LONDON (Reuters) ? HSBC Holdings Plc (HSBA.L) (0005.HK) said on Wednesday that tepid revenue growth posed a challenge at its US Household business after disappointing results from the consumer finance unit.

Household?s net income fell 32 percent to $322 million in the third-quarter from a year earlier under US accounting rules, the world?s second-biggest bank by market value said on Monday.

Net interest income barely grew to $2.04 billion from $2.01 billion as profit margins were squeezed.

?The revenue trends are modestly growing or flat. It?s something we are addressing in our plans and that?s the challenge,? HSBC Finance Director Douglas Flint said in a conference call with analysts.

The bank will review Household?s products and costs to try to stem margin decline, Flint said.

HSBC?s shares fell on Tuesday because investors were disappointed with the performance of Household, which had grown strongly in previous quarters. The bank?s stock fell 0.8 percent to 919 pence on Wednesday.

HSBC bought Household in March last year for $14.8 billion in the UK bank?s biggest acquisition. HSBC wants to expand the business and cross-sell products between Household and its US retail bank.

HSBC has been changing Household?s lending to focus on less-risky, lower-margin business. Profitability was also squeezed by higher funding costs as US interest rates rise.

Flint said rising US house prices meant customers were able to borrow against the increased value of their property rather than taking out unsecured loans, which are more profitable for the bank.

He also said the credit card business was focusing on so-called sub-prime customers who borrow little but pay default fees.

Flint was upbeat on the outlook for bad-loan provisions at Household, saying the improving US economy made it easier for people to repay.

?Trends have all continued to track favourably, albeit the rate of improvement has begun to level off. We see that continuing for the foreseeable future, given current (US) economic conditions.?

Household?s third-quarter provisions as a percentage of average assets dropped to 4.36 percent from 4.42 percent a year earlier, HSBC said on Monday.

Flint said HSBC?s US retail bank was growing faster than expected as a result of the Household deal. HSBC is selling Household products through the retail unit and Household is referring customers to the bank.

HSBC plans to expand the US retail bank geographically to sell Household?s products as part of a strategy to be a national bank in the United States, Martin Glynn, president and chief executive of HSBC Bank USA, told Reuters last week.