HSBC Closes A US Sub-Prime Unit

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HSBC (HBC), the largest bank in Europe, said HSBC Finance would close Decision One Mortgage. According to Reuters the company will  be "cutting 750 jobs and taking an $880 million writedown, because the business is no longer sustainable."

HSBC Finance has closed two of its three channels for subprime mortgage lending. Reuters reports that the company will continue to originate subprime loans through its network of more than 1,350 branches.

The move may have two consequences over the near-term. The first is that the number of large sub-prime lenders is beginning to drop. The may end up being good for market leader Countrywide (CFC), which appears to be recovering from its recent trouble.

The other by-product of the decision is that HSBC is probably much less likely to buy another bank in the US to improve its market share here.

HSBC has been pressured by activist investors to improve returns. The retreat from the US market may also be a sign that the agitation is having an effect.

Douglas A. McIntyre