The Australian arm of the world's largest bank, HSBC, is gearing up to capitalise on the withdrawal of other foreign banks from the local syndicated lending market, even as it posted a 42 per cent jump in its full year 2008 pre-tax profit to $176 million.
The London-based HSBC Holdings subsidiary in Australia expanded its commercial banking customer base by focusing on those with cross-border needs, which led to an 84 per cent leap in pre-tax profit to $68 million, the bank said in a statement on Thursday.
The standout performance came from HSBC Australia's global banking and markets division which more than doubled its pre-tax profit to $102 million - up 143 per cent on the 2007 result.
By contrast, the bank's personal financial services unit saw its pre-tax profit halve even as it grew its high net worth customer base by 76 per cent and grew credit card market share partly through the September 2008 issue of the white-label Woolworths' Everyday Money credit card.
Pre-tax profit for the division plummeted 53.7 per cent to $19 million.
The Australian operations of the bank, which employs 1600 people, grew its gross loan book during the year from $12.99 billion to $13.3 billion on the back of higher activity in its residential mortgage, personal and property businesses.
Local chief executive Stuart Davis said HSBC is committed to growing its presence in Australia, but the lender will come under margin pressure in 2009 as credit quality weakens.
Globally, parent HSBC Holdings plc is exiting its US consumer finance business after North America was the only region to post a loss in 2008. This dragged down the group's overall pre-tax profit to $9.3 billion - a 62-per cent fall on the 2007 result.
HSBC Australia did not release its after-tax profit number and provisions for bad and doubtful debts.
Davis, said the bank was well positioned and capitalised locally, although the global banking parent was forced to carry out a $27.7 billion rights issue.
"We anticipate that 2009 will be a tough year for the Australian market, with pressure on financial margins combined with a weakening credit quality environment," Davis said.
"With a strong capital base, a diversified income stream and strong liquidity we will continue to position HSBC to benefit when economic conditions improve."
Davis said the bank had benefited from investors using HSBC as a counter-party on foreign exchange and interest rate trades, as the activity of rival banks in those areas waned.
He said HSBC had been approached by customers that had experienced some participants in lending syndicates scaling back financial commitments in the next year.
"Our focus in the past 12 months has been and will continue to be on our existing customers," Davis said. "The first priority is keeping the balance sheet for them.
"They may want to carry out normal business, or if they have multi-banking relations they may have been told that some of those banks will not be there or will be there for a lesser amount.
"There has not been an enormous retreat from foreign banks in terms of existing lending. It's been new lending that's been cut back."