Yet another mortgage-backed securities player has left Wall Street.
On Feb. 27, HSBC Holdings PLC disbanded the U.S. mortgage-backed securities department of New York-based HSBC Securities Inc., sending its staff of 25 looking for jobs.
Ten traders, structurers, and researchers and 15 support people were laid off, said a spokeswoman for HSBC in New York.
"We exited the business because we're putting the focus on cross-border opportunities," she said.
The closing is part of HSBC's efforts to keep its focus on its primary businesses-commercial banking in Asia and Europe, analysts said. HSBC Securities is expected to remain small, with about $317 million of capital.
HSBC Holdings, headquartered in London, has operations in Asia, Europe, North America, and the Middle East. Its U.S. properties include Marine Midland Bank.
Analysts in New York and London said closing the mortgage-backed securities department may reflect small profits in the business as well as an effort to keep the bank focused on its core business.
This year UBS Securities, Donaldson, Lufkin & Jenrette, and Chase Securities have trimmed or closed their mortgage-backed securities operations in response to the wave of refinancings, smaller profits, and stronger markets in the asset-backed and commercial mortgage arenas.
HSBC has close ties with Asian and European originators, and this overseas business is more in line with the company's global profile than mortgage-backed securities, which are inherently a U.S. product.
"I don't think that particular unit would be a major part of the group," said one overseas analyst.
"It is group policy to make as a priority its consumer and retail banking franchises" in Asia and Europe where HSBC has regional strength, he added. "It doesn't view expanding its investment banking as a priority in developed markets."
Unlike big broker-dealers, smaller mortgage-backed securities firms often try to be niche players.
The HSBC mortgage unit started to carve a niche for itself last year by focusing on agency mortgage-indexed principal redemption bonds-agency debentures with high yield but significant volatility. Investors typically purchase these as a substitute for callable agency notes.
To head this effort, Richard Rosati was hired as the executive managing director for mortgage-backed securities. The mortgage-backed operation also did business in pass-through securities and collateralized mortgage obligations.
HSBC had proposed an expansion of the mortgage department to use more capital and staff. Plans to offer whole-loan CMOs and securities backed by subprime originations also were in the works. But the proposals were rejected by the headquarters in London.
HSBC Securities ranks 33d among mortgage-backed securities managers in 1997 and 1998, with one issue brought to market, according to Securities Data Co. The issue HSBC underwrote was a $20 million offering by the Federal Home Loan banks.