Europe's biggest bank HSBC Holdings is expected to report another big hit from its exposure to the U.S. mortgage crisis on Wednesday, when it will also release a group trading update.
HSBC had scheduled third-quarter results for HSBC Finance, its consumer finance arm formerly called Household, and HSBC USA for Wednesday, and will now add comments on group operations.
HSBC's update is normally released in early December. A spokesman denied it had been brought forward, saying a date had never been set for its release.
The bank, which is now the world's largest non-China bank after sharp share-price falls by Citigroup and other western peers in recent weeks, is expected to increase its impairment charge on U.S. mortgages and say conditions there continue to deteriorate, analysts said.
Mortgage Services arrears have risen rapidly and we expect the trend to continue with these results, James Hutson, analyst at Keefe, Bruyette & Woods said in a research note on Monday.
HSBC Finance's impairment charge rose to $7 billion in 2006, and analysts see that jumping to between $8 billion and $10 billion this year.
The unit's provision was just over $2 billion in the second quarter.
The blow could be softened as HSBC took an extra $1.8 billion provision for further losses in the fourth quarter of last year.
That was seen as a conservative move, but that provision now looks light, analysts at Morgan Stanley said.
Morgan Stanley said third-quarter impairments should rise materially and forecast the unit's bad debts will rise to $10 billion in 2007 and to $12.8 billion in 2008.
Deepening trouble in the U.S. subprime mortgage market and how it is affecting other areas of financial markets were highlighted on Monday by private equity firm Blackstone.
The subprime black hole is appearing deeper, darker and scarier than they (investment banks) thought, Blackstone President Hamilton James said.
HSBC was one of the first banks to address problems in the subprime market and cut its exposure by stopping buying subprime loans originated by other lenders and replaced top management, but it is still exposed through the run-off of that book and its branch-generated mortgage business.
Bad debts on U.S. unsecured loans, such as on credit cards and auto financing, are also expected to rise in the third quarter.
HSBC shares are down 8 percent this year, but have outperformed other major western banks in recent months due to its greater focus on Asia and strong capital position. The DJ Stoxx Europe bank index has fallen 15 percent this year.
(Reporting by Steve Slater, editing by Sue Thomas)