HSBC Sheds Auto Portfolio

Nearly two years after halting auto finance operations, HSBC Holdings has sold the last $2.9 billion of auto loans in its portfolio.

HSBC sold the portfolio, in run-off mode, to an undisclosed buyer for $2.7 billion. The London-based financial conglomerate had sold another $1 billion portfolio, plus servicing operations, to Santander Consumer USA last November.

Reduced exposure to auto losses contributed to the profit recorded by HSBC’s North American operations in the second quarter. The unit earned $492 million, compared with a loss of $3.7 billion in 2Q09, and bad-loan charges dropped to $4.6 billion from $8.5 billion.

Yet despite the full-fledged exit from auto finance, HSBC said today that it would start “gently growing” its consumer finance business. For now, growth will come in the credit card sector, as HSBC stopped originating mortgages along with auto loans in 2008.

But how long will it be before the company returns to the auto finance space? My guess: two years.

What's your guess?

Tags: hsbc, portfolio, santander

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Comment by Bob Dudley on August 4, 2010 at 8:01pm: Good post. I used to work for HSBC Auto and the strategic vision of the company changed. The new focus was to concentrate on emerging markets where the growth potential was much higher. Moreover, auto lending was a relatively low return business vis-a-vis credit card and other businesses that generated higher ROI.

The exception was auto refinance, where returns were quite high. Losses were minimal. That business was growing healthily.

In the final analysis, I wouldn't expect HSBC to return to auto lending anytime soon.

Comment by Michael Duke on August 9, 2010 at 3:31am: Probably never, or not for many years. There is an entire world outside the US that has not yet seen the 35% mortgage refi with hidden credit insurance.