The UK-based bank announced a flurry of changes to its business in the States. HSBC announced 6,100 job cuts, raising $18 billion in new capital, and pulling out of consumer lending in the United States.
The company is most notorious for its purchase of Household International, one of America’s most prolific subprime lenders. In addition to aggressive subprime first mortgages, HSBC also bought subprime second mortgages at high loan-to-value limits, many of which are completely underwater or non-performing. The company announced that it will finally close Household (renamed HFC and Beneficial) lending units after bleeding red ink in trying to prop up the failing arms of the business.
From the New York Times:
HSBC Holdings, the British banking giant, said Monday that it would ask investors for nearly $18 billion in new capital and cut more than 6,000 jobs as it braces for more market turmoil and positions itself for possible acquisitions.
HSBC, which has not sought to raise cash from the British government, said it was seeking to raise £12.5 billion, or about $18 billion, in a rights issue of shares. HSBC made the announcement as it reported 2008 net income of $5.7 billion, down from $19.1 billion in 2007. The bank also cut its 2008 dividend by 29 percent to 64 cents a share.
HSBC’s foray into the American subprime mortgage market has cost it dearly. In 2003, it paid $15.5 billion for Household International, making it the world’s top subprime lender. It has since had to inject billions of dollars into the unit to keep it afloat.
On Monday, it said it would shut down the business, renamed HFC and Beneficial, and cut 6,100 jobs. It said its American retail bank and credit card businesses would remain intact.
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