HSBC Holdings PLC said Monday it regretted its foray into U.S. consumer finance and had decided to wind down its business there, prompting a $10.6 billion goodwill writedown and the loss of about 6,100 jobs.
Chairman Stephen Green said the bank now regretted its U.S. acquisition and will stop writing consumer finance business through its HFC and Beneficial brands.
The goodwill write-down weighed heavily on HSBC's 2008 earnings, pushing net profit down 70% to $5.73 billion from $19.13 billion a year earlier.
Still, Green stressed at a conference later Monday that "we are not turning our back on the U.S. What we want to do is ensure that we have a business there that makes a reasonable profit for the group," although he wouldn't put a figure on it.
Going forward, HSBC's involvement in the U.S. will be about helping business customers do business in, for example, China or Central and South America, Green said. "We won't go out and buy a bank for middle America," he added.
He envisions that HSBC's strategy can be executed through organic growth as well as "incremental" acquisitions. "I don't think there's one bank that could take us in one leap from where we are to where we want to be," Green said.
HSBC also Monday announced a record-breaking GBP12.5 billion, 5-for-12 rights issue priced at a heavily discounted 254 pence-a-share. Executives said the move was intended to protect the bank against a difficult 2009 while also giving it the fire power to snap up acquisitions if opportunities arose.
The bank's North American business reported a $15.5 billion loss for 2008, including the goodwill write-down.
"The significant deterioration in U.S. employment and economic outlook in the fourth quarter of 2008 were the primary factors in causing us to write off all the remaining goodwill carried on our balance sheet in respect of our personal financial services business in North America," HSBC said.
Green said 2008 was the most extraordinary year for the global economy and financial services in well over half a century.
"The management team has worked tirelessly to address this problem acquisition in the U.S. and we have considered all viable options," Green said. "It is now clear that models of direct personal lending that depend on wholesale markets for funding are no longer viable," he said.
The bank plans to maintain its U.S. credit-card business.
HSBC said 2009 is likely to be difficult, although it expect parts of Asia, the Middle East and Latin America to continue to outperform Western economies despite being constrained by the global downturn.
"We see unemployment rising through 2009 into 2010 in both the U.S. and the U.K., together with continuing declines in housing markets. We should remember that the U.S. is the driver of the global economy and global growth depends on the U.S. recovery," Green said.
At 1140 GMT, HSBC shares were down 97 pence, or 20%, at 394 pence, underperforming the Stoxx Europe 600 bank index, which was down 9.3%.