HSBC Exits US Mortgage-Backed Securities Business

November 8, 2007 No Comments »

HSBC Holdings Plc announced today that it is exiting the formerly lucrative mortgage-backed securities business in the United States amid ongoing credit concerns.

The move to stop the sale and trade of mortgage-backed securities in the United States will result in 120 layoffs stateside, as well as about 20 in London, according to HSBC spokesman Pierre Goad.

HSBC plans to retain its asset-backed business both in the U.S. and abroad, which would include securities backed by non-U.S. mortgages.

The decision to exit the MBS game comes after the collapse of the mortgage market led to the closure of its subprime wholesale lending unit Decision One, along with a large mortgage office in Carmel, Indiana.

The Decision One closure in late September resulted in the loss of 750 jobs and a $954 million hit, while the Carmel office closure is believed to have led to 600 job losses.

Last month, HSBC Financial Corp. Ltd. announced that it was closing 30 of its 140 branches in Canada in an effort to curtail riskier consumer lending amid the ongoing mortgage crisis.

HSBC Finance was once one of the top subprime originators in the United States, closing roughly $53 billion in 2006 before production began to plummet on credit concerns.

The move follows similar cuts by JP Morgan, who cut 100 jobs in its global credit markets business last month, Credit Suisse, who laid off 150 workers in its MBS unit, and UBS, who slashed 1,500 jobs in its investment banking unit.

It is estimated that about a third of Wall Street employees involved in the creation and sale of MBS will lose their jobs this year if market conditions don’t improve, according to financial-services recruitment firm Options Group.

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