LONDON - HSBC HOLDINGS, the British bank that criticised state banking bailouts to 'failed managements' yesterday, may lose some market share as rivals receive government guarantees, Exane BNP Paribas said.
The London-based bank's 'liquidity advantage is fast disappearing,' eroded by the government support for other banks' loans.
It may also have to increase pricing as margins narrow, said analysts led by London-based Ian Gordon in a research note to clients on Tuesday.
He has an 'under-perform' rating on the stock.
London-based HSBC, which lends less money than it receives in deposits, according to filings, hasn't taken any money from the state bailout plan announced last month.
British government guarantees have been given to 'failed managements' and ought not to last 'too long,' HSBC Chief Executive Officer Michael Geoghegan told the Financial Times yesterday.
A bank spokesman confirmed the comments. State aid 'may create the wrong type of behaviour by managements in those banks,' he added.
The UK, which is investing 37 billion pounds (S$85.69 billion) in HBOS, Royal Bank of Scotland Group and Lloyds TSB Group, is also providing about 250 billion pounds to guarantee unsecured loans between the banks.
Barclays, which is raising nearly 7 billion pounds in share sales to investors including Mideast funds, is also eligible for the guarantee.
Unlike HSBC, the three recipients of state aid and Barclays all lend more than they receive from deposits, according to company filings, said wires agencies.
Gaining ground
Loan guarantees will help rivals dependent on capital markets to gain ground on HSBC while central bank moves to cut interest rates will squeeze margins, hurting large deposit gatherers including HSBC, Mr Gordon said.
'Banks that are short deposits, long loans, the sorts of banks that have faced liquidity problems in the past 12 months, clearly benefit the most,' Mr Gordon said.
HSBC's 'core profitability' is being 'materially' eroded by rising bad debt charges and slowing revenue growth, Exane also said, after the bank published its third-quarter trading statement yesterday.
US mortgage and credit card defaults will probably increase in the fourth quarter and first half of 2009, according to the analysts.
The UK bank's third-quarter profit rose even as it set aside a more-than-estimated US$4.3 billion to cover bad loans in the US.
The unit 'declined markedly' because of consumer and corporate loan defaults.
Overall pretax profit was helped by lending in Asia, accounting gains on its debt and the sale of assets in France.
'HSBC was a major recipient of deposit inflows' in the third quarter as 'retail customers moved to larger and stronger institutions,' the bank said on Tuesday.
'HSBC is responding to the increasing economic uncertainty by considering carefully how it deploys its balance sheet and capital strength,' it said.