HSBC faces hit on U.S. bad loans and Asia slowdown

Fri 07 Nov, 2008 11:33

LONDON (Reuters) - Europe's biggest bank HSBC Holdings (HSBA.L) is set to next week report another hit of near $4 billion (2.53 billion pounds) on bad U.S. loans and may signal a slowdown in Asian growth as the credit crisis bites.

HSBC is expected to say on Monday its U.S. impairments continued to rise due to losses on bad mortgages as the book is being run down and unsecured losses pick up as unemployment rises, according to analysts' forecasts.

Bad debts at U.S. consumer finance arm HSBC Finance will rise to $3.7 billion in the third quarter, up from $3.4 billion in the previous quarter and on the way to a 2008 impairment of $14.4 billion, James Hutson, analyst at Keefe, Bruyette & Woods, said in what he termed a "prudent" estimate.

UBS pegs the third quarter impairment charge at $3.6 billion, while Cazenove predicts HSBC Finance will make a quarterly loss of $850 million.

HSBC does not release full quarterly earnings, but will issue a group trading update alongside its U.S. results. The update is likely to flag a slowdown in Asia, more asset writedowns and gains on the value of its own debt, and a negative impact of currency moves, analysts said.

"We expect the group to report a resilient performance in turbulent markets with good profit growth across Asia and the Middle East offset by continued pressure in the U.S. from high impairment charges," analysts at Credit Suisse said this week.

HSBC was one of the first lenders to unveil big losses on U.S. mortgages in November 2006, and a worsening economy and rising unemployment could push recovery in HSBC Finance -- formerly called Household -- back to 2010, analysts reckon.

HSBC has fared better than most banks during the credit crisis due to its strong capital and liquidity position, and that position may have improved as it attracts deposits because it is seen as a safe haven, analysts said.

Its shares have dipped 12 percent this year to 747 pence after an 18 percent tumble in the last month as fears have increased about a slowdown in Asia. The DJ Stoxx Europe bank index has more than halved this year.

HSBC could also clarify gains made on the sale of its London-headquarters in the update, analysts said.

(Reporting by Steve Slater; Editing by Victoria Bryan)