Slick
Jr. Member
Posts: 80
|
 |
« on: June 06, 2009, 10:36:23 AM » |
|
Sara Schaefer Munoz and Carrick Mollenkamp
June 05, 2009 02:28pm
WHEN the subprime-mortgage crisis hit in the US, global banking giant HSBC was among the first to get clobbered. Now it could be headed for round two.
Through its subsidiary, HSBC Finance Corporation, HSBC is a big holder of risky US consumer loans, a toxic portfolio on which it has already taken more than $US40 billion ($49.9 billion) in impairment charges.
This year, HSBC raised $US18.5 billion in fresh capital and said it would wind down most of HSBC Finance, moving to close a bad chapter in the parent bank's 144-year history.
But because economic and housing data suggest many more US consumers are likely to default, analysts are wondering how many billions of dollars more the bank may lose on loans it currently records as good.
"There is the potential there for a large loss," says Adam Steer of research firm CreditSights.
HSBC entered the US subprime market in 2003 with the purchase of lender Household International and quickly built up a large portfolio of assets consisting mostly of risky mortgage loans.
As of March 31, HSBC placed a value of $US90 billion on those assets, well above the $US57.5 billion the bank believed the loans would fetch were it to sell them in the markets.
The bank's rationale is that while things might look very bad now and cash-strapped investors are wary of buying such loans, chances are good that its customers will ultimately pay the loans back.
An HSBC spokesman said the bank understands the value of the loans better than the market, because it sees day to day how borrowers are paying, and the "vast majority" in fact do pay back the loans.
Mr Steer, though, isn't so sure.
Read more at The Australian
|
