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HSBC vows to grow 'aggressively' in mortgages, plow resources into fintech

HSBC Holdings Plc plans to continue to grow "aggressively" in U.K. mortgages and is plowing resources into fintech development, its departing CEO, Stuart Gulliver, told analysts during a full-year 2017 earnings call.

Gulliver is due to step down Feb. 21 and will be replaced by John Flint, currently CEO of HSBC's retail banking and wealth management division, which grew its residential mortgage loan book to £85.6 billion at the end of 2017 from £83.8 billion a year earlier. The bank had a 13.7% share of the U.K. mortgage market in 2017. Interest-only mortgages accounted for £21.1 billion of its U.K. loan book, while buy-to-let mortgages totaled £2.8 billion and those on the standard variable rate £3.9 billion.

The expansion of HSBC's distribution network of brokers in the U.K. has been a major driver of growth in the mortgage book, rather than any lowering of standards in credit quality, Gulliver said. Flint echoed those comments, saying that he saw the U.K. as "a stable credit environment, perhaps more stable than one might expect."

Proactive approach

On the topic of Open Banking, a new U.K. regulation that came into effect Jan. 13 and requires banks to give third parties such as fintechs and payments companies access to customer data, Gulliver said HSBC had been committing resources to developing new consumer banking products.

"It's here — the regulatory direction of travel is clear," he told analysts. "The potential disruption this could cause is quite significant. So, it's important that we get in early, testing, learning and experimenting."

In September 2017, the bank launched HSBC Beta, a product that allows customers to see all their accounts on one screen, regardless of who they bank with. HSBC's First Direct brand is currently working on another mobile and online product with a fintech within the U.K. Financial Conduct Authority's so-called "sandbox," a virtual space in which new or untested software or coding can be run securely.

"It's important that our customers aggregate through us," Gulliver said. "It's all ultimately about control of the customer relationship."

HSBC has achieved eight out of the 10 strategic goals it set for itself at an investor update in 2015, the outgoing CEO said. These include setting up a U.K. ring-fenced bank, reducing the global footprint from 73 countries to 67 and solidifying its "pivot to Asia" strategy by growing market share and AUM in China. HSBC still has to meet targets for revenue from RMB internationalization and U.S. bank profitability targets but has made "significant progress" toward both, he added.

At a group level, the bank reported a loss of $274 million in the fourth quarter of 2017, compared with a loss of $4.44 billion during the same period of 2016. Full-year 2017 profit attributable to ordinary shareholders of the parent company came in at $9.68 billion, up from nearly $1.30 billion in 2016. The bank finished the year with a common equity Tier 1 ratio of 14.5%, up from 13.6% at the end of 2016.