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Hsbc Says It Wants To Lend But Businesses Won't Borrow

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http://www.independent.co.uk/news/business...ow-1766996.html

While Barclays Bank faced a storm of criticism, HBSC had an altogether easier ride yesterday.

The bank's admission that there had been a disaster at its US sub-prime lending business heralded the world's descent into a financial crisis from which it has yet to recover.

But while HSBC yesterday admitted a sharp rise in loan losses – impairment charges rose to $13.9bn (£8bn) up by $3.8bn and profits fell by half to $5bn – it managed to escape the sort of criticism engulfing its neighbour whose headquarters are literally five minutes walk away. Partly it is because HSBC has always had a reputation of being stingy when it comes to bonus payments (although its directors are certainly handsomely rewarded).

Addressing the issue of lending to British businesses, the bank said that it had advanced £1.2bn of new lines of credit in the first half of the year of which only £500m had been drawn upon. Overall, the bank remains cautious about conditions for the future, and noted that unemployment was rising in both the US and the UK faster than expected. However, the HSBC's Asian businesses remain strong and the chief executive, Michael Geoghegan, said the value of its Chinese holdings had risen sharply.

"We stayed in when others got out," he said. "We are now reaping the benefit." While Barclays has ambitions to be a truly global bank, HSBC is already there and is being sustained by its strong position in the fastest growing parts of the world economy. Unlike Barclays, which will resume paying dividends this year, but did not pay any at the interim stage, HSBC is still making payments (of $0.16 a share this time). It even had some crumbs of comfort over the US disaster. "The run-off is proceeding well," said Geoghegan. "And at some point, as the US recovers, there may yet be an appetite for a business offering a yield like this."

It appears that the juggernaut is still rolling and, despite economic jitters, picking up speed.

I've noticed that we seem to be having a raft off articles saying that banks will lend to business but businesses don't want to borrow.

Co-incidence that all of these stories have appeared before and during bank reporting season?

Could it be that the banks will lend but at such high rates that it's impossible for businesses to borrow and be productive with the debt?

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Could it be that the banks will lend but at such high rates that it's impossible for businesses to borrow and be productive with the debt?

An awful lot of businesses now exist only because the bank was willing to extend loans to them for silly amounts at silly rates.

It is a rude awakening for a lot of 'businessmen' that you can't simply borrow lots of money, pay yourself most of it then go back for more. (Unless you are a bank of course, in which case have a raise)

Banks will extend credit to businesses when it is safe for them to do so but given the state of the real economy an awful lot of businesses are suddenly looking very sub-prime.

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http://www.independent.co.uk/news/business...ow-1766996.html

I've noticed that we seem to be having a raft off articles saying that banks will lend to business but businesses don't want to borrow.

Co-incidence that all of these stories have appeared before and during bank reporting season?

Could it be that the banks will lend but at such high rates that it's impossible for businesses to borrow and be productive with the debt?

isn't it simply that they will lend to prudent businesses - but prudent businesses won't take up the offer as they are being cautious in these tricky times - goes with being prudent. The businesses that really need it - ones that are nearing insolvency - won't pass the banks' criteria to be offered the loans they need.

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An awful lot of businesses now exist only because the bank was willing to extend loans to them for silly amounts at silly rates.

It is a rude awakening for a lot of 'businessmen' that you can't simply borrow lots of money, pay yourself most of it then go back for more. (Unless you are a bank of course, in which case have a raise)

Banks will extend credit to businesses when it is safe for them to do so but given the state of the real economy an awful lot of businesses are suddenly looking very sub-prime.

exactly - entirely compatible with my post

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Could it be that the banks will lend but at such high rates that it's impossible for businesses to borrow and be productive with the debt?

Or that businesses just don't want to borrow money at the moment. Anyone half sane can see that the recession isn't going to get better until all that excessive debt has been sorted out. We're not 1% of the way yet... Why take on debt you know will cripple your company, when you don't need to expand and why you should be cost cutting and not spending.

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isn't it simply that they will lend to prudent businesses - but prudent businesses won't take up the offer as they are being cautious in these tricky times - goes with being prudent. The businesses that really need it - ones that are nearing insolvency - won't pass the banks' criteria to be offered the loans they need.

Spot on. The company I work for is aiming to pay down debt at a faster rate than at any time I can remember; everyone in manufacturing industry that I know says the same thing - if we can come out of this recession reasonably intact and with much lower gearing we will make a killing. I am sure they are right.

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Or that businesses just don't want to borrow money at the moment. Anyone half sane can see that the recession isn't going to get better until all that excessive debt has been sorted out. We're not 1% of the way yet... Why take on debt you know will cripple your company, when you don't need to expand and why you should be cost cutting and not spending.

I actually think we are about 50% of the way there; another year and it will be sorted

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Spin. The banks have been calling in overdrafts and reducing limits left right and centre. Its also a business where the banks have to get to know their customers.

By their criteria no business would be a good proposition. They would rather do mortgage lending. Less hastle and fully secured.

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I actually think we are about 50% of the way there; another year and it will be sorted

OK 1% a bit low, but I don't think we're 50% either.

Is it possible to make things worse so we could only be -10% of the way there?

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Many businesses will NOT want to borrow in a recessionary climate. Simple as. Time for the government to wise up a little. Jeeez, they're just so public sector.

Many businesses that survived the bubble years simply did so by borrowing ever larger amounts of cash. They need to fail. They're clearly unsustainable.

I guess there are some deserving cases out there who are struggling to access credit. I just don't know of any myself.

Edited by gruffydd

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An awful lot of businesses now exist only because the bank was willing to extend loans to them for silly amounts at silly rates.

It is a rude awakening for a lot of 'businessmen' that you can't simply borrow lots of money, pay yourself most of it then go back for more. (Unless you are a bank of course, in which case have a raise)

Banks will extend credit to businesses when it is safe for them to do so but given the state of the real economy an awful lot of businesses are suddenly looking very sub-prime.

Perfect description of my wife's boss.

A potentially good business, but they have a strange marketing policy. You go to them to buy something custom made. No need to pay a deposit to cover the material they have buy. On delivery - no need to pay now sir put it on account. Later - oh sorry sir we've forgotten to remind you about that account for three years, never mind you want to buy another so lets just put that on account too.

The owners have spent the past 5 years increasing the overdraft, claiming the low takings mean no pay increase (for years on end), claiming they take no money out of the busines, yet somehow buying property, extending property and generally splurge spending on themselves.

Its behaving like a very sub-prime business, and the bank has called a halt on any increase to the overdraft. When it eventually goes bust somebody may be able to buy something that, if properly managed, could be a very profitable business indeed. I'm sitting on my savings keeping a beady eye on it.

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I guess there are some deserving cases out there who are struggling to access credit. I just don't know of any myself.

Very well put; the majority just wouldn't want to borrow in the current environment while banks would be more than happy to lend to viable businesses. The ones squeaking most ought to be the ones that need to roll "perpetual" facilities at a low rate they assumed would last forever. Not much different from IRO mortages as an awful lot of companies just never planned their cash flows to incorporate paying back the principal. It would be foolish to assume that most businesses are run by a completely different set of people who did not fell for illusions created by the CBs.

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a few folk at sharp end of small business loans discussing this very issue right now on 'you and yours' R4 - or listen again later...

(sorry if this has already been mentioned, didn't read the whole thread)

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