HSBC records $3.4bn third-quarter sub-prime losses

by Gill Montia

Story link: HSBC records $3.4bn third-quarter sub-prime losses

HSBC has reported that losses from bad debts linked to the US sub-prime mortgage crisis amount to $3.4 billion in the three months to the end of September 2007.

The bank conceded that the charge was $1.4 billion higher than similar writedowns in the first-half of the year and warned that further, possibly higher, losses lie ahead.

Chief executive Stephen Green, stated that he “… wouldn’t want to put a percentage on it. It depends on the housing market and the overall US economy.”

However, underlying revenue growth in the third-quarter was higher than in the first-half of 2007 and profit for the period remains ahead of market expectations.

HSBC was the first bank to publish details of sub-prime losses, and in February of this year closed Decision One, its US sub-prime lending business. Only last week it closed its mortgage-backed securities unit.

The news of the latest writedown has fuelled the campaign by Knight Vinke, the asset management firm and HSBC shareholder.

Knight Vinke has been petitioning for a change of focus at HSBC and has commented that today’s news “underscores the risks associated with not focusing sufficiently on businesses where HSBC has comparative advantage and of building a group that may have become too large and too complex to be controlled effectively”.