HSBC set to pay the price for US expansion
When HSBC acquired US finance group Household in 2003 it was a move which was received with great applause by many investors. However, since 2003 the US economy has peaked and taken a serious downturn which has impacted on the profitability and strength of the US division. HSBC is set to announce figures this week which will show a significant increase in US bad debts which are set to hit around $5 billion. While there has also been a significant reduction in the profitability and strength of European operations there is no doubt the US division has been hit hardest.
While the HSBC board of directors has already confirmed that the US operation will remain part of the group for the foreseeable future, there are many influential shareholders who think otherwise. Many people had HSBC earmarked as one of the more conservative of the worldwide banking operations but this reputation for a cautious approach has been shattered over the last 12 months. Slowly but surely, in line with many other UK banking operations, HSBC has seen a significant increase in bad debts and a reduction in business levels.
So far the UK bank reporting season has made fairly depressing reading with very little optimism with regards to a potential short-term recovery in the UK economy.
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