For HSBC today is the day to make a move according to one analyst. “If HSBC cut its dividend by half, its dividend yield will fall to 5 percent from 10 percent and given the bank’s huge exposure to UK and U.S. market, 5 percent yield is not attractive any more,” said Steven Leung, director with UOB Kay Hian. “If the stock can’t recover to HK$72 or HK$73 by tomorrow the situation can get pretty ugly.”
We started monitoring the day at 3 AM in the United States. The Dow is down 259 points at noon Eastern Standard time (in New York) as bad news comes from the United Kingdom and Hong Kong. HSBC Plc is down to the lowest point since 2001 on the FTSE. In Hong Kong HSBC closed down 4.1 percent. Here at Household – HSBC Watch we study information from around the world relative to HSBC. On Monday morning I knew something would happen, but I didn’t know what. It was one of those thoughts people get when news and information does not look right, but neither does it appear to be wrong.
HSBC likes their own press releases, telling how great they are. Efforts to go green, reduce the carbon footprint, and related subjects appeal to HSBC. The amount of ‘How Great We Are’ press releases is down. HSBC also failed to inform the press about job cuts and ‘realignment’ at HSBC Finance. At the same time employees were kept in the dark too, so what really happened?
Perhaps HSBC’s silent treatment backfired, as little or no information came from London. Had HSBC addressed realignment at HSBC Finance perhaps Morgan Stanley analysts would have seen more information, tempering thoughts of problems as far in the future as 2011. HSBC also has problems in the U.K. where default credit card interest rates are approximately 40 percent.
Some say the U.K. is behind the United States relative to financial problems, but we think the U.K. is ahead of the United States, and a good window to the future. UK banks pushed too far for profits. In the U.S. the mortgage and housing bubble burst for the same reason.
A true indicator of problems at HSBC is determined by how far, and how much, HSBC actually pushed their ‘Household Model’ which is based on failed predatory lender Household International. A total spread of that model would mean HSBC cannot survive. If the ‘Household Model’ was only used by HSBC in developing nations those nations will not provide HSBC with profits when the model fails. Either way HSBC may have real problems.
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