On HSBC

CLSA highlighted some numbers on HSBC ....

US, UK businesses. HSBC has US$272bn in loans in the US and US$313bn in loans in the UK, accounting for 62% of total loans. This compares with US$94bn in capital as of December 2008. It is worth remembering that the bank has US$64bn in commercial real-estate and construction loans in the US and UK combined, or 65% of its equity base today where writedowns are likely.


In the US book, it is worth reiterating that half is subprime lending, with average delinquency rates of 22% and all other at 5%. We should also caution that HSBC’s US credit-card loans amount to US$19bn, which grew 24% during the go-go years 2005-07 and where industry data are worsening fast here. Winding down HSBC Finance.


HSBC announced that it will stop writing new business for its consumer lending at HSBC Finance, where it had US$62bn in outstanding loans as of 2008. Where these loans are held for sale, we expect some writedowns. CEO Michael Geoghegan said in a recent conference call that ‘US credit-card unit faces a “difficult” two years as the economy deteriorates’.

With worsening economics in the US, this is likely to lead to significant losses and HSBC Finance may need support from its parent. A quote from Page 66 of the group’s annual report, ‘Based on management’s forecasts, HSBC expects to provide capital support to its US operations in each of the next three years’.