Amid profit plunge, HSBC will scale back U.S. lending

HSBC, Europe’s largest bank by market value, on Monday reported a 70% drop in 2008 net profit and said it would raise $17.7 billion in new capital through a share issue, while cutting 6,100 jobs as it closes consumer loan businesses in the U.S.

HSBC said it would scale back lending in the U.S. after being stung by the collapse in subprime mortgage-backed securities -- although its U.S. retail banking business will remain.

By turning to investors for new capital instead of asking for government aid, the bank would avoid the strings that go with the bailouts given to other British banks. It also said it would cut its dividend and not award bonuses to its top executives.

In 2008, net profit tumbled to $5.7 billion from $19.1 billion a year earlier as the company wrote down the value of assets, particularly in the U.S.

Because of the weakness of the U.S. market, HSBC said it would scale back its consumer lending operations there -- shutting down its HFC and Beneficial brands, causing a loss of 6,100 jobs.

“Management believes it will take years before property values return to the levels seen prior to the decline and, as such, has concluded that recovery in the subprime mortgage lending business is uncertain and the industry is unlikely to stabilize for a number of years,” HSBC said.

The company said its retail bank branch business in the U.S. would not be affected by this decision and it would continue to issue credit cards.

HSBC also confirmed that it lost about $1 billion in the alleged investment fraud by Wall Street financier Bernard Madoff.