HSBC is expected to report another huge writedown, of more than $1 billion (£480 million) by some estimates, on its portfolio of high-risk sub-prime mortgages in the United States, escalating fears that the fallout from America’s housing crisis is far from over.

The bank will announce the writedown as it unveils the third-quarter results for its US division on Wednesday, nine months after its American home loan operation became the first high-profile casualty of the sub-prime meltdown by announcing that its bad debts for 2006 would be $1.8 billion higher than forecast.

The announcement will fuel concerns that Citigroup’s estimate that Wall Street investment banks eventually will lose collectively $64 billion on securities backed by sub-prime mortgages could prove short of the mark. So far, Wall Street firms have conceded about $25 billion of such losses.

Since HSBC reported its first writedown in February, the group has closed its Decision One sub-prime lending operation, ceased buying high-risk home loans from other lenders and, on Thursday last week, shut its mortgage-backed securities unit, with the loss of about 120 jobs.

An HSBC spokesman declined to comment on any potential writedowns at the bank.

HSBC’s latest writedown would come as America’s sub-prime mortgage crisis continues to inflict financial damage on the banking industry’s collective balance sheet. In many cases, the true damage wreaked by the credit crunch may come from nonfinancial headaches, such as court cases and government investigations, which can have a much longer-term impact on business by damaging its reputation.

Citigroup appears to be suffering more than any other Wall Street firm, after it emerged that the US Securities and Exchange Commission (SEC) was preparing to launch a second investigation into the world’s biggest bank. This comes hard on the heels of a separate SEC probe into whether the bank had sought to hide some sub-prime losses in affiliated entities, known as structured investment vehicles.

Citigroup also faces numerous lawsuits from investors who feel that the bank had not been entirely straight with them about its exposure to the credit crunch and are looking to recoup some of the losses on their shares.

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