) isnt way which case it may prove more resilient.  I guess I/we should look at the TSB as an example and try and look at its it too heavily into dairy for instance compared to others?
Kiwibank would seem to be lending as irresponsibly as the big 4 ie 95% loans?...not sure TSB is much better....