Household provides loans, credit cards, car financing and credit insurance to 50 million customers in North America and the UK.

In the UK, it operates under the brand names HFC and Beneficial.

HSBC group chairman Sir John Bond said: "This deal brings together one of the world's most successful deposit gatherers with one off the world's largest generators of assets.

"It is an extremely good match."

US access

The deal will see HSBC take control of Household's network of consumer lending and credit insurance offices, giving it a prized foothold in the US consumer finance market.

The takeover values Household shares at a 30% premium over their Wednesday closing price.

Household stock has come under pressure in recent months because of concerns that low interest rates and bad loans would dent its earnings.

HSBC's own shares were down 4.2% at 677p in late morning trade, reflecting fears that the bank will face the same risks once the transaction goes ahead.

News that HSBC plans to issue new shares to fund the deal, diluting the value of its existing stock, put the share price under further pressure.

But some analysts said the move made good strategic sense.

"Over 75% of all return on equity is derived from the US, so it's where you have to be if you want to be a global player," said Mark During at Brewin Dolphin Securities.