HSBC targets a bigger local presence

Buoyed by a strong result in the first half of the year, HSBC Bank Australia is pushing ahead with its plan to be the biggest foreign-owned bank in Australia. It will open new branches, increase its share of small business and middle market banking, upgrade its export finance offering and be more aggressive in debt capital markets.

HSBC Australia reported a pre-tax profit of $152 million for the six months to June, an increase of 28 per cent over the previous corresponding period.

The commercial banking division was the big driver of higher earnings. Commercial banking pre-tax profit was up from $13 million in the first half last year to $47 million in the latest half.

HSBC Australia chief executive Paulo Maia said the improvement in commercial banking was due to a combination of lower impairment charges and an increase in the commercial loan portfolio.

Personal financial services pre-tax profit rose 53 per cent to $26 million. Maia said the number of customers using the group's "mass affluent" transaction and investment account, Premier, has increased by 54 per cent over the past year.

HSBC opened its 25th branch, in North Sydney, earlier this year. It will open a branch in Canberra this month and by the end of the year will have two new branches in Melbourne. It is scouting for another location in Sydney.

Maia said: "You need a combination of direct, which we do quite well, with retail. There are opportunities we can pursue with a bigger branch network, including more SME business."

Customer accounts were up 26 per cent to $14.9 billion. Gross loans and advances were up 15 per cent to $15.1 billion. The mortgage book increased 28 per cent to $7.9 billion, personal lending was up five per cent to $1.1 billion, development and other property-rated finance was up eight per cent to $2.3 billion, and commercial lending was up four per cent to $4.4 billion.

The bank's weak spot was its global banking and markets division. Pre-tax profit was down from $85 million in the June half last year to $76 million in the latest half.

Maia said the division performed very well last year and was affected in the latest half by the change in the interest rate cycle.

Maia said: "Balance sheet revenue declined in the rising interest rate environment but the bust continued to drive revenue growth through growing market share in foreign exchange trading, interest rates and fixed income."