HSBC cuts 750 jobs in US sub-prime business

Banking giant HSBC today announced plans to close part of its US sub-prime mortgage business, axing 750 jobs.

The bank’s US subsidiary HSBC Finance is shutting its Decision One operation, which generated the mortgages to borrowers with poor credit history through brokers.

HSBC warned of rising default levels on US mortgages back in February and was hit by higher-than-expected bad debt charges of $10.57bn (€7.5bn) last year.

The bank’s warning was the first sign of the current credit crunch across the globe as markets lost confidence in trading bonds secured on the high-risk mortgages.

But the bank will remain in the sub-prime mortgage market, offering cash to lenders through its network of 1,600 branches across the US.

HSBC chief executive Michael Geoghegan said: “It’s no longer sustainable and not the right place to allocate capital in the future.

“We said we would make tough decisions and we have done exactly that.”

HSBC said in July that a restructuring of the US operation to reduce to sub-prime risks were “progressing well”.

In March, the bank stopped buying mortgage loans from other financial institutions to cut its exposure to potential defaults.