Unsecured Personal Debt: The Next Shoe to Drop?

HSBC has been one of the biggest subprime lenders in the US ever since it bought Household International for $15.5 billion in 2003. It was one of the first major banks to take big subprime-related losses, too, and it doesn't seem to have been a player in the CDO market, which has largely protected it from the second big shoe to drop. But HSBC could now be a harbinger of a third dropping shoe – unsecured lending. Its results today are impressive, but the bank did take a $3.4 billion charge relating not to mortgages but rather to unsecured personal loans and credit cards.

Nouriel Roubini reckons the next big downward lurch in the credit markets is going to be commercial real estate, but at this rate unsecured personal lending might beat it to the punch. US credit-card debt han't been spiralling upwards in the same way as it has in, say, the UK, but there's still a hell of a lot of it, and the classic way to get out from under it – by paying it off with a home equity loan – doesn't work if you don't have any equity in your home.