HSBC doubles UK mortgage mkt share, sees tough H2

LONDON (Reuters) - HSBC (HSBA.L) doubled its share of new UK home loans in the first half and held bad debts flat across its domestic business, but warned of a challenging second half as Britain's economy continues to deteriorate.

In commercial banking, where analysts have been looking for indicators of distress among UK companies, HSBC said it had experienced "slightly" higher impairments for smaller businesses and in receivables finance -- both after long periods at close to historic lows, but possible indicators of a growing strain.

"You can see a definite pickup of impairments particularly in the (small and medium enterprises) sector. More of that will come through in the second half, but it is difficult to know at this stage what impact that will have," Alan Keir, HSBC's general manager for UK commercial banking, told reporters after the group presented its half-year earnings on Monday [nL487970].

"I believe the book is well positioned but we are not immune from the overall economy."

Keir said the bank had not tightened its lending criteria for existing commercial banking customers but was being "more selective" in areas including retail, construction and property, where consumer spending is expected to drop sharply.

In personal banking, HSBC's share of Britain's new mortgages jumped to 6 percent in the six months -- double its traditional underweight position -- thanks to a "rate matcher" offer that helped it grab a bigger slice of the market as its competitors retreat in the face of the credit crunch.

"Our market share is at a healthy level now," Joe Garner, general manager for UK personal financial services, said. "We absolutely want to continue to be a significant player."

Garner said the bank was not "far off" a 5 percent share of Britain's mortgage stock, 2 points above its traditional share. He said the bank would not chase market share, but could go up to a 10 percent share of new home loans -- "as long as it is the right 10 percent."

Despite the deteriorating economic picture, HSBC said overall personal finance impairments were down 6 percent, as the bank benefitted from tighter loan criteria over the past two years -- including not allowing local staff to override the wider system.

Personal loan balances fell 10 percent.

"It is because we didn't feast in the good times that we have no famine in what are clearly tougher times," Garner said.

Mortgage arrears rose but HSBC said they were in line with the sector trends and remained below a UK average of just over 1.3 percent. The bank, which has sold all its mortgages directly and does not lend to landlords, did not disclose a specific number for its lending.

Current account balances per customer dipped 5 percent, as UK consumers face higher food and utility costs, but the bank said this was also the result of higher savings.

Overall, profit before tax for HSBC's UK business jumped almost 80 percent, lifted by one-off items including a card processing joint venture with Global Payments (GPN.N).

(Reporting by Clara Ferreira-Marques; Editing by Rosalba O'Brien)