HSBC is expected to report additional write-offs of nearly $4 bln

According to analysts' forecasts, HSBC, which reports its U.S. results on Monday, is expected to say that it will continue to incur substantial losses from bad debts in its U.S. mortgage business for some time. The bank is reducing its exposure to the U.S. mortgage market and is not writing any new mortgage business, but HSBC says it will take time for this to unwind completely. Meanwhile, other customers are expected to default on their mortgages as unemployment levels rise.

"It is clear that the U.S. consumer finance market will worsen before improving, and therefore expect another weak quarter," Alex Potter, a banking analyst at Collins Stewart, said Friday.

James Hutson, an analyst with Keefe, Bruyette & Woods, said he expected bad debts at HSBC Finance, the U.S. consumer finance arm, to rise to $3.7 billion in the third quarter, up from $3.4 billion in the previous quarter and on the way to $14.4 billion for the year.

UBS put bad debts in the third quarter at $3.6 billion. Cazenove did not itemize bad debts specifically but predicted HSBC Finance would incur a quarterly loss of $850 million.

HSBC does not release full quarterly earnings but will issue a group trading update alongside its U.S. results. The update is likely to indicate a slowdown in Asia, more asset write-downs and gains on the value of its own debt, as well as a negative impact of currency moves, analysts said.

"We expect the group to report a resilient performance in turbulent markets with good profit growth across Asia and the Middle East, offset by continued pressure in the U.S.," analysts at Credit Suisse said this week.

HSBC was one of the first lenders to report big losses on U.S. mortgages in November 2006. A worsening economy and rising unemployment could delay recovery in HSBC Finance, formerly called Household, until 2010, analysts estimate.

HSBC has fared better than most banks during the credit crisis because of its strong capital and liquidity. That position may have improved as it attracted deposits because it was seen as a safe place, analysts said.


Sources :

The International Herald Tribune: HSBC expected to report more write-offs next week from U.S. division, November 7, 2008

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