HSBC faces crisis over US credit cards

geoffky

OH dear they must of expected this..there again



HSBC faces a meltdown at its US credit card operations where around $50bn (£34bn) has been lent to people with poor credit histories, say analysts.
Write-offs at the credit card arm of HSBC Finance Corporation (HFC), formerly Household, a sub-prime lender, could double to $10bn in 2009, according to brokers. Fears are growing that the bank could be forced to ask shareholders for more cash, on top of the £12.5bn it raised during its recent rights issue designed to bolster its balance sheet.
Analysts at Soci!t! G!n!rale said that the strong take-up of the share offer did not necessarily "translate into smooth sailing for HSBC over the next couple of years" as it faced the prospect of rising bad debt and sour loans. The bank is not yet out of the woods, added SocGen.
Of particular concern are loans outstanding at HFC's credit card business, which stood at $49.6bn last year - representing around two-thirds of all HSBC credit card loans. The HFC credit card operation wrote off $5.4bn in bad or doubtful loans in 2008, according to the annual report, but made a profit of $520m. But analysts say that the profit will be wiped out this year and the offshoot will plunge into the red

http://www.guardian.co.uk/money/2009/apr/12/hsbc-credit-cards-us-business

zedyy

This doesn't sound good.

bailout v.1.8 anyone??

ad44downey

So the recent optimism shown for HBSC may well have been misplaced.

1984ReturnsForReal_2

zedyy wrote: »

This doesn't sound good.

bailout v.1.8 anyone??

Thats going to be hard bearing in mind both HSBC & Barclays have been funded heavily by the Middle East..

michaels

Piece I read on HSBC (sorry can't remember where - Economist?) said it could walk away from its US obligations if it chose to but this was thought unlikely because of what it would do to the banks reputation - but who knows.

Same piece also said that according to their internal models even in a worse case scenario their US loan book was worth more than mark to market - again hmm...

cocktail

1984ReturnsForReal wrote: »

Thats going to be hard bearing in mind both HSBC & Barclays have been funded heavily by the Middle East..

oops! HSBC bosses---better get your bonus packages /pension payouts sorted. this time its the Middle East paying.

Radsteral

no wonder why hsbc declined to offer me a mortgage even though 10 years with them and saving/credit/business acounts all with them.. 10 years not a single time gone overdraft and outlook for my bussines well ok..
the excuse was '' although we seeing your personal account showing really really great outcome we can only base our decision on your company financial statements= what you pay yourself there''

oh well, i ll base my decision on soc-generale analysis then
and as soon as i get tim eto go to co-op bank will jump there all my savings etc .
that ll help hsbc too
Die little piggy die!

Martinslovechild

This doesn't bode well for Citibank, the world's biggest credit card issuer (owner of Egg in the UK).

I've felt for a while that the next chapter of the sorry mess the economy's in will revolve around credit cards. Simply because if people can't borrow against their homes (M.E.W.) due to the house price crash and general mortgage lending restrictions, the next place they'll go is their credit card(s).

We already know that credit card companies have been tightening up in general, either by increasing interest rates for existing borrowers, reducing credit limits or writing to cardholders advising them that their custom is no longer required.

Common sense says that the next bit of the credit crisis to unfold is a huge increase in bad debts in credit card land. That will likely mean lots of bad news from the likes of MBNA, Citibank & Capital One.

We know that MBNA have already made a lot of staff redundant and Capital One have ceased issuing 0% balance transfer deals.

It all just seems a matter of time now...

TEDDYRUKSPIN

This is normal. Many banks are in this situation. I believe it was mentioned a while ago on the bbc about the so called, 'second wave'.

Many banks will need to fork out more money to wipe of the debt due to america. The debt all being credit cards and personal loans. Expect another drop soon around the end of the year.

chucky

zedyy wrote: »

This doesn't sound good.

bailout v.1.8 anyone??

doubt it - it won't come as much of a surprise if most if not all banks post a profit for this year.

Goldman Sachs Group Inc posted higher-than-expected first-quarter profit as it took more trading risk, and it said it planned to raise $5 billion of common shares to help pay back government funds, but it also lost $1 billion in the final month of last year.

http://uk.reuters.com/article/marketsNewsUS/idUKN1338702020090413

ad44downey

Martinslovechild wrote: »

This doesn't bode well for Citibank, the world's biggest credit card issuer (owner of Egg in the UK).

I've felt for a while that the next chapter of the sorry mess the economy's in will revolve around credit cards. Simply because if people can't borrow against their homes (M.E.W.) due to the house price crash and general mortgage lending restrictions, the next place they'll go is their credit card(s).

We already know that credit card companies have been tightening up in general, either by increasing interest rates for existing borrowers, reducing credit limits or writing to cardholders advising them that their custom is no longer required.

Common sense says that the next bit of the credit crisis to unfold is a huge increase in bad debts in credit card land. That will likely mean lots of bad news from the likes of MBNA, Citibank & Capital One.

We know that MBNA have already made a lot of staff redundant and Capital One have ceased issuing 0% balance transfer deals.

It all just seems a matter of time now...

It's amazing. Just when you think things for the world economy can't get any worse you get more disturbing news like this. This will send credit card interest rates soaring.