HSBC takes £3bn credit crunch hit

Banking giant HSBC has warned of economic recession in the US after announcing an extra £3 billion in credit crunch losses.

The bulk of the losses came from bad debts in the US and write-offs on mortgage-backed investments hit by the financial turmoil.

In a trading update, HSBC it had increased pre-tax profits in all major emerging markets such as Asia and the Middle East but accepted that the 2008 outlook was "unusually difficult" to predict and said a US recession was "increasingly likely".

And the bank remains gloomy on the prospects for the US housing market, where soaring defaults among borrowers shattered confidence in investments based on the loans last summer - sparking the current credit crisis.

It said: "It seems likely that the deterioration in the US housing market will extend into 2009. There is an increased likelihood of a recession this year."

In the UK, HSBC said it had lifted profits at its retail banking business due to lower costs than last year, when it returned millions in overdraft fees to customers.

The company has focused on growing its savings deposits in the UK but launched a bid to boost its share of the mortgage market last month with its "rate-matching" offer.

HSBC has attracted customers by offering to match their existing fixed-rate deals for two years, although they have to have a 20 per cent deposit and pay a fee for the deal.

source : http://itn.co.uk/news/a5bd07ceb5c55fd9df2d7a6814df310b.html