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SCMP Reporter

As most banks in Hong Kong struggle with the rising problem of credit card default by reining in credit lines and being more cautious about issuing cards, Hongkong and Shanghai Banking Corp is actually seeing growth in its card business.

Hong Kong's biggest bank is gaining market share, adding customers and increasing profits on its card business, according to general manager Raymond Or Ching-fai.

'Our strategy in cards has been to convince our cardholders to use their HSBC card more often . . . and to hope some of that turns into receivables,' Mr Or said yesterday.

Based on figures for last year, 'that strategy seems to work. Card spending and card receivables have grown by double digits', he said.

'And it's excellent in an industry where receivables [on average] contracted 6 per cent.

'Despite the [high] charge-offs and personal bankruptcies, the profitability on cards still exceeded 2001 and we also gained a lot of market share.'

Hongkong Bank had 1.84 million cards in circulation at the end of last year, compared with about 1.74 million at the end of 2001.

Mr Or admitted Hongkong Bank was not immune to the problem of rising credit card defaults as Hong Kong struggles with steep unemployment and more than three years of deflation - leading to a record number of personal bankruptcies last year.

'I admit it's a problem but compared to our peer group, we've done a terrific job,' he said.

The average charge-off ratio, or portion of credit card debt Hong Kong banks wrote off, reached 13.25 per cent last year.

Hongkong Bank's credit card provisions nearly doubled last year to HK$2.29 billion but its charge-off rate of 10.2 per cent was well below the industry average.

Banks are hoping new rules starting from April 1 which allow banks to share positive credit data on customers will help ease the problem.

Mr Or said that although the decline in personal bankruptcies in the past two months was encouraging, it was too early to say the rates had peaked.

'Bad debt is obviously part of an economic problem,' he said.

As the economic downturn continued to take a toll on traditional sources of income for banks, Hongkong Bank would increasingly focus on building its wealth management division, Mr Or said.

Sales of unit trusts rose about 20 per cent last year as the bank launched many new investment products. Pre-tax profits from its personal financial services division rose 6.3 per cent to HK$13.58 billion, although that figure includes business in other parts of Asia.

Over the past few years the bank had built up a sales force of about 460 financial planning executives, which it expected to increase to 600, Mr Or said.

The bank also increased its share of the residential mortgage market last year although 'average margins continue to go south', which meant profitability was not growing much, he said.

Mr Or declined to comment on talk that HSBC was interested in buying Citibank's mortgage portfolio, although he said HSBC 'is open to acquiring mortgage assets'.



HK Bank boosts cards share