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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