Big bank HSBC (HBC) will take a $3.4 billion charge "I think the thing that’s emerged in the third quarter is that the housing market deterioration is beginning to have a broader impact, both within the market and beginning to extend into other areas," said Douglas Flint, group finance director, in a prepared interview picked up by MarketWatch.
That is bad news all around for banks that have high consumer exposure in home loans, but also in the credit card and unsecured lending businesses.
Just when it appeared that it might be safe to go back into the water by investing in bank stocks, it appears that they could be hit by another huge round of write-offs, these due to credit defaults from beleaguered consumers. Bank-based credit cards often carry brutal interest rates over 18%. Some consumers have borrowed to their full limit on these cards. Many of the same bank customers also have home equity loans which may be "underwater" because of falling home values.
Look for large US banks to begin to write-off consumer loans in Q4 and for this to continue into 2008. Financial stocks may not have seen their lows yet.
Douglas A. McIntyre
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