2008-08-05 - Hammered:

HSBC reported second quarter results today, but there is a twist in the 10-Q. Instead of reporting the Level 3 numbers for them directly, we will sort through some of the folly for you.

The principals come in as write-downs of $3.9B and no capital raised; however, $10.1B was taken in loan loss reserves along with a steady $7.1 B level of Level 3 from first quarter. Computing the Misery Index.

Here’s the tally thus far:

1. Tally for Write-Downs/Charge-Offs: $6.6B + $3.9B = $10.5B
2. Tally for cash raised: $0.0
3. Current Level III assets: $7.1B
4. Current loan loss reserves: $10.1B

We now sum all the distresses to get HSBC’s current Misery Index of $27.7B. <>

2008-08-01 - Misery:

HSBC is due to report second quarter earnings next week, so we thought we would recap the important numbers so far.

Through first quarter 2008, HSBS took write-downs of $6.6B on mortgage-related assets and has raised no capital. The bank’s first quarter 2008 10-Q (pg 24) shows that its Level 3 assets as of March 31, 2008 were $7.1 B while provisions for loan losses totaled $408M, up from $205M a year earlier. The amount of Level 3 assets at fair value was $163.98B, which represents 5.45 percent of total assets.

Misery Index = $6.6B + $408M +$7.1 B = $15.91 B

Misery Index (at fair value) = $6.6B + $408M +$163.98B = $170.99B <>

2008-05-19 - Off Balance:

Banks are not writing down their write-downs and getting away with it. Instead they are writing them down in the balance sheet, and there is a distinction.

HSBC was hiding $1.3B on the balance sheet, but we will balance things out for them by adding $1.3B to their existing $5.3B total, bringing them up to $6.6B.

2008-05-14 Admit a Little, Lie a Lot:

The kitchen sink finally got too heavy for HSBC and they were outted yesterday for a true $5B Q1 2008 loss.

2008-05-12 HSBC Revenue and Write-Downs Both Go Up:

HSBC reported fiscal first-quarter 2008 earnings today and said both revenue and write-downs related to the US subprime mortgage market were up.

2008-03-31:

Europe’s biggest bank by market value, HSBC Holdings PLC said this in their 2007 annual report:

In 2007, we absorbed a total of US$2.1 billion of write-downs on asset-backed securities and credit trading positions, leveraged and acquisition financing positions, and monoline credit exposures resulting from unprecedented disruption and deterioration in the credit markets. In North America, the mortgage-backed securities operation was closed to new business and downsized.

Overall, the bank’s earnings were up 17.9 percent to $1.65. The save was made by diversification into fast-growing markets, including Hong Kong, China and India and a reduction in dependence on the U.S.

HSBC PLC is out in front so long as the hot markets don’t cool off. But with the crisis in the credit markets just coming to roil, more write-downs and future losses seem inevitable.

For 2007, the total write-down hit at HSBC is $2.1B. But beware:

The bank may post further writedowns on credit-related securities, Chief Executive Officer Michael Geoghegan said at a press conference today. Growth may slow in Asia, he said.

If they come, it will most likely be from Household International Inc, which the bank bought in 2003.

Despite the modest write-downs, HSBC took $10.6B and $17.2B in loan losses in 2006 and 2007.