HSBC Holdings PLC, Europe's biggest bank, said Friday it plans to continue to invest primarily in fast-growing emerging markets where it expects "reasonable growth" this year against a weaker outlook for the United States and Europe.
However, Chairman Stephen Green also said that HSBC would invest further in the United States, particularly in markets that target Hispanic customers, despite criticism from some investors about its exposure to the U.S. subprime crisis.
"To maintain our position as the world's leading international emerging markets bank, we will continue to invest primarily in fast-growing emerging markets," Green told shareholders at the company's annual general meeting. "They will eventually represent 60 percent of our business."
The company accepted that the U.S. subprime mortgage market remained challenging and said it would continue to close down various businesses, an initiative it started early in 2007, when it said that it would take three years "to deal with the problem."
Investor Knight Vinke Asset Management, which is believed to hold less than 1 percent of HSBC's shares, has called on the bank to dispose of its U.S. operations, an idea that Green has said is "unthinkable."
"Despite current problems, there are clear opportunities that play to our strengths _ especially with Hispanic customers and with internationally oriented businesses _ and where we will be investing accordingly in the years ahead," Green told shareholders on Friday.
The Hispanic population is one of the fastest growing ethnic groups in the United States, accounting for an increasing share of consumer wealth.
Yet, while credit card use among the nation's 42 million Hispanics is on the rise, many Latino households don't have access to credit, according a survey conducted last year by the National Council of La Raza, which found that 80 percent of American households use credit cards, compared with only 56 percent of Hispanic households.
HSBC revealed earlier this month that it had taken a US$3.4 billion hit in the third quarter at its U.S. consumer finance division, HSBC Finance Corp., because of subprime losses.
The impairment charges were US$12.2 billion and US$7 billion in 2007 and 2006, respectively.
The company is in the process of closing or consolidating some 360 HSBC Finance Corp. branches, taking the number of remaining branches to around 1,000.
Green said that HSBC sees a weak outlook in the United States, "which may well move into recession," and a "relatively weak" picture in Europe.
"No one knows how much this will impact Asia and other emerging markets _ but overall, they will probably continue to exhibit reasonable growth," he added.
Chief Executive Michael Geoghegan, who said the year had been "probably the toughest in my 35 years in banking," said that the U.S. credit card business, which is broadly 50 percent prime and 50 percent nonprime, continues to remain profitable.
The bank dismissed concerns about the company's funding capabilities, raised by Eric Knight, chief executive of Knight Vinke.
"The bank is funding itself perfectly," company Finance Director Douglas Flint said, adding that the bank was "comfortable it can access debt markets."
