HSBC considers future of US business

by Gill Montia

Story link: HSBC considers future of US business

HSBC’s activist shareholder, Knight Vinke, is urging the bank’s chairman, Stephen Green, to dispose of HFC, its troubled American banking business.

While HSBC is expected to report record profit of $24 billion today, its HFC mortgage business has a high level of exposure to the US sub-prime mortgage crisis and has cost it more than $11 billion as a result of lending in the US sub-prime market.

Knight Vinke is understood to be arguing that any loss incurred in the disposal of HFC would quickly be recovered by a rise in the group’s share price.

The move would also be in line with the bank’s strategy of focusing on emerging markets.

Without HFC, the majority of the group’s earnings would come from growth markets in Asia and Hong Kong.

Should HFC be sold, it would need to be recapitalised with an injection of between $10 billion and $15 billion.

The cost to the group has raised the possibility that HSBC could simply walk away from HFC.

However, such a move would deeply damage the bank’s reputation in the US and would leave bondholders with $150 billion of debt.