In 2002-3, HSBC was looking to expand outside of the emerging markets where it was gaining market share and wanted to go after the US market. They jumped right in by acquiring Household International Inc. in 2003 for USD 15.5 billion, now called HSBC Finance Corp., it lent money to people who were termed risky. Although highly lucrative, it’s equally risky to offer these sub-prime loans (an article from the NY Times about the market). With the stagnation in housing prices and with interest rates going up, people with these notes are now having to re-finance and can barely afford the new mortgages.
Back at HSBC, many of the top executives who gave the green light for the acquistion of Household Int’l have been let goÃ¯Â¿Â½ Which is expected when you bet USD 15.5 billion on an expansion plan that goes haywire. However, there Asian operations are still rolling along and the bank has reported a net income of USD 7.06 billion, while bad loans ballooned to $10.6 billion, mainly in the U.S.