HSBC says may leave UK, warns on global slowdown

Wed Nov 9, 2011 7:11am EST
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By Steve Slater and Douwe Miedema

LONDON (Reuters) - HSBC (HSBA.L: Quote) said costly new capital rules might force it to leave Britain, a threat it has made before, but which this time came with a bigger-than-expected fall in profit and a warning of "very challenging" conditions ahead.

Extra British regulations could cost $2.5 billion a year, which the bank said on Wednesday may be "too high" to stay, though it would delay its decision to move its headquarters back to Hong Kong or elsewhere until at least next year.

HSBC's corporate clients provided a rare bright spot, but its investment bank revenues slumped in credit and in rates, while a U.S. moratorium on mortgage foreclosures forced U.S. delinquencies up for the first time in two year and drove losses on bad debts sharply higher.

Shares in Europe's biggest bank fell more than 5 percent, after HSBC said its underlying pretax profit in the three months to the end of September fell 36 percent from a year ago to $3 billion.

"Asian growth is insufficient to fill the hole left by run-off of the Household disaster in the U.S., and (investment bank) GBM profitability has fallen sharply," said Ian Gordon, analyst at Evolution Securities. "The challenge of improving the group's cost efficiency is tortuous," he added.

HSBC (0005.HK: Quote) Chief Executive Stuart Gulliver aims to cut annual costs by $3.5 billion and sharpen the bank's focus on Asia, quitting countries where the bank lacks scale in an attempt to revive profitability.

HSBC said loan impairment charges in the third quarter were $700 million higher than a year ago, mainly due to an increase in provisions for its mortgage portfolio in North America.

The increase was largely linked to the moratorium on foreclosures in the United States.   Continued...

<p>A man walks past the HSBC logo at the bank's headquarters in Hong Kong September 8, 2011. REUTERS/Tyrone Siu</p>