TEXT OF INTERVIEW

SCOTT JAGOW: In London, one of the few stocks going up this morning is HSBC. The bank turned in its profit report for last year and it made a record amount: $22 billion. But HSBC is losing a ton of money on sub-prime mortgages in the U.S. market. Our European correspondent Stephen Beard joins us. Stephen, what do the banks say about that today?

STEPHEN BEARD: We’ve heard today the scale of bad debts in the sub-prime market. HSBC is writing off $11 billion. The problems are not unique to HSBC, but it’s quite clear that a lot of these sub-prime or low-quality loans were written without due care and attention. Some of these loans were going sour within two or three months of them having been granted.

JAGOW: Good grief. Do we know why HSBC was so into the sub-prime market?

BEARD: That’s the slice of the market that HSBC has been most heavily exposed to. That’s what they bought into when they bought Household Finance in 2003. That is the market of course which showed the most dramatic growth in recent years, but that it turns out now, is the market which is showing the biggest capacity for loss and default.

JAGOW: Well do you think HSBC regrets getting into the sub-prime market?

BEARD: Wouldn’t you if you lost $11 billion? Yes I think they most certainly are. They make a point in their commercial, in their advertising here in the U.K. of describing themselves as the local bank, the bank that understands local conditions. Well they certainly didn’t understand local conditions in the U.S. and they must be rather grateful for their deep roots in the Far East. That’s where it is at least making big profits.

JAGOW: OK Stephen, thank you very much.

BEARD: OK Scott.

JAGOW: Stephen Beard in London