LONDON — In its May SEC filing, HSBC mostly discussed the challenges with its mortgage business and what it is doing to turn this segment around; however, it also mentioned the U.S. vehicle finance business, indicating this unit is being trimmed down.

"Beyond the mortgage and credit card actions discussed above (in the SEC filing), we reduced the size of the vehicle finance business, continued to tighten underwriting criteria, discontinued certain taxpayer financial services' products and increased our efforts around cost containment," according to the report.

Unfortunately, HSBC did not offer more details in this area.

Discussing its overall North American sector, the company reported that its pre-tax profits were down significantly from the same time frame of last year, mostly due to higher loan impairment charges in the U.S. consumer finance business and further write-downs in Global Banking and Markets. These losses were somewhat offset by increases in HSBC's own debt held at fair value, officials said.

Additionally, the company indicated that loan impairment charges in the U.S. consumer finance business came in at $3.2 billion, much higher than $1.6 billion in the first quarter of 2007, yet down from $4.6 billion reported in the fourth quarter of last year. Executives attributed this loss in part to seasonal trends.

"It seems likely that the deterioration in the U.S. housing market will extend into 2009; it is also clear that U.S. economic growth has slowed and there is an increased likelihood of a recession this year," officials said in the report.

"Against this economic backdrop, we continued to experience higher delinquencies across our major lending portfolios, though these were broadly in line with our expectations at the end of 2007," they continued.

Moreover, HSBC said it is focusing on risk management during the tough economic times in the U.S.

"We are progressively refining our strategies and product offerings to protect and enhance the underlying value of this business for our shareholders by dealing responsively and responsibly with our customers," executives noted.

Unlike the U.S., credit quality in other countries has tended to be stable, according to the company. However, HSBC pointed out that it continued to experience higher loan impairment charges as its Mexico portfolio seasoned, saying that these were covered by lending spreads.

Given the difficult times in the U.S., the company also said it has been working to generate capital to meet growth in emerging markets and cover the higher capital requirements needed by the "volatile market conditions."

Looking toward the future, Stephen Green, group chairman, said, "The outlook for the rest of the year remains unusually difficult to foresee in the current environment."

While he indicated that emerging markets show much promise, of the U.S., Green reported, "However, it seems increasingly likely that the U.S. will enter a recession in 2008, the length and depth of which is uncertain. The timing of any recovery in the U.S. housing market, which is likely to be the primary stimulus in restoring confident to the U.S. economy, is also unclear.

"A housing market upturn will itself depend on liquidity returning to credit markets and a resumption of securitization activity," he continued. "While illiquidity in financial markets remains of continuing concern, the major economic risks facing the global economy now include inflationary pressures, particularly from rises in food and energy prices."