Household International always seemed an uncharacteristic acquisition for HSBC Holdings.
The US$15 billion purchase of the American sub-prime lender back in 2003 tilted HSBC away from its traditional banking markets in Asia and Britain and pointed it firmly towards the higher-risk business of United States consumer finance.
Initially, the gamble paid off handsomely. With interest rates low and US shoppers on a credit-fuelled spending spree, unsecured lending to consumers with spotty credit histories proved a highly lucrative activity.
In the first few years it owned Household, HSBC earned an average 17 per cent annual return on its investment in the US company.
Even so, there were concerns. After the US Federal Reserve started to raise interest rates from their four-decade lows in mid-2004, fears began to grow that default rates among Household's high-risk borrowers could mount.
In response, HSBC began to re-orient Household's portfolio towards less risky but lower-margin secured loans, principally in mortgages.
