HSBC Bank Australia has emerged as another big beneficiary of the Reserve Bank’s Term Funding Facility.
HSBC’s local banking subsidiary, which has more than doubled the size of its mortgage book since 2016, continued to build market share in home lending throughout 2021 after drawing A$513 million from the TFF.
Over the two years that TFF funding was available, HSBC drew down more than $1.25 billion.
Funding via the TFF has allowed banks such as HSBC to access three-year term cash at an annual cost of only 0.1 per cent.
The ultra-cheap TFF funding was a material factor in HSBC’s business last year, accounting for at least 12 per cent of the bank’s total funding requirements.Financial accounts published on Friday confirm HSBC as one of Australia’s fastest growing lenders after the bank reported its total loan book grew by $3.3 billion or 15 per cent to $33.6 billion.
The bank suffered a slight fall in cash earnings from its core operations in the 12 months to the end of December, with operating profit falling 2 per cent to $216 million.
However, the bottom line was severely impacted by a slide in the market value of investments held on the bank’s balance sheet.
There was a $45 million slide in the market value of investments, which largely accounted for a 25 per cent fall in net profit to $187.3 million.
Australian accounting rules require non-cash items such as the movements in the market value of assets to be included in net profit.
The bank incurred a six per cent increase in operating expenses to $757 million.
In commentary included in the annual report, directors of HSBC Australia attributed the increase in overheads to “performance related staff costs, property reorganisation costs and the ongoing investment in digital initiatives”.
Official data shows HSBC is one of the fastest growing APRA-regulated home lenders in the country, along with Macquarie Bank and Bendigo.
In 2021, HSBC grew its mortgage book by more than 12 per cent or $2.7 billion to almost $25 billion.
The bank’s home loan book stood at $10.5 billion at the end of December 2016.
HSBC is continuing to work through an anti-money laundering compliance weakness that was first identified in 2019.
While the bank has been looking to remediate the problem, directors have not revised the wording of a contingent liability since last year.
“In December 2019, the Bank raised with AUSTRAC one such matter relating to theunderreporting of a limited category of cross-border transactions involving Non-Bank Financial Institutions and other Financial Institutions,” the board stated in note 25 to the 2021 accounts.
“The Bank is continuing to work with AUSTRAC in relation to this matter in line with our open and transparent approach with regulators.”
HSBC Bank Australia paid a dividend of $66 million to its parent in 2021 – down $13.5 million on the 2020 dividend.