As expected, HSBC has decided to shut down Decision One, its ailing, wholesale subprime lending unit, taking a $945M hit in the process.
The closure will result in 750 job losses, including 248 in South Carolina, 121 in Charlotte, NC, and additional losses in Phoenix, Arizona.
“It’s no longer sustainable and not the right place to allocate capital in the future. We said we would make tough decisions, and we have done exactly that, said Michael Geoghegan, group chief executive of London-based parent HSBC Holdings plc.”
HSBC said that despite the closure, it would still offer subprime mortgages through its US branches.
The banking conglomerate will now focus on loan origination through historically better performing retail channels, under the HFC and Beneficial brands.
HSBC Finance was one of the top subprime originators in 2006, closing roughly $53 billion, though recent production had slipped dramatically after the secondary market imploded.
Decision One has been around since 1996, and was later bought out in 1999 by Household Finance which was acquired by HSBC in March 2003.
HSBC Finance will continue to service existing Decision One loans, of which there are $349 million loans in process, awaiting funding.
Shares of HSBC were trading up roughly one percent in late trading on Wall St.
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