In the infamous words of Rod Roddy, HSBC Holdings (NYSE: HBC) come on down! You're next on the Earnings are Falling (or The Price is Wrong if you like). The banking firm announced this morning that its 2008 profit fell some 70%, which is prompting the firm to halt most of its U.S. consumer lending business. HSBC's net profit fell to $5.73 billion from $19.13 billion a year ago. In North America, HSBC took a goodwill charge of $10.6 billion stemming from the restructure of the region. Taking this charge out of the equation, HSBC's profit dropped 18% to $19.9 billion. Experts had expected a pretax profit of roughly $20 billion.
The company announced that it will close a good portion of its U.S. consumer lending business, costing more than 6,000 employees their jobs. Chairman Stephen Green said that the bank "considered all possible options" for its U.S. lending arm (that has been with the company since 2003's acquisition of Household International), but a "most extraordinary" 2008 made it clear what had to be done with the U.S. operations. Green stated that "with the benefit of hindsight, this is an acquisition we wish we had not undertaken." HBC added that it was taken for roughly $1 billion by Bernard Madoff.
Thanks to this news, HSBC (which some say is the most resilient of the foreign banks) has plunged 10% in London. Technically, watch for the pain to continue for HSBC, as it faces a great deal of overhead resistance from its 10-week moving average. This trendline has provided downside pressure since October 2008, and it doesn't look like the shares will muster up enough strength to mount a rally any time soon.
New Facebook share structure hints at IPO
Before the bell: Futures higher ahead of housing, jobless data
Nuclear power is on the comeback trail
Reader Comments (Page 1 of 1)
3-02-2009 @ 3:17PM
Amy said...
I don't see this as a shock. I worked for a company that for almost a year we were in charge of rewritting the loans that HSBC made that were considered predatory lending. I am actually shocked that it took this long for HSBC to semi implode. I would have thought that they would have been one of the first in the many banking institutions that went under. It is a terrible shame that this happened but the way I look at it they caught a lucky break after the predatory lending that took place in the late 90's.
3-03-2009 @ 3:14AM
Aaron Fu said...
on a positive note, HSBC yesterday launched a Vaccine Investment ISA which not only does good but delivers a fixed return of 16.2%.
great example of corporate / community synergy there.
blogged here: http://is.gd/lszs