Problems with US credit markets spreading to wider economy warns HSBC

HSBC, Britain’s biggest bank, warned problems with US credit markets are spreading to the wider economy.

The bank said consequences from sub-prime mortgages are now running to US credit cards and car loans.

The warning came as the bank wrote off £1.65 billion related to bad debts in its US consumer finance arm from July to September, worse than the City predicted.

However, the bank insisted profits for the 3 months would still be up on the same period last year.

HSBC’s chairman, Stephen Green, said there has been a broader deterioration of the housing market and associated credit and I don’t think anybody knows if we’ve reached the bottom.

Furthermore, Michael Geoghegan, HSBC’s chief executive said HSBC is not considering quitting the US market and said if anybody can work this out, HSBC can. It’s got a reputation for doing this around the world.

Hoewever Ian Gordon of broker Exane BNP Paribas, said HSBC’s comment that year-to-date profits are ahead of the first 9 months of 2006 fools no one. Their claim that it is difficult to assess the outlook for the rest of 2007 is remarkable given that there are only about 6 weeks left to Christmas.

HSBC was the first bank in the world to highlight the problems on the sub-prime crisis nearly 12 months ago which ultimately led to it issuing its first-ever profits warning earlier this year.

Furthermore, last week the bank said it would cease trading repackaged American mortgages and cut 120 jobs, 20 of which are in the City.

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