HSBC said third-quarter profit rose even as it set aside $4.3 billion to cover bad loans in the U.S. and forecast “further deterioration.” The U.S. unit “declined markedly” because of consumer and corporate loan defaults. The $4.3 billion total was more than analysts estimated, thinking HSBC would only lose about $3.7 billion. What’s a few million either way? Further detrioration is an interesting term as well. It means that the economy is getting worse, and HSBC Finance has a target audience that feels the effects more so than others. Investors are preventing some lenders from modifying mortgages, but it is unclear how HSBC is effected in that regard.
This morning news from Hong Kong, the original home of HSBC (Hong Kong Shanghai Bank) tells us something we already knew back when William F. Aldinger III sold predatory lender Household International to HSBC. One JPMorgan analyst, Sunil Garg, said HSBC Finance Corp, the bank’s consumer-lending subsidiary in the United States, is an “unviable business” in the current environment. Lending spreads are inadequate to run a business like HSBC Finance that is beset with excessive risk, he said.
New names to watch are HSBC Business Solutions and HSBC Consumer Credit. Business Solutions appears to be private label credit card and merchant credit card operations, while HSBC Consumer Credit appears to be HFC and Beneficial Finance. As John McCain, Barrack Obama and Sarah Palin can tell you, it has something to do with lipstick on a pig. HSBC name changes distance the bank from predatory lender Household International, and attempt to remove the high interest, abusive, and predatory link between HSBC USA and troubled HSBC Fianance. Nothing has changed, however, except the names. See our complaints blog for more.
Thomas Hartley of Business First of Buffalo reported that HSBC USA has no plans to take part in the federal government troubled asset relief program (TARP). The article “HSBC Passes On Federal Program” says HSBC supports the U.S. government’s efforts as part of ongoing public and private initiatives to address issues in the marketplace, including the recent announcement of the TARP (troubled asset relief program) Capital Purchase Program.
HSBC tumbled 13.5 percent on Friday October 24 as investors focused on the bank’s exposure to the American mortgage market and the impact that rising corporate defaults could have on their credit derivative exposure. Exposure? In reality HSBC was, and is, heavily involved with American subprime, thanks to Household International and HSBC Finance (HSBC Consumer Credit).