HSBC Says U.S. Loans Still Cloud Its Outlook

LONDON — Two leading European banks delivered surprises to investors on Monday. One, HSBC Holdings, reported deeper problems at its American unit, while another, Banco Santander, reversed course and said it would sell shares to raise more capital.
HSBC, the biggest bank in Europe, still reported a rise in third-quarter pretax profit on the back of its growing Asian business, as well as asset sales and accounting gains. But it said it had set aside $4.3 billion to cover bad loans at its American unit in the quarter, more than analysts had expected.

The United States business was among the first to fall victim to the subprime mortgage market more than a year ago.
HSBC’s chief executive, Michael Geoghegan, said he could not predict when bad loans at the American unit might peak. “Whilst the mortgage portfolio matured,” he said, “the fact is that consumer lending and credit card debt is linked to the economy.”
The United States unit would further deteriorate “in the near to medium term,” he said in a conference call Monday.
HSBC has so far weathered the turmoil in the financial markets better than most of its rivals, mainly because it had profited from continuing growth in Asia, where it generates about 65 percent of its pretax profit. The bank did not have to tap the British government for funds to meet capital requirements as it attracted more customer deposits. Its shares have dropped 12 percent this year, less than those of most of its European rivals, including BNP Paribas, Santander and UniCredit.

[Sigma Contract Specification]

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Streamline Dealing
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Clients taking advantage of wrong price quotes in the Market Watch will be requoted.
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