[NYTr] Booming Economy: HSBC shuts wholesale lending arm

[All the News That Doesn't Fit]

The Financial Times - Sep 21, 2007
http://www.ft.com/cms/s/0/f44de614-686d-11dc-b475-0000779fd2ac.html

HSBC shuts wholesale lending arm

By David Wighton in New York

HSBC continued the restructuring of its US mortgage business, which has
suffered heavy losses on subprime loans, by announcing the closure of
its wholesale lending arm with the loss of 750 jobs.

HSBC, which is under pressure from activist shareholder Eric Knight to
review its strategy, said the move reflected the strategy of focusing
on providing mortgages through its 1,300 consumer lending branches in
the US.

These loans, which HSBC holds on its own books, have better delinquency
rates than the industry average.

“Today’s market requires a strong and flexible business platform, and
we will focus on our branch network as the primary point to provide our
HSBC Finance customers with loans and mortgages,” the bank said.

The move follows HSBC’s decision in March to stop acquiring portfolios
of loans from other mortgage lenders, which led to heavy losses after
delinquencies on blocks of subprime mortgages.

The wholesale lending arm, called Decision One, originated non-prime
loans through brokers which it then securitised. But since the credit
squeeze in the summer investor demand for such securities has dried up.
It has warehoused loans of $349m on its books.

Michael Geoghegan, HSBC’s chief executive, said the unit was a small
part of its US business. The closure will result in the loss of 750
jobs in South Carolina and Arizona, adding to the thousands of job cuts
already announced by the US mortgage industry. There will be an
after-tax charge of $65m for restructuring costs.

Copyright The Financial Times Limited 2007