Mortgages Uncovered

There are growing fears that HSBC is starting to waiver from its original resilience in the credit crunch and it is now revealed the bank is sitting on a potential £20.8 billion of bad or toxic mortgage assets. Not only this but now that the Hong Kong economy is starting to topple it spells the end of the bank’s reasonable shares prices.

HSBC shares took a large 17% nose dive this week from 109p to 696p in just a week. Morgan Stanley’s, Michael Helsby had warned that HSBC have most of their subprime mortgages offered through it household division in Northern American and at present this equated to 33 billion of dangerous mortgage assets which was far more than the bank’s market value. Should the bank need to write off this money then the capital reserves it has will fall back to such a level that it will be in exactly the same situation as many of its rival UK banks and will become forced to be re-capitalized by the taxpayers.

HSBC is Hong Kong’s leading mortgage lender and it has started to tip into the recession, with plummeting home prices.

A spokesman for Alliance Bernstein said

“evidence from 15 bank crises around the world in recent years indicates that bank share prices hit the bottom three to four months after government intervention, a pattern that would mean UK banks reaching their nadir in December or January next year.”