By Carmel Crimmins and Dan Wilchins
NEW YORK, Dec 7 (Reuters) - HSBC is looking to boostinvestment banking profits by packaging more of its loans intobonds and selling them to investors in the United States.
Post-crisis regulations have made it more expensive forbanks to retain loans on their balance sheet so to reduce theamount of capital it has to set aside to cover potential losses,Europe's largest bank is looking to repackage loans sold inAsia, Africa and the Middle East as bonds.
"Given our global footprint, we are able to originate assetsfrom all over the world, repackage them, and then offer them tothe U.S. investor base," said Thierry Roland, HSBC's head ofglobal banking and markets for the Americas.
"Investors come to us to buy emerging market assets."
HSBC has traditionally used an "originate and hold" approachto its loans. In 2013, the bank distributed only a quarter ofloans made by its global banking and markets division but in the12-month period up to April of this year, it had distributednearly half of them, according to figures released during apresentation in June.
The "originate and distribute" model of securitized debthelped fuel the 2007-08 financial crisis because so many of thebonds were linked to mortgages given to risky U.S. borrowers.The riskiness of the products were not reflected in the ratingsassigned to them.
HSBC was at the center of the crisis after a 2003 takeoverof Household International, a lender to people with poor credithistory, made it one of the biggest subprime lenders when thehousing market crashed.
Since then, the bank has purged itself of around $100billion of crisis-era loans.
"Our risk appetite to do business in the United States isgreater now," said Roland.
HSBC's U.S. division, which includes retail banking andwealth management as well as investment banking, is underpressure to boost income. It made a profit of $282 million inthe first six months of this year but that was less than thebank made in Canada despite U.S. revenues of $3 billion beingmore than triple the amount in its northern neighbor.
While HSBC has said it could sell underperforming businessesin the United States, Brazil, Turkey and Mexico if they cannotbe turned around, Chief Executive Stuart Gulliver bank has saidthe bank is likely to remain in the United States given theimportance of dollar clearing for its trading business as wellas providing access to U.S. companies.
Roland, who took over as U.S. investment banking chief inApril, is making a small number of hires to facilitate the pushon securitization as well as in other areas such as junk bonds.
Dennis Lafferty, one of Goldman Sachs' top distressed-debttraders, is joining the bank later this month to run the U.S.section of a global loans and special situations unit.
"We are adding selectively. It is about hiring people whoare going to blend into the culture," said Roland, a native ofFrance. (Editing by Tom Brown)