HSBC issues fresh warning on consumer debt growth

HSBC has become the second bank in less than a week to issue a stark warning on the debt crisis affecting British consumers.

The bank said yesterday the rising tide of bankruptcies and individual voluntary arrangements - a less drastic substitute enabling consumers to become debt-free in five years by requiring banks to write off a portion of their loans - "looks unlikely to abate in the medium term". It warned that this continued to be the "major influence" on the charges banks have to take to cover bad loans.HSBC's comments follow a similarly bleak statement by Barclays last week.

Organisations such as the Counter Credit Counselling Service have reported sharp rises in the number of debt-ridden consumers coming to them seeking help and have urged banks to lend responsibly.

HSBC said the rising tide of insolvencies combined with the increasing difficulty many consumers are having servicing their debts, had helped put a brake on the growth in consumer lending. It said this was hitting revenues from spin-off products such as loan-related insurance products.

The bank also saidbad loans were rising in the US, its biggest market. They had increased against the first half of the year, thanks to more bankruptcies and a weaker housing market.

The finance director, Douglas Flint, admitted the bank "miscalculated" some borrowers' ability to repay mortgages but the company said tighter pricing and underwriting had cut the volume of higher risk mortgages.

HSBC also said its corporate and investment bank had delivered "a weaker third quarter relative to its very strong first-half performance". This was largely due to lower trading volumes.

Shares in HSBC fell again yesterday, down 14p to 923p.