| Small firms find themselves in debt trap, says HSBC |
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LONDON: British global bank HSBC Plc said the number of small firms struggling to repay debt is increasing and that these firms are finding the going tough mainly because of the economic slowdown and the resultant freeze on consumer spending, higher borrowing costs and rising energy bills.
The bank's finance director Douglas Flint told analysts in a trading update that the country's economic scenario looks quite soft and the smaller companies find it tough. He said HSBC is being more selective in a weaker economic environment about the amount of credit advanced and who are entitled for it.
The London-based bank, the third largest in the world, had earlier said there is some improvement in credit experience in the personal sector after it had tightened its lending practices earlier this year. However, Flint said it is too early to say whether delinquency levels had peaked.
While HSBC operated in 77 countries, Flint said the U.K. market remained its "least predictable". In the U.S. where HSBC makes over 30 per cent of its profit, the recent Thanksgiving holiday weekend had shown healthy consumer activity. In Hong Kong, another major market for the bank, demand for loans was relatively subdued. Since the Hong Kong currency is pegged to the U.S. dollar, the interest rates are rising, which curtails consumption.
While the bank does not give out exact quarterly financial figures, it said all its divisions delivered a higher pre-tax profit in the third quarter than a year ago but said trading revenues are set to be lower in the fourth quarter. Said Flint: "We've seen continued progress in the transactional business and in global markets - in all the areas we've been spending money to invest in our business."
Analysts expect HSBC to deliver pretax profits for the full year of about 2 billion pounds, 1.9 billion pounds in 2004.
The shares of HSBC rose 10.5 pence to 936.5 pence. The bank denied reports that it is in talks to buy Bankgesellschaft Berlin.
Posted
on : Fri, 02 Dec 2005 20:20 GMT | Banking News
By : Mike Lawson
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