Household HSBC Watch

HSBC USA CEO Paul Lawrence took over from Sandy Derickson. While Derickson was a former Household International employee she was also unemployed when London headquaters made management changes. Some say Derickson was in over her head, while others point out that she was hired by Household after “running GE Auto Finance into the ground.”

Mr. Lawrence’s operation reported a 91% decline in third-quarter net income, to $21 million. During the period, the firm boosted reserves to cover expected credit losses by 94%, or $402 million.

At HSBC’s consumer finance business results were much worse. Formerly Household International, which has long catered to consumers with tarnished credit histories under the Beneficial and HFC banners, the unit posted a net third-quarter loss of $1.1 billion, compared to net income of $551 million in the year-earlier period. The unit also took an $881 million write down for Decision One, a subprime lending unit that it decided to close in September.

HFC and Beneficial branch closings, in addition to the closing of Decision One, could have been avoided according to some, while others say 10 to 20 percent layoffs were expected in 2003. “Thousands of workers would have quit in 2003 had HSBC changed lending standards and the pay structure when HSBC bought Household International” said one source close to the matter. “Instead, HSBC continued to make bad loans without regard for the customer, kept a pay-for-performance pay structure, and now must offer severance packages. Bad loans speak for themselves, being felt around the world by many, but it will take years for HSBC to divorce itself from Household International and the HFC and Beneficial names.”