HSBC to writedown a further $1bn in sub-prime losses

by Gill Montia

Story link: HSBC to writedown a further $1bn in sub-prime losses

It is rumoured that HSBC will be writing-down a further $1 billion in connection with its portfolio of US sub-prime mortgages.

The bank is expected to announce the loss on Wednesday of this week, when it reports third-quarter results for its US division.

HSBC made its first such writedown in February of this year and has since withdrawn from the sub-prime market.

The bank closed its Decision One lending business and has recently disbanded it mortgage-backed securities unit.

The rumours have increased fears that the fallout from US sub-prime crisis is far from over and raised questions about current estimates of the cost of the crisis.

Citigroup has estimated that Wall Street investment banks will eventually lose around $64 billion on securities backed by sub-prime mortgages; total losses so far reported are in the region of $25 billion.

In addition to direct losses banks may incur significant costs for court cases and investigations by regulators.

At the same time, damage to reputation can have a long-term impact on business.

Citigroup, for example, is facing a number of lawsuits from investors who asserts that the bank has not been entirely honest about its exposure in the debt markets.