HSBC is in talks to sell some of its subprime mortgage portfolio for US$200 million less than the book value.
The sale to a subprime lender in the United States, SpringCastle Acquisition, and a mortgage investor managed by private-equity firm NewCastle Partners of Connecticut in the US was slated to be completed in the second quarter, HSBC said yesterday.
SpringCastle's Springleaf Finance would also buy HSBC's loan-servicing facility in the US, with completion expected in the fourth quarter, the bank said. When the transaction is completed, most of the employees will transfer to become employees of Springleaf.
Patrick Burke, the chief executive of HSBC Finance Corporation, said: "These agreements are a continuation of HSBC's strategy to reposition its US operations and focus on the core businesses."
Sally Ng, a banking analyst at China International Capital Corporation (Hong Kong), said the bank was making good progress in restructuring.
HSBC Finance Corporation, a subsidiary of HSBC in North America, agreed to sell a portfolio of US consumer loans for US$3.2 billion. The book value of the assets being sold was about US$3.4 billion at the end of last year, the bank said.
Steven Chan, an analyst at Citic Securities, said HSBC was making a loss in the sale but it would result in a better positioning of capital. "The outcome is neutral, as it is expected. HSBC may target to reposition its US business in a quicker way," he said.
The bank reported full-year pre-tax profit in North America surged more than 20-fold to US$2.3 billion from US$100 million, helped by a 51 per cent drop in loan impairments.
HSBC boosted its core tier-1 capital ratio, a measure of financial strength, to 12.3 per cent for last year from 10.1 per cent a year earlier.
The group will announce its strategy from 2014 to 2016 in May.
Shares in HSBC rose 0.3 per cent to HK$84.05 yesterday after the announcement.