HSBC (0005) yesterday reported third- quarter bad-debt charges in its American operations surged 19 percent from the previous quarter to a higher-than- expected US$4.3 billion (HK$33.54 billion) but said third-quarter profit for the whole group rose from a year earlier.Group chief executive Michael Geoghegan said he expects even higher loan impairment charges for the US operations in the near to medium term.
"The fact is we're going into global recession," Geoghegan said.
Analysts had expected loan- impairment charges of between US$3.6 billion and US$3.7 billion in HSBC's US personal financial services businesses, according to a Reuters survey. HSBC's London-listed shares were trading 0.9 percent lower, at the equivalent of HK$90.52, by early afternoon UK time.
HSBC also revealed it had pumped US$1.3 billion in additional capital into HSBC Finance Corp, a subsidiary that was once the largest subprime mortgage lender in the United States, during the third quarter.
Third-quarter losses at HSBC Finance narrowed to US$271 million, from US$1.1 billion in the third quarter of 2007, after a US$1.7 billion boost from fair-value gains on its own debt. Associate HSBC USA Inc reported a third- quarter loss of US$136 million, down from a US$21 million profit during the same period last year.
HSBC's global banking and markets unit wrote down US$600 million on credit-trading positions in the quarter and took a US$4.8 billion charge against reserves to reflect lower values for illiquid asset-backed securities it holds.
Geoghegan said the whole group's third-quarter profit was higher than the third quarter last year, with Asia driving operating profitability. However, the bank said pre-tax profit for the nine months ended September 30 was down compared to the same period last year.
The group's third-quarter results were boosted by US$3.4 billion of fair- value gains on the value of HSBC's own debt and a US$2.4 billion gain booked on the sale of its French regional banks.
Changes in accounting rules helped HSBC to reclassify US$13 billion of trading assets it holds so it does not need to mark down their value, as long as they are not impaired. Third-quarter profit would have been US$835 million lower without the accounting changes, it said.
Geoghegan said HSBC has no specific plans for any substantial reductions in staff across the world. Group finance director Douglas Flint said HSBC's dividend policy remains intact.
