HSBC forges ahead, surpassing targets

Things are looking up for the credit card and loans market in the country, with business showing continual recovery since the end of the war and the ensuing economic growth. As HSBC’s Head of Personal Financial Services Sarit Wijeyekoon pointed out, 2010 has been good and 2011 is shaping out to be even better. With HSBC’s Personal Financial Services division recording growth in terms of credit cards, personal loans and auto loans, he’s got cause enough to be optimistic.

HSBC’s top-end products – Premier and Advance – have contributed in no short measure and the promotions carried out by the bank have elicited a lot of interest among this premier customer base. “We have surpassed our targets in terms of the first quarter; we had a very strong first quarter,” asserted Wijeyekoon, adding that the bank sees a lot of future potential. It also has many exciting promotional plans in the pipeline, which will enable it to stay ahead.

Following are excerpts of an interview:

By Marianne David

Q: Could you tell us about the success of the Personal Financial Services business in 2010?

A: It was a year in which we saw business recovering across the board, with the end of the war and the economic recovery, which also followed. We started to see a lot of positive indicators, for instance loan recoveries became much better; we saw a very positive impact in terms of provision levels and considerable credit growth over the year. We saw growth in terms of credit cards and unsecured loans, what we call personal loans, and also auto loans – especially after the relaxation of duty.

If I take credit cards for instance, because we are very strong in credit cards, we actually saw our market share increasing last year to 26% in terms of the number of cards issued. We have 26% of the total market. We also saw growth in terms of the outstandings in credit cards, which grew to 49%. That was very promising because in previous years we saw a slight deterioration in the overall credit card market.

We’ve invested a lot in terms of marketing and promotions and we saw a positive improvement in customers’ spending habits and usage of credit cards. We also established ourselves as the dominant player in terms of the premium space around credit cards because we have the Premier credit card and we also launched a proposition called HSBC Advance and that has an advanced Platinum credit card. We believe we have about 70% of the premium market in credit cards.

If you take the Platinum, Advance Platinum and Premier cards that we offer; because of that we are able to offer our customers some very good deals. We find that most of the credit card merchants would want to tie-up with us because we are able to offer them this premier customer base.

Q: How has 2011 been so far?

A: The year has been very good – definitely an incremental improvement on last year. I would say we have surpassed our targets in terms of the first quarter; we had a very strong first quarter. Obviously there has been some impact from the reduction in the credit card interest rates, but because of our market share and positioning in credit cards, we have still been able to stay ahead.

Q: How would you describe the credit card and loans market in Sri Lanka?

A: Actually the credit card market shrank over the last few years. If you look at the Central Bank statistics, you see that. Most of that shrinkage was more on the lower end of the market. There is definitely a lot of potential there because we only have about 800,000 credit cards out there among a population of over 20 million.

We see a lot of future potential and it’s very important as a credit card issuer that we build scale. We are definitely building scale and investing in the business. You can also see that there is a lot more activity and competition now in the market, which we welcome because it keeps everyone on their toes.

As for the loan market, the unsecured loan market grew a lot over the last couple of years. We saw about 40% to 50% growth in that market. There was a certain element of north east customers, but I would say most of it is Western Province in a big way. I think it is a trickledown as well – the larger companies benefit first from economic expansion and in turn their employees and it trickles down.

In the north and east also we’ve seen very decent growth. We only have one branch in Jaffna; and we have seen good growth in terms of credit.

Q: Any expansion plans in the pipeline? Are you looking at opening up in the east as well?

A: Not immediately; we will be opening in Galle in July and that’s our plan for this year, the east could follow. With Galle, we will have 17 branches. Our model is not focused on branch expansion; we have direct sales for instance – that is mobile direct sales around the country. We also have a third party network for payments, for instance at Cargills supermarkets and the post offices and many others, so many different ways (over 1,000), so we don’t really need to open up many branches.

Q: How has the overall business performance been in Q1 2011?

A: We expect that our credit card market share has increased, but we don’t see the statistics until the next quarter. However, we are very confident that we have increased our share. We’ve also seen an increase in our Premier and Advanced customer bases of about 20%, which is very promising.

Q: Is that existing customers moving up or entirely new customers?

A: I would say about 25% would be existing customers moving up; the rest are new customers coming in. These two propositions are very popular so we see a lot of demand. I think this is because what we can offer is very unique and doesn’t just apply to local benefits – these are global products.

If you are global and mobile, it helps to have a Premier account, for instance, because you can open an account overseas and there are so many other benefits involved.

Q: Any specific campaigns coming up to promote these products?

A: Yes; we just finished ‘Winner Every Minute’ on 30 April which was for the Avurudu season. We were rewarding customers for the highest transaction every minute. We have things happening all the time. I can’t specifically mention anything because it needs to be a surprise, but we are definitely investing a lot more this year in terms of promotions and value adds because that’s our unique selling point.

Something interesting we just launched was an application for iPhone, iPad and Android users. It’s an application that allows you to see deals around the world, because HSBC through its network has tied up with several thousand merchants around the world. We have 19,000 locations and 160 countries which are offering special deals to HSBC customers so using this application before you travel and when you travel, you will be able to see what offers are available. There are many offers in Singapore and Thailand for instance in this region and many more across the world.

Q: Do you see your customers taking advantage of these offers?

A: Definitely! A very large portion of our customers’ card spending is overseas. I would think that even if they have several cards in their wallets, our card would be the one they would prefer to use overseas because of the HSBC branding and security. It’s a global card and looks the same whether it’s issued from Australia, England or anywhere else. They would feel more comfortable using the HSBC card.

Q: How do you view the economy overall?

A: We see month-on-month improvements and with the Central Bank holding the rates where they are, I think that is definitely spurring credit growth. We are waiting to see if there is any impact in terms of duties being increased over the last few weeks.

Q: What are your thoughts on regulated interest rates on cards and its impact on business?

A: We are always compliant with whatever the regulator wants us to do. Ideally for us, any interest rate should be driven by competitive pressures and if a rate is out of whack with the market, customers will decide. That is the ideal situation. The whole industry approached the regulator in terms of the rate; we did have certain issues.

The credit card business is a very high cost business and there is a lot of investment involved, so a certain margin has to be maintained because of that. However, we respect the regulator’s wishes and we immediately adjusted our rates and it’s business as usual. We are continuing to invest because we believe the credit card business has a lot of potential.

Q: What are your thoughts on the local mindset towards credit cards?

A: There was quite a lot of credit card expansion about three years ago and then we had this global economic crisis and the economy also took a bit of a beating. With that some people did suffer, because they might have been overextended. As a result of that, credit criteria were tightened and CRIB became a positive and a negative CRIB. All these things contributed to tightening things a lot. I would say the situation now has evolved quite a bit and credit criteria are much tighter across the industry.

We can say that people’s attitude towards cards is also turning much more positive. There has been a lot of awareness and education being carried out; for instance, we have a credit counselling hotline for our customers and we try to help them out if they need to restructure. We try to work with them rather than at cross purposes.