HSBC Sees No Relief In Bank’s Plight
HSBC, the UK’s largest bank, sees no indication that the UK consumer will grow tired of using IVAs to release them of their loan burdens.
The bank’s 2006 pre-close trading update reveals the results of the trend ‘seen since the second half of 2005.” No research indicates that the use of IVAs to pay off loans will abate in the next six months. This has led the banks to call on the government to step in and stop the drastic increase in bad debts.
Bad loan injury jumped 36 per cent. In the first nine months of 2005 the people who defaulted on loans jumped 65 per cent, to a total of 77,000. This is according to the Insolvency Service.
Record numbers of UK consumers are declaring bankruptcy or entering into individual voluntary arrangements (IVA). The major lenders in the personal loan and credit card markets are accumulating huge amounts of bad debt.
HSBC said: “ On a year-to-date basis, underlying revenue growth slowed, attributable largely to the aggregate of seasonal variations in fee income, a conscious decision to slow the rate of lending growth in more finely priced markets, fewer disposal gains and a weaker trading performance in CIBM in the third quarter.”
According to HSBC, “ Increases in short term interest rates will impact borrowers who have adjustable rate mortgages that are now resetting. In addition, further weakness in the housing market, lower consumption and lower employment also pose potential risk.”
Analysts predict that the bubble will burst when enough UK consumers report that IVAs are ‘ten times worse’ than bankruptcy, with the same financial difficulty attached, afterwards, but with five years of ‘living in hell’ before the debt is released.