HSBC to repackage global loan into bonds to increase profits

HSBC will repackage loans it has sold in Asia, Africa and the Middle East into bonds to increase its investment banking profits.

According to Reuters, earning from loans has become difficult due to the post-crisis regulations. HSBC global banking and markets for the America's head Thierry Roland said, "Given our global footprint, we are able to originate assets from all over the world, repackage them, and then offer them to the U.S. investor base. Investors come to us to buy emerging market assets." 

HSBC's traditional strategy on its loans was "originate and hold." The company has distributed only 25 percent of its loans to its global banking and markets division in 2013. However, during the 12-month period that ended April this year, the bank has distributed almost 50 percent of those loans.

The "originate and distribute" strategy contributed to the 2007-08 financial crisis since most of it were given to risky U.S. Borrowers, who used it for their mortgages.

Meanwhile, The Motley Fool is suggesting that HSBC will become as profitable as ever in the future, despite its steadily falling share price. Its share price in 2013 was over 700p, now its only 523p. However, the bank is making more money than most companies in Britain, and any other bank in the world, overtaking rivals Barclays and Lloyds Banking Group.

"Commodity prices have fallen further in recent weeks. Weaker Chinese demand is part of the story, as an expected boost in infrastructure has not materialised and housing investment is yet to lift. HSBC has cut its China growth forecasts for 2016 (from 7.2% to 6.7%)," according to a research team at HSBC in a report by FX Street.

"At the same time, more commodity supply is hitting the market. Australia's iron ore production is ramping up further and OPEC's lack of agreement means more oil on the global market too. Thankfully for Australia, growth is shifting to the non-mining sectors."

HSBC was hit the hardest during the crisis after it was bought by the Household International in 2003. It became one of the largest subprime lenders during the housing market crash. Since then, HSBC has removed around $100 billion worth of crisis-era loans.