Just over 10 years ago, HSBC was the first canary in the world’s financial crisis coalmine to signal trouble ahead. Today’s 7% bloodbath in the banking behemoth is the biggest drop since the financial crisis after reporting fourth-quarter profit that missed estimates on a surprise drop in revenue, which it warned could fall again this year.
As we recently noted, 10 years ago this month, HSBC Holdings, the world’s third-largest bank at the time (and one of the most aggressive players in the U. S. market for low-quality mortgages), sent a chill through the financial world with news that its bad-debt charges will be 20% higher than forecast… and became the first canary in the coalmine of what would become the worst financial crisis of a generation.
“This is a material negative surprise for HSBC,” said John-Paul Crutchley, an analyst at Merrill Lynch. Foreclosures jumped 35% in December versus a year earlier, according to recent data from RealtyTrac. For the fifth straight month, more than 100,000 properties entered foreclosure because the owner couldn’t keep up with their loan payments, the firm noted.
For its part, HSBC said its overall charge will be about $10.56 billion, about 20% higher than the average analyst forecast of $8.8 billion.
In explaining the outcome, the bank said its own risk projections had failed to predict how many borrowers would fall behind on mortgages as interest rates climbed and saddled them with higher monthly payments.
This post was published at Zero Hedge on Feb 21, 2017.
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