HSBC chief takes responsibility for trouble in US division
by Elaine Frei
In the wake of a profits warning, HSBC’s chief executive has taken personal responsibility for the issues in its US operations that prompted the warning, saying that he will be “as hands-on” as he needs to be to right the problem. The largest bank in the UK and the third largest in the world, HSBC (HSBA) said that the problems have arisen in the division previously known as Household International, which the bank purchased in 2003 for £9 billion. New management has been put in charge of the US unit to deal with the problems that led to the issuance of the warning.
The issue has grown out of second mortgages granted in 2005 and 2006 as house prices in the US rose and homeowners had to find some way to cover larger payments. While most customers have been paying their first mortgage payments, they have been slow to pay on their second mortgages.
Shares in HSBC fell to a nine-month low after the warning was issued but had recovered to a loss of just 17.5p to trade at 913.5p by midday. Some analysts said that the warning would affect the credibility of the bank’s leadership. Merrill Lynch reduced its profits estimate for the bank by 10 percent due to the warning.
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