Analyst says HSBC suffers subprime hangover
Global bank HSBC Holdings (HBC) remains one of the strongest banks in the world, but continues to reel from its purchase of subprime lender Household International back in 2003, a report from Gimme Credit analyst Kathleen Shanley said Thursday. Still, Shanley said HSBC remains generally solid with a 10.6% core tier 1 capital ratio and a before-tax profit of $7.2 billion in the third quarter of 2011, compared to $3.6 billion last year, based on the bank's interim financial results. HSBC purchased subprime lender Household International for $14 billion eight years ago and later called the deal an "acquisition we wish we had not undertaken," Gimme Credit said Thursday. Analyst Kathleen Shanley said HSBC put its subprime business in run-off mode more than two years ago. Since then, the HSBC Finance portfolio, the subprime segment of the business, has watched its total assets fall from $77 billion at the end of 2010 to $61 billion in September. Still, HSBC recorded a $700 million increase in impairment losses for the third quarter because of runoff assets in North America, Shanley reported. The Gimme Credit report blames the performance of the runoff portfolio on foreclosure delays. Shanley noted that HSBC acknowledged on a conference call that "foreclosures are taking longer, in part because of the foreclosure moratoriums." Write to Kerri Panchuk.