EARNINGS
HSBC says profits better than last year, but warns of higher losses
HSBC Holdings PLC warned Monday that bad debt and losses may be higher in the near future and medium-term, as global economies slow and problems spread from mortgages to home equity, credit card and commercial loans.
The British banking giant, the second-largest European bank, said third-quarter profits were “ahead” of last year, as its Asian operations and emerging markets business outperformed U. S. businesses hammered by bad debt and writedowns.
The London-based parent of HSBC Bank USA reported loan impairment charges of $4.3 billion in U. S. personal financial services, up $700 million or 19 percent from a year ago. That was largely due to higher losses on mortgages and credit cards for HSBC Finance Corp., plus rising delinquencies on home equity loans for HSBC Bank.
The British giant also wrote down the value of its investments by $4.8 billion and trading positions by $600 million.
Here in the United States, HSBC Bank USA lost $136 million, compared to a profit of $21 million in the same quarter a year ago, after setting aside more money for bad debt and recording lower fee income and trading revenues.
HSBC Finance, formerly Household International, narrowed its loss to $1.58 billion from $2.1 billion. The division received a $1.3 billion capital infusion from the parent company.
In early October, the company added $1.3 billion in capital to its British subsidiary as part of the British government’s support program, and HSBC Finance has been approved to sell up to $12 billion in short-term debt, known as “commercial paper,” to the U. S. Federal Reserve if no other investors will buy it. But it has not needed to do so, and also said it has no plans to participate in the Treasury’s bank stock purchase program.
HSBC, which reports detailed earnings every six months, did not report specific results for all of its global operations, but does issue an interim management statement to guide investors and others. It also files quarterly reports with the Securities and Exchange Commission for its U. S. operations.
Globally, net interst income from taking deposits and making loans grew “in line with” the first half of the year, while net fees fell because of weaker equity market-related income and lower U. S. credit card fees. Expenses were in line with the first half of the year.
At the U. S. bank, net interest income from taking deposits and making loans rose 26.6 percent to $1.17 billion, despite a 4.3 percent drop in loans to $91.7 billion. Deposits rose 4.8 percent to $121.8 billion. But the bank set aside $658 million for bad debt, up 64 percent.
Fees fell 26.5 percent to $275 million, as the bank lost $122 million and $178 million on trading and securities, respectively, compared to slight profits a year ago. Expenses rose 9.3 percent to $974 million.
