HSBC?s Bad Loans Hurt US Income

International banking giant HSBC reported that net income for its U.S. unit, HSBC Finance Corp., fell 53 percent to $255 million in the first quarter, as it set aside a total of $3.2 billion for loans in the U.S. The bank set aside $4.6 billion for bad loans in the fourth quarter of 2007.

Five percent of mortgages were 60-day delinquent in March, up from 4.2 percent in December. HSBC reported it has modified the terms on nearly 12,000 mortgages, primarily, including 1,500 in the first quarter. Most of the modified mortgages were adjustable rate mortgages that were due to reset.

London-based HSBC entered the U.S. market in 2003 with its $15.5 billion purchase of Household International Inc., and renamed it HSBC Finance. Household had long been a lender to middle market and subprime borrowers. HSBC trades under the HBC ticker on the New York Stock Exchange.

The delinquency rate for credit cards increased to 5.9 percent in the first quarter compared with 5.8 percent at the end of 2007. Delinquencies on private label cards rose to 3.6 percent from 3.4 percent.

HSBC executives said they expected the struggling housing market will send the U.S. economy into a recession this year.