Monday, May 12, 2008

HSBC Doubles Up Q1 Write Downs

After writing down just $2.1 billion to asset-backed securities, monoline credit exposures, credit trading positions, and leveraged loan financing positions, for all of 2007, HSBC reported a $3.2 billion write-down on subprime mortgage assets in the United States. And while the bank and the finical media are trumpeting that the first-quarter profit was better than in the same period a year ago,

Underlying revenue was "comfortably ahead" of a year ago after a $2.7 billion gain due to the changing value of the group's own debt. That gain largely reversed out in April, but even without it, revenue growth remained positive in the first quarter, HSBC said.


we keep our eye on the fact that the fiscal first quarter write down doubled the same period of 2007. In addition
The group also said Monday that its global banking and markets arm took a write-down of $2.6 billion, including $500 million on subprime assets, $1.1 billion of non-subprime credit trading assets and $700 million on its exposure to bond insurers.
Significantly growth came from Asia and Latin America where inflation has yet surface. So, despite the top line improvement

...it's worth noting the lender itself was more cautious. "The outlook for the rest of the year remains unusually difficult to foresee in the current environment," the bank said.
HSBC is a bank relying on top line growth from emerging markets to off set the write downs incurred by damaged US subprime mortgages. It is not so much the bank as its fortunate exposure to superior markets responsible for the revenue growth. But as the credit crunch and inflation spread globally, the growth and profits will shrink locally in the same emerging markets the bank depends on to drive that top line number. We won't lose sight of this fact or the fact that the write down total just climbed by $3.2 billion, from $2.1 billion to $ $5.3 billion.

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