HSBC to Refocus on Asian Markets – NYTimes.com
But few banks have the strong ties to local businesses and a rich heritage in the region HSBC can point to. Founded in 1865 as the Hongkong and Shanghai Banking Corporation by Thomas Sutherland, a Scot who was then working for the Peninsular and Oriental Steam Navigation, it established itself as the main financier for British shipping and trade in opium, silk and tea. It handled China’s first loan in 1874 and grew so important to Hong Kong that many consumers hold their entire pension in HSBC shares.
It was a good business for the better part of a century. But in the 1980s, when financial markets in the West were booming, HSBC decided to expand into the United States and Europe. It bought Marine Midland Bank in the United States and, after doubling its assets with the purchase of Midland Bank of Britain in 1992, HSBC moved its headquarters to London from Hong Kong.
Still hungry for market share in the American market, HSBC bought the subprime mortgage lender, Household International, for $14.2 billion in 2003, a purchase it now says it regrets. It was that business that made HSBC the first major bank in 2007 to sound the alarm about mortgage market losses after its own piled up.
Almost three years later, provisions for bad loans at the unit are finally starting to decline as HSBC winds down most of the business. Over the last two years, HSBC has relied on its earnings from emerging markets to compensate for losses in the United States.
Along the way, it was supported by Hong Kong investors like Li Ka-shing, Hong Kong’s richest man, who helped HSBC raise £12.5 billion, or $18.5 billion, in a rights issue earlier this year while many rivals had to accept government succor.