HSBC, which was supposed to have avoided the worst of the credit crunch, revealed today that it hadn’t, launching a record-breaking capital call from shareholders for £12.5bn and admitting it lost $15.5bn in the US last year.
Back in 2002 HSBC, formerly Hong Kong and Shanghai Banking Corporation, plunged into the US market with the mad decision to buy a company called Household, one of the most enthusiastic sub-prime lenders, for $20bn. Household was noted for charging extortionate rates of interest to borrowers who, surprise, surprise, found the repayments challenging (as they say these days).
Lots of people said don’t do it but HSBC, then led by Sir John Bond, ignored them and now says it’s going to close down that business and write off all the money it paid.
Everybody knew about the looming Household disaster but seeing it in cold black and white helped to drive the London stock market down over four per cent in morning trading, testing the 3500 mark (at its peak two years ago the market hit 6700).
Sentiment wasn’t helped by the news from the US that AIG, once the world’s biggest insurer and the proud shirt sponsor of Manchester United, that it lost an eye-watering $62bn in the last quarter of 2008.
It’s to receive yet another $30bn from the US government’s bailout fund, which should last a couple of weeks at current rates.
What will these financial halfwits inflict on us next?