HSBC Holdings PLC's U.S. consumer lending unit is likely to announce this week that it will increase the money it sets aside for souring subprime mortgage loans, according to analysts who follow the U.K. bank.
On Wednesday, HSBC Finance Corp.'s third-quarter report could show that the consumer-lending business has had to increase its reserves because of increased deterioration in the U.S. subprime and housing markets, Lehman Brothers analysts Robert Law and Raul Sinha said in a recent report.
The report will be closely watched because HSBC Finance is one of the biggest subprime mortgage lenders in the U.S. The unit also provides auto loans and credit cards, two sectors that are being closely watched to see if borrower defaults have increased. HSBC, in a 2003 expansion in U.S. banking, acquired lender Household International Inc.
It renamed the unit HSBC Finance Corp. with hopes of using the business and its technology to expand in the U.S. and globally.
Late in 2006, however, HSBC Finance began to notice increasing delinquencies for mortgages it had acquired. Those mortgages, largely originated in 2005 and 2006, would ultimately force the bank to increase bad-debt costs in February. HSBC spokespersons declined to comment before the results on Wednesday.
In Friday trading on the London Stock Exchange, HSBC shares fell 11 pence to 840 pence. The bank's American depositary receipts fell $2.06 to $87.93 on the New York Stock Exchange.
