Slump in profits and jobs as HSBC wilts

Nov 11 2008 by Peter McCusker, The Journal

BRITAIN’S biggest bank HSBC has seen profits hit further as a result of the financial crisis and disclosed further sub-prime writedowns.

The group said pre-tax profits in the nine months to September were below last year, although it added that third-quarter profits were higher than a year ago.

Its battered investment banking business took a £383m credit crunch writedown, while it also saw bad debts in its US business rise by £447.5m over the quarter to £2.75bn. HSBC said it was braced for even higher impairment charges as credit trends worsened.

The US business is being impacted by rising borrower defaults amid increasing levels of unemployment as the world’s biggest economy slides into recession.

In the UK, bad debts also rose in the three months to the end of September, although it said loan impairments had reduced in the year to date.

HSBC added that writedowns in its investment banking arm – which is seeing 4% of its global workforce cut – would have been £835m higher had it not been for an accounting change. Michael Geoghegan, group chief executive, said the industry was facing “extraordinary times”.

Meanwhile, the fight to push forward an alternative to the Lloyds TSB takeover of HBOS was stepped up by a former bank chief who insists the current offer is “no longer the best deal”.

Sir George Mathewson, ex-chief executive of Royal Bank of Scotland, is trying to convince shareholders they will not benefit from the Lloyds deal.

It emerged at the weekend that he and former HBOS chief executive Sir Peter Burt were seeking to oust the current chairman and chief executive in a move to thwart the Government-backed bid.

Yesterday Sir George told the BBC’s Good Morning Scotland that two million small shareholders could receive as little as half the value they should, under current Lloyds TSB proposals.

He warned: “Because of a deal which was struck under necessity, when it appeared there could not be a better deal possible, we are now faced with thousands of people all over the UK losing their jobs as we enter recession and the creation of an absurdly huge, and in my view unsustainable monopoly, in one of our most important and sensitive markets.”