BRITAIN'S biggest bank HSBC has added to the gloom in the battered banking sector with news of more credit crunch pain and spiralling bad debts.
The group said losses from US loans and mortgages soared to $4.3 billion (£2.73 billion) in the third quarter.
Fellow lender Nationwide also revealed more woes for the sector, with an 18 per cent drop in underlying interim profits and warnings of two more years of house price falls.
And Abbey-owner Santander, which owns Bradford & Bingley’s branch and savings business, became the latest bank to appeal to shareholders for a balance sheet boost.
The third quarter trading update from HSBC marked the last to come from the big five UK banks.
The group confirmed third quarter profits were up on a year ago thanks to growth in Asia, but said its pre-tax profits in the nine months of the year had suffered.
HSBC also signalled there may be less support rom its Asian market as it said growth was beginning to slow.
Its troubled US consumer finance business saw losses from defaults rise by $700 million (£443 million) in the third quarter.
HSBC said it was braced for even higher impairment charges as credit trends worsened.
The US business is being impacted by rising borrower defaults amid increasing levels of unemployment as the US economy goes into reverse.
In the UK, bad debts rose in the three months to the end of September, although it said loan impairments reduced in the year to date.
Michael Geoghegan, group chief executive, said the banking industry was facing “extraordinary times”.
Its investment banking business – seeing four per cent of its global workforce cut – took a $600 million (£383?million) credit crunch writedown.
HSBC added the hit would have been $835 million (£529 million) higher had it not been for an accounting change. The bank was first to flag up losses from the US sub-prime mortgage meltdown, which led to the credit crunch – the root of the global banking crisis.
But its presence in markets such as Asia and the Middle East has until now protected HSBC.
The bank has not been forced to ask for taxpayer cash under the Government’s £37 billion bank bail-out, transferring cash from other parts of the business to boost capital strength.
However, there was little hope of better borrowing for Britons despite the moves to shore up bank balance sheets, with HSBC saying it had still not decided if last week’s shock 1.5 per cent interest rate cut would be passed on to standard variable rate (SVR) borrowers. Nationwide revealed a 72 per cent plunge in half-year residential mortgage lending – to £1 billion in the six months to September 30.
Its share of the net lending mortgage market fell to 5.6 per cent from 6.2 per cent this time last year.
Nationwide said the clampdown came partly as it sought higher quality borrower business, although the group saw bad debts rise more than a fifth to £74 million in the first half as borrowers struggled with repayments.
Nationwide funded lending in the six months to September 30 through retail deposits, at £2.6 billion.
It said its share of the retail deposits market almost doubled to 34 per cent, from 18 last year as savers made a “flight to safety”.
But it paid a higher price to attract savers amid heightened competition and said this hit underlying interim profits, down from £394 million a year ago to £322 million.
Graham Beale, chief executive of Nationwide, said house prices would continue to fall by one to 1.5 per cent a month at least for the remainder of the year. But he added there was hope the market would see a turnaround as price falls and lower interest rates began to help buyers.
Nationwide was one of a number of lenders to pass on the Bank of England’s 1.5 per cent base rate cut on standard variable mortgages last week amid reports the Government had pressured them to make cuts.
Mr Beale remained tight-lipped on the part played by the Government, but said there was “no conflict”.