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HSBC’s record pre-tax profit of $22 billion for 2006 was hurt dramatically by the $10.6 billion in bad debts primarily related to subprime mortgage lending in America.
North American bad debt soared to $6.8 billion in 2006 from $4.9 billion, representing 64 percent of the group’s total, even though the region only accounts for 21 percent of profits.
HSBC, who primarily focused on subprime second mortgages has seen its amount of bad debt soar. Subprime second mortgages are issued to people with poor credit who need additional capital from their home but are unable or unwilling to refinance their first mortgage.
Michael Geoghegan, chief executive, … dismissed criticism that HSBC’s acquisition of Household International for $14.8 billion in 2003 had exposed the bank to too much risky lending.
HSBC no longer offers these second mortgages but will be feeling the effects of its lending for some time to come.
Last 3 posts by Morgan
- Subprime Bananas - June 28th, 2009
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