HSBC says squeeze may last until late next year

HSBC has warned that the US cre-dit crunch is unlikely to peak until the end of 2009.

Last week the banking giant report-ed a 10% rise in pre-tax profit despite unveiling £8.7bn worth of write-downs – 63% more than in 2006.

Some £5.85bn of write-downs were generated by the group’s US business as a result of exposure to sub-prime mortgages.

Douglas Flint, group finance director at HSBC, says the bank depends on the US economy but admits he has no idea when its financial downturn will end.

Flint says: “A year ago we would have said that by the end of 2008 we’d see a turnaround. Maybe it will be the end of 2009 now, I don’t know.”

In an effort to alleviate the pressure caused by sub-prime losses, HSBC has closed 400 branches and tightened its lending criteria.

Profit generated from high street branches fell 16% in 2007 but group pre-tax profit rose to £12.2bn – up from £11.1bn in 2006.

Stephen Green, chairman of HSBC, says: “This is likely to be a year of caution in the financial sector until liquidity, transparency and the proper pricing of risk return.”

The bank says it intends to focus primarily on emerging opportunities in the coming months while working on developing global franchises in more mature markets.