HSBC Holdings PLC chief executive Michael Geoghegan said Tuesday that measures taken to deal with the company's subprime mortgage problems in the United States are working.
"Deterioration has been contained. ... In the first four months of the year, the rate of increase in delinquency has slowed," he said at a shareholders' meeting in Hong Kong, without giving any figures.
But Mr. Geoghegan said the situation may worsen.
"In the second half of the year, more loans in this portfolio will reset and will undoubtedly have some problems for some customers," he said.
The extent of the expected worsening will depend on the health of the U.S. economy and its property market, Mr. Geoghegan said.
To help alleviate the situation, the company said it would restructure up to $4 billion worth of subprime U.S. mortgages on more manageable terms this year and is seeking to securitize some of these assets.
HSBC said in early March that impairment charges at its North American personal financial services unit rose 34%, to $6.68 billion in 2006, from $5 billion in 2005, after the souring of acquired mortgage loans.
The poor performance of HSBC's mortgage business in the United States has hampered growth for the entire bank. HSBC said 2006 net income rose 4.7%, to $15.79 billion, from a year earlier.
To diversify its revenue stream, HSBC said it aims to double the profit contribution from its insurance business, including wealth management and retirement-planning products. But Mr. Geoghegan did not specify a time frame.
"Only 9% of our customers have insurance products with HSBC. We have the ability to do much better," he said.
Regarding HSBC's intention to list its stock in China's yuan-denominated, A-share market, the banking company's chief executive said it is discussing the matter with the Beijing authorities. He said there is no plan to spin off any of its subsidiaries, including its new locally incorporated China unit, for that purpose.
