HSBC in warning over US business

Banking giant HSBC warned today that the turnaround of its US business may take until the end of 2009, as it unveiled a $17.2bn US (€11.3bn) hit from bad debt and loan provisions.

The group said write-downs relating to defaults last year soared by 63% from 2006 – more than City expectations – as the fallout from the slowing US housing market crisis deepened.

But the company, which is the UK’s biggest banking group, still managed to post a 10% increase in pre-tax profits to $24.2bn (€15.9bn). The figure was in line with market estimates.

The US housing crisis, which has seen record default rates and repossessions as high-risk or sub-prime borrowers struggle to meet loan repayments, saw write offs at HSBC’s US consumer banking business jump 80% to $11.7bn (€7.6bn) last year.

Group finance director Douglas Flint said the bank was now dependent on the general health of the US economy for a turnaround.

Asked when the situation would peak, he said: “A year ago we would have said by the end of 2008 we should be seeing a turnaround. Maybe it’s the end of 2009 now, I don’t know.”

Mr Flint said the “vast majority” customers were keeping up with their loans in the US, with bad-credit customers largely expunged from its operations.

But he added: “You are now exposed to the general economic conditions in the US.

“If unemployment holds up then I think we should see a turnaround within 18 months or so. If it doesn’t maybe it will take longer – it depends on the general economic health of the US.”