HSBC regret America venture
(4 March 2009 – UK) In its latest profit results, HSBC has said that it regrets the personal finance acquisition that it made in North America and has decided to move out after a massive loss in 2008.
For North America, HSBC reported a loss of US$15.5 billion including the goodwill impairment charge of US$10.6 billion in Personal Financial Services.
Stephen Green, Group Chairman said that the significant deterioration in US employment and economic outlook in the fourth quarter of 2008 were the primary factors in causing the bank to write off all the remaining goodwill carried on the balance sheet in respect of its Personal Financial Services business in North America.
He said that despite seeing the disruption in sub-prime lending as early as 2006 and sharply scaling back in 2007 while others continued to grow, virtually no one then foresaw the subsequent scale of the deterioration in the US economy and financial markets.
He concluded that it is now clear that models of direct personal lending that depend on wholesale markets for funding are no longer viable.
In light of this, HSBC have taken the decision that, with the exception of credit cards, it will write no further consumer finance business through the HFC and Beneficial brands in the US and close the majority of the network and run off all existing business.
The decision will eliminate 6,100 jobs.
Green said that, with the benefit of hindsight, this is an acquisition that the bank wishes it had not undertaken.
HSBC, however, remains committed to the US as a core market for HSBC. HSBC Bank in the US is not affected by the restructure. HSBC will focus on those businesses and customers that benefit from global connectivity, including global corporate and commercial businesses, and in Private and Premier banking.
Stephen Green, Group Chairman said that the significant deterioration in US employment and economic outlook in the fourth quarter of 2008 were the primary factors in causing the bank to write off all the remaining goodwill carried on the balance sheet in respect of its Personal Financial Services business in North America.
He said that despite seeing the disruption in sub-prime lending as early as 2006 and sharply scaling back in 2007 while others continued to grow, virtually no one then foresaw the subsequent scale of the deterioration in the US economy and financial markets.
He concluded that it is now clear that models of direct personal lending that depend on wholesale markets for funding are no longer viable.
In light of this, HSBC have taken the decision that, with the exception of credit cards, it will write no further consumer finance business through the HFC and Beneficial brands in the US and close the majority of the network and run off all existing business.
The decision will eliminate 6,100 jobs.
Green said that, with the benefit of hindsight, this is an acquisition that the bank wishes it had not undertaken.
HSBC, however, remains committed to the US as a core market for HSBC. HSBC Bank in the US is not affected by the restructure. HSBC will focus on those businesses and customers that benefit from global connectivity, including global corporate and commercial businesses, and in Private and Premier banking.
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