HSBC sees debt-crisis worsening

By NICK GOODWAY FOR MAILONLINE
Updated: 12:43 EST, 5 December 2006

Britain's biggest bank, HSBC, sees no sign of a slowdown in the trend for consumers choosing to go bankrupt or apply for individual voluntary arrangements rather than pay off their debts.

It said in its pre-close trading update that the trend 'seen since the second half of 2005 looks unlikely to abate in the medium term', and remains the major factor in its bad debt write-offs.

In the first half, bad loan impairment charges jumped 36%. But in the first nine months of the year the number of people in default on loans in the UK jumped 65% to 77,000 according to the Insolvency Service.

The bank also said it had seen a slowdown in its investment banking business in the third quarter after a strong first half.

HSBC recruited more than 1400 new people to its securities business in the last year, but said third-quarter revenues had been down, partly due to seasonally lower volumes from institutional and corporate clients and less volatility in financial markets. But it said the investment in people helped it improve its market share in most areas.

The bank also warned that its US business, mainly in mortgages, remains an area of risk.

Douglas Flint, finance director, said there had been further weakening in the US housing market.

HSBC said: 'Increases in shortterm interest rates will impact borrowers who have adjustable rate mortgages that are now resetting. In addition, further weakness in the housing market, lower consumption and lower employment also pose potential risk.'

But overall the bank said it was still performing well with third-quarter figures ahead of a year ago. Particularly strong growth came from its emerging markets operations in Mexico, India, Turkey, the Middle East, Brazil and across Asia.

Despite the UK and US loan problems it said impairment charges were 'modestly up' on the previous quarter and the same period a year ago.

HSBC shares today fell 20p to 917p.