HSBC Writes Off $11B in Mortgages

HSBC is keen on returning to its Asian roots after being mercilessly beaten up by the US subprime mortgage meltdown. Yet, before it moves on, the Sunday Times reports that the firm will write off $11 billion in dud loans made to subprime clients in America:

HSBC’s US business has faced escalating losses from thousands of low-income families who have been unable to repay loans. But the scale of its write-off, largely linked to the US business, will surprise many investors; they will want to know whether the worst is now over and whether the write-off, technically called an “impairment charge”, covers anticipated losses for this year as well.

The provision is equivalent to a third of last year’s operating profits of $30 billion and half its pretax profits, expected to be just north of $22 billion. This will be the highest-ever profit made by a British-based bank. To put it in context, the write-off is equivalent to the overall profits of £5.7 billion announced by HBOS, Britain’s fourth-largest bank, last week.

HSBC has already replaced its senior North American management team, and Doug Flint, the group’s finance director, and Geoghegan have been charged with putting the operation back on track.

Aaron Krowne's Mortgage Implode-o-Meter tracks the unfolding subprime story.