Yes, yes, we know its early but this comment from the chairman of HSBC, seems unlikely to be beaten:
HSBC has a reputation for telling it as it is. With the benefit of hindsight, this is an acquisition we wish we had not undertaken.
Indeed!
And Monday’s annual results , accompanying its £12.5bn rights issue, spell out why.
First, there’s a goodwill impairment charge of $10.6bn, this pushed losses in HSBC’s North American business to over $15bn.
Then there’s the small matter of $16.3bn in loan impairment charges and other credit risk provisions . On top of that comes a $62bn portfolio of secured and unsecured real estate, which will be placed in run-off.
HSBC says this draws a line under the whole, sorry affair.
In light of this, we have taken the difficult decision that, with the exception of credit cards, we will write no further consumer finance business through the HFC and Beneficial brands in the US and close the majority of the network. Thus, in terms of new business, we are drawing a line and we will run off our existing business, providing all necessary support to HSBC Finance to enable it to do so in a measured way and meet all its commitments.
We are not so sure.
Update:
Lex on HSBC.
This may be the UK’s largest rights issue but has HSBC actually done enough? Two numbers leap out. First, the enormous difference between the carrying value and fair value of receivables at Household, the troubled US subprime lender that HSBC has shoved into run-off. This stands at $34.3bn. The second number relates to unrealised losses on available-for-sale debt securities. This stands at $21.4bn, a near ninefold increase on the previous year. Taken together, these potential future fair value adjustments of about $56bn dwarf the $17.7bn of new equity capital that HSBC is now raising from its shareholders.
Related links:
HSBC unveils record £12.5bn rights issue – FT.com
HSBC hates subprime – FT Alphaville
HSBC research snaps – FT Alphaville