FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of February, 2007
HSBC Holdings plc
42nd Floor, 8 Canada
Square, London E14 5HQ, England
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
Form 20-F X Form 40-F ......
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).
Yes....... No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ..............)
HSBC TRADING UPDATE - US MORTGAGE SERVICES
HSBC Holdings plc wishes to update the pre-close trading statement issued on 5
December 2006 in respect of a single matter.
That trading statement included comments on the challenges within the Mortgage
Services operations of HSBC Finance Corporation, in particular in relation to
certain loans acquired in 2005 and 2006. Given these challenges, the Group Chief
Executive, Michael Geoghegan is continuing to directly coordinate the necessary
actions to manage the Group's response.
The impact of slowing house price growth is being reflected in accelerated
delinquency trends across the US sub-prime mortgage market, particularly in the
more recent loans, as the absence of equity appreciation is reducing refinancing
options. Slower prepayment speeds are also highlighting the likely impact on
delinquency of higher contractual payment obligations as adjustable rate
mortgages reset over the next few years from their original lower rates.
We have reviewed critically the impact of these factors in determining the
appropriate level of provisioning at 31 December 2006 against the Mortgage
Services loan book. We have taken account of the most recent trends in
delinquency and loss severity and projected the probable effects of re-setting
interest rates on adjustable rate mortgages, in particular in respect of second
lien mortgages. It is clear that the level of loan impairment provisions to be
accounted for as at the end of 2006 in respect of Mortgage Services operations
will be higher than is reflected in current market estimates.
We now expect that the impact of increased provisioning in this area will be the
major factor in bringing the aggregate of loan impairment charges and other
credit risk provisions to be reflected in the accounts of the Group for the year
ended 31 December 2006 above consensus estimates^ by some 20 per cent. This is
subject to final review and subject to external audit.
Generally, apart from the Mortgage Services operations, the performance of the
HSBC Group's businesses for 2006 was in line with our latest expectations.
Further information will be provided in the Group's 2006 results announcement
and the annual report and accounts, which are due to be released on 5 March
2007.
Footnote
^ Consensus estimate based on the average for loan impairment charges and other
credit risk provisions of US$8.8 billion from the most recent reports of 11
analysts.
Note to editors:
HSBC Holdings plc
HSBC Holdings plc serves over 125 million customers worldwide through some 9,500
offices in 81 countries and territories in Europe, the Asia-Pacific region, the
Americas, the Middle East and Africa. With assets of US$1,738 billion at 30 June
2006, HSBC is one of the world's largest banking and financial services
organisations.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HSBC Holdings plc
By:
Name: P A Stafford
Title: Assistant Group Secretary
Date: 08 February 2007