HSBC accused of overvaluing loans by $30bn

by Gill Montia

Story link: HSBC accused of overvaluing loans by $30bn

HSBC’s activist shareholder, Knight Vinke, has responded to yesterday’s news that the bank has written down a further $3.2 billion in mortgage-related losses by demanding that HFC, the group’s US consumer finance arm, should be sold.

The fund manager has also accused HSBC of having not made an accurate value adjustment on its loans to customers and financial institutions.

In this respect, Knight Vinke is suggesting that at today’s value, the loans are worth almost $30 billion less than the bank asserts and that $23 billion of that adjustment relates to HFC.

Finally, Vinke Knight is arguing that the bank will have to write off a $10 billion goodwill impairment associated with the $14 billion acquisition of HFC, in 2003.

HFC is also faced with refinancing at least $80 billion of its loans before the end of 2011. HSBC’s chief executive, Michael Geoghegan, is known to be committed to a consumer finance presence in the US.

However, in yesterday’s trading update, the group’s chairman, Stephen Green, admitted that the likelihood of the US entering a recession during 2008 is increasing.