Mar 9, 2009
Europe’s largest bank, The Hong Kong and Shanghai Banking Corporation (HSBC), announced that it will scale back its US lending as a result of failed sub prime mortgage investments. Coming off of their worst quarter ever, HSBC will be eliminating 6,100 jobs nationwide by closing all 800 of its Household Finance & Beneficial Offices here in the US.
So what happened to HSBC’s profits? In 2007, HSBC reported profits of $19.1 billion. Their 2008 profits came in at a much less $5.7 billion. Unable to predict the deterioration of the US economy, HSBC purchased Household International six years ago for $14 billion. This purchase made HSBC the largest subprime mortgage lender in the US. Forming the Household Finance & Beneficial offices, this unit began lending money to borrowers that did not have strong credit history. What was predicted to be a successful and profitable acquisition turned ugly in 2008, when consumer loans considered 60 or more days delinquent rose dramatically from 7.7% to 12.5%.
Stephen Green, group chairman for HSBC, stated that “In light of this, we have taken the difficult decision that, with the exception of credit cards, we will write no further consumer finance business through the Household Finance and Beneficial brands in the U.S., and will close the majority of the network.”
In official statements, HSBC has promised that despite the halt on its consumer lending practices, it will continue to help its current customers pay off their loans, helping them avoid foreclosure.
What does this mean for me? Green also vowed that HSBC is “not turning our backs on the US“, as they will continue to issue and promote credit cards. Simply stated, this is good for consumers! The credit card HSBC is bringing back, Orchard Bank card, is their subprime card for bad credit borrowers. Originally pulled from the web on December 1st of 2008, it is available again for consumers. With the lowest rate among subprime cards, HSBC’s Orchard Bank Card does not have outrageous upfront fees to pay. This card is designed for people who are looking to rebuild their credit.
To sum it up: HSBC’s decision to discontinue its consumer lending business actually benefits the millions of consumers who are looking to re-establish a strong credit history. It is important to remember that you have many options when choosing a credit card company, as companies like HSBC promote specific credit cards to help people with poor credit. Check out sites like Credit.com to learn more about the various credit card options you have as a consumer.
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