HSBC Says 'No Thanks' To U.S. Auto Loans
Automotive News [sub] reports that HSBC is leaving the U.S. auto loan business. The financial giant cites diminished returns on investment (i.e. it's not making money). The Hong Kong-based banking house plans to eliminate its $12.5b portfolio of American auto loans over the next three years. According to the less-read SubPrime Auto Finance News, HSBC has been reducing its exposure to the volatile US car market since March of this year. Since HSBC wasn't in the lease-financing business, it hasn't faced the ravages that have led the domestic automakers to end their leasing problems. In fact, the cause of the withdrawal seems less about its business is tanking and more about putting the money to more profitable use. "Our vehicle finance portfolio actually improved credit quality over the period," HSBC Finance CEO Michael Geoghegan claims. "But the business does not have sufficient critical mass or the pricing power to provide an acceptable return to the group." Interestingly, Forbes argues that HSBC's willingness to write down bad debt early in the subprime mortgage crisis indicated a conservative approach that paid off. HSBC stock took an immediate hit, but with its books in order, it's now considered to be better off for having faced reality when other banks clung to their bad paper. Maybe HSBC sees more unraveling ahead for U.S. auto lenders, and wants to avoid the writedowns it endured a few months ago.
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HSBC's name written in Chinese translates to Hong Kong Shanghai Silver Company. Their headquarters in Hong Kong is pictured on the HK money. We put old government buildings on ours. Think about the responsibility HSBC has to it's masters and you'll understand why this is big.
"The Hong Kong-based banking house" HSBC is headquartered in Canary Wharf in London. I also wouldn't read too much into this. HSBC (and most UK banks) are still smarting over the sub-prime crisis and are treading gingerly. They can't keep posting losses every quarter. Who do you think they are? An American car company....?
If you have five dollars and HSBC has five dollars, HSBC has more money than you. HSBC can divide by zero. On the anniversary of it's founding, HSBC randomly selects one lucky Chinese and/or English child to be thrown into the Sun. HSBC doesn't believe in Germany.
Their commercials crack me up. "Money should be fat, it should be big..." Red piggy bank rolling and skating around with dollar bill signs in its eyes. Love it.