Several key structured finance executives at HSBC have either resigned or transferred out of its New York office recently, in what some market observers say is the bank's effort to pull back from the subprime mortgage market after losses in that area of its business.
Earlier this year, HSBC said it might lose about $1.8 billion stemming from its holdings of poorly performing subprime ARMs and second-lien loans originated in 2006.
"The company, three years ago, got involved in [subprime mortgages] in a big way," said one market observer. "Now, that business is performing poorly. The company will be more conservative going forward."
Caroline Morrill, head of debt syndicate for the Americas for HSBC Securities, left the firm sometime in late March. Morrill, who joined HSBC in May 2004, was appointed to her former position in August 2005, when the bank was in the midst of a push to bolster its debt team. Morrill joined HSBC after leaving the syndicate desk at ABN Amro.
Jon Voightman, a managing director in the mortgage-backed structured products group, resigned from the bank in early April, industry sources said. Voightman has had a long career in subprime mortgage investment banking. Before running HSBC's subprime banking business, he worked at Goldman Sachs, and before that, he spent six years working on subprime MBS deals at Lehman Brothers, according to industry sources.
Jon R. Bottorff, who was HSBC's global head of ABS and structured finance, was transferred to HSBC Finance in the bank's Chicago office, where he is now an executive vice president. One market source said Bottorff's former ABS and structured finance responsibilities would be run out of London. The bank, however, would not discuss Bottorff's new role in Chicago or how his old duties will be handled. Before joining HSBC, Bottorff was head of asset-backed finance for the former Dresdner Kleinwort Benson within its North American global finance group, based in New York.
Like Morrill, Bottorff was an ABN Amro alum who eventually joined HSBC in 2004. At that bank, he was a senior vice president and managing director of asset securitization.
Regarding HSBC's future dealings in subprime mortgages, market sources do not think that the bank - or its peers, for that matter - will want to acquire subprime origination operations again because those businesses are currently unhealthy. Instead, most will increasingly regard subprime mortgage investment as a credit risk trading business.
"London has said, We've lost so much money there'," one market source said. "They are that much more gun shy about getting involved with those deals going ahead."
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