HSBC Says Subprime Meltdown Spreading Into Credit Cards, Other Loans

HSBC warned today that the subprime meltdown is spreading into credit cards and other types of consumer loans, says the NYT. The bank announced that it will be taking a larger write down than it forecast, due to the spreading delinquencies.

“We are seeing a re-evaluation of asset classes in U.S. real estate and this is going to continue,” HSBC’s chief executive, Michael Geoghegan, said on a conference call with analysts. “We’re not through the credit crisis yet.”

“Early stage delinquency rates in both cards and branch unsecured lending are also showing signs of deterioration,” HSBC said in a statement.

The bank will now be setting aside $3.4 billion to cover bad loans.

HSBC Takes $3.4 Billion Charge [NYT]
(Photo:Maulleigh)

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  1. elf6c says:

    It wasn’t my incompetent management and credit risk decisions, is the sub-prime market. Yeah, that’s the ticket.

  2. kimdog says:

    This is probably linked to the slowing housing market. People took out the equity in their homes to pay off credit cards, but then charged them back up. Or they they financed items that they couldn’t afford, betting that the property values would continue to rise. Even people who didn’t take out sub-prime mortgages were using their houses like ATM’s. This is only going to get worse. Many people who thought of themselves as upper or middle class are going to get a rude awakening as the house of cards collapses.

  3. bohemian says:

    Now think back on the total bombardment by banks and other lenders to “use that home equity”. They were telling people to borrow against their equity for everything from boats to vacations to credit card debt.

    Sure the consumer should shoulder some of the blame for not fully investigating what they were doing and simply believing the marketing. Lenders that continued the marketing bs while consumers were signing on the line need to should some of the blame too.

  4. Ah, the big guys uncover another “duh”!

    Good for them! Maybe eventually they’ll figure out that IF they bombard people with media telling them it’s a good idea to refinance, get home equity loans, and use credit for everything, and then back that up with an army of trustworthy-looking bankers and brokers trained to push sales, THEN well-meaning people might get themselves in trouble! IMAGINE THAT!

  5. karlrove says:

    Damn my investment strategy: Don’t spend money you don’t have and your income is your budget!

  6. Keter says:

    I’ll bet that when you dig down into the “credit crisis” you’ll find some stupid individuals who played fast-n-loose with their credit and got in over their heads, but you’ll find more people who are having financial problems due to unemployment or underemployment. There are a lot of people who still haven’t recovered from being downsized or laid off during the dot-bomb bust…they’re still stuck in contract jobs with months of unemployment between gigs, or in jobs that pay a lot less than they ever (sensibly) believed they would make given their ability and experience.

    Much of what we’re seeing now may be responsible people reaching the end of their savings, having not made it out of the hole before they ran out of cushion. That hole was dug for them by the corporations they depended on for jobs and investments. Many of the jobs Americans went into debt to train for are now permanently gone overseas — leaving them with the debt, but not the job they earned — and many people’s investments have been mismanaged, further pinching prudent people who were trying to set money aside for hard times and retirement.

  7. King of the Wild Frontier says:

    @Keter: Oh, come on. Don’t you know that the consumer is always to blame? (Right, @elf6c and @karlrove?) I mean, if a meteorite hit Cleveland and killed half the population, then obviously those people should have replaced their roofs earlier.

  8. julienne says:

    @kimdog: Amen! I saw a link somewhere (probably here) that although financing of big ticket items is dropping, consumer spending has not slowed down at all.

    There are moments I think I’m a freak for having a paid off house.

  9. popeye_doyle says:

    @Keter: Don’t worry, those jobs will all be back in the US when we approach bottom and our labor force becomes the cheapest in the world. I’ll be an Executive Vice President again!

  10. Namilia says:

    So let me get this straight…snarkiness aside,

    1. People talked into “low-rate” ARM mortgages for homes way out of their budget.
    2. People live beyond their means using credit cards, in many cases maxing the cards out.
    3. People take out HELOC loans to pay said credit cards.
    4. People max out said credit cards again.
    5. ARM Mortgage rates go up, people begin foreclosing on their homes.
    6. People begin defaulting on their HELOC loans and credit card payments..?
    7…?

    Goddamn, what a mess we’ve gotten our country into if I’m understanding this correctly. I’m 21 and my only outstanding debt is my car (which I have been diligently paying for years now) but seeing the mess this whole sub-prime/credit has become, I really do not look forward to when I try to get my first home or whatnot.

    It seems to me, and I know I am not as experienced or as educated as many posters here (woohoo AA degree! ^^’) that this is just the tip of the iceberg. I am afraid, and perhaps too much so, that with the decreasing value of the American dollar, the aforementioned mess, oil prices rising, and a plethora of other things such as jobs going overseas, the social security crisis (with the baby boomers now retiring) and others, that our economy is going to end up in a bigger mess than the “slight recession” I have heard on the news. Maybe I am lumping too much together, but I just have a real bad feeling about the future of this country.

  11. Namilia says:

    Oops, run-on sentence. That should be “I am afraid, and perhaps too much so, that with the decreasing value of the American dollar, the aforementioned mess, oil prices rising, and a plethora of other things that our economy is going to end up in a bigger mess than the “slight recession” I have heard on the news.”

    At least, that makes more sense than that rambling mess. :P

  12. FLConsumer says:

    “No Sh*t”. I vote this article for one of the most obvious articles of the year. You don’t say, people who are having trouble paying their mortgages also might have problems paying off their credit cards. I never would have imagined.

    @Namilia: At one point, I used to fear the government the most. Now, I’ve learned, it’s not the government, nor foreign powers, nor terrorists who will destroy this country — its own people will. For “only” 21, you’ve got a good understanding of the current lay of the land.

  13. RocktheDebit says:

    @Namilia: God, I wish more people had your sense.

  14. barty says:

    @Keter:

    We’ve had folks going further into debt and putting less money into savings well before the dot-com bust. If anything, it was people over-leveraging themselves during the dot-com bust (racking stuff up on CCs instead of paying cash…then the bottom fell out) that is to blame for most people’s woes.

    At the end of all of this, it will come down to people making stupid and irresponsible decisions with their finances. Nobody was holding a gun to their head and forcing them to run up $50,000 in credit card debt.

  15. theblackdog says:

    It sounds like the changes I’m making to fix my finances are coming at the right time. By the time I’ve paid off my credit card and student loans in the next year or two, I should be able to find a house for a decent price and hopefully have the best deal because I won’t be a big financial risk.