HSBC mulls US acquisitions amid subprime mortgage woes

PUBLISHED : Wednesday, 02 April, 2008, 12:00am
UPDATED : Wednesday, 02 April, 2008, 12:00am


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HSBC Holdings, the global lender haunted by US subprime mortgage woes, has indicated that it has no plans to pull out of the US market and may even make acquisitions there.

'We may consider acquiring banks linked to Spanish and Asian communities,' said Michael Geoghegan, the group's chief executive.

'This will not be a large regional bank,' he added.

Knight Vinke Asset Management, an activist HSBC shareholder, reiterated last weekend that the bank should spin off HSBC Finance, its US consumer finance unit with heavy exposure to the subprime lending business.

Mr Geoghegan, however, believed the group's diversification strategy was working and that there was a lot of potential for growth.

He said the bank had already taken measures to address the US subprime problem, including business restructuring, tightened mortgage underwriting criteria, and reduced assets through sales and write-downs.

He said that the mortgage services portfolio of HSBC Finance had been shrunk to US$33 billion from US$50 billion.

Mr Geoghegan said the bank would continue to participate in the consumer finance business in the US and expected to expand its portfolio.

He added that minimal additional funding for its US unit was required this year.

The bank injected US$960 million of capital into HSBC Finance in the fourth quarter and US$1.6 billion in the first quarter.

Mr Geoghegan said the bank also had repositioned itself in Britain, where there is widespread concern that the economy could be dragged down by the US.

He said the bank had already reduced its market share in unsecured lending and real estate loans in the past 18 months.

Meanwhile, the bank continues to focus on emerging markets and plans to raise earnings and investment in faster-growth markets in Asia and Latin America.

Separately, Sandy Flockhart, HSBC's Asia-Pacific chief executive, said yesterday that the profitability of lending in Hong Kong may be squeezed if the US Federal Reserve continued to cut interest rates.

Reductions of 75 basis points or more would affect HSBC's net interest margin in the city, though 'we're not there yet', Bloomberg quoted Mr Flockhart as saying.