HSBC fears debt crisis will deepen
HSBC has warned the US credit market “may well get worse” after unveiling a 63 per cent jump in group bad debts to £8.6billion for the year to December.
The bank’s specialist lending business in the US, HSBC Financial Corporation (HFC), saw bad debts leap 79 per cent to $11.7billion (£6billion), as problems spread from mortgages to credit cards and car loans.
But a buoyant performance from the bank’s businesses in Asia, Latin America and the Middle East helped group pre-tax profits soar 10 per cent to a record £12billion.
“We are now by far the biggest foreign bank in China,” said chief executive Mike Geoghegan. “We made more than $1billion profits there for the first time.”
HSBC’s figures mean UK banks generated £41billion of profits last year. Its shares rose 24p to 790p.
Executive chairman Stephen Green said the figures vindicated the decision to make selective disposals in mature markets while focusing on fast-growing emerging markets.
Green dismissed activist investor Knight Vinke’s calls to dump HFC, saying it would play a key role in letting HSBC forge a business with the US’s booming Hispanic population.
He said it would be unreasonable, unrealistic, unthinkable and irresponsible to leave HFC debt investors, who hold $150billion in bonds, “high and dry”.
Credit crunch write-offs in the bank’s investment arm reached $2.1billion, up from $295million.
UK high-street banking profits fell 16 per cent to £740million after the bank took a £115million hit on paying overdraft fee compensation. It warned it could lose up to £300million should the current court case on the fees go against the banks.
The bank is to revamp its board and executive pay in an apparent sop to investors, who have complained about corporate governance.
Long-serving non-executives Baroness Dunn, Sir Brian Moffat and Lord Butler are standing down later this year to be replaced by software company Oracle’s finance chief Safra Catz and Indian entrepreneur Narayana Murthy.
Executive salaries will be frozen this year but maximum bonuses will increase from 250 per cent to 400 per cent of their base pay.
***************************************************************************
BACK TO CITY & BUSINESS FOR MORE TOP STORIES
***************************************************************************
