HSBC US bad debt exposure $3.4bn

UK bank HSBC has said its bad debts from the US sub-prime lending crisis were $3.4bn in the third quarter.But the bank’s overall profits will be more than a year ago as revenue growth offset the bad debt charge, HSBC said.

HSBC is the latest victim of a credit crunch linked to problems in the US sub-prime market that lent money to people with poor credit histories.

Rivals Citigroup, Merrill Lynch and UBS have also revealed billions of dollars of exposure to US sub-prime debt.

HSBC, which was reporting on its performance during the three months to the end of September, said that the problems in the US real estate market could continue in coming months.

It said that the bad debt charge at its US consumer finance business was $1.4bn more than implied by extending first-half trends, reflecting the extent of the credit crisis.

“There is the probability of further deterioration if the current housing market distress continues and further impacts the broader economy,” HSBC said.

Unlike the big write downs announced by several Wall Street banks, HSBC’s loss is related to mortgages it has on its books, rather than investment banking exposure to mortgage-related products.

HSBC’s shares added 4.4% to 879 pence in early stock market trading in London.