John Bond, the HSBC chairman, said the bank was badly hit in the second half by problems in Malaysia and in Hong Kong, where he is predicting zero growth this year.
He said that while he remains confident of Asia's prospects in the long term, he could not rule out the possibility of "further setbacks" this year.
The bank has also witnessed a sharp deterioration in its loan portfolios in Thailand and Indonesia, although in Korea, where the group yesterday sealed a $900m deal to buy control of Seoul Bank, HSBC believes the worst may now be over.
Mr Bond said: "The year ahead promises to to be another challenging year and much will depend on the performance of the US economy and its ability to continue a remarkable record of sustained growth."
In Hong Kong new specific provisions rose by $689m reflecting the collapse in the property market. For Asia-Pacific generally, provisions were increased by $1bn to cover exposures to large corporates in Malaysia, Indonesia and Thailand.
HSBC announced plans to seek a New York listing in addition to its current dual listings in London and Hong Kong. The bank is also scrapping its two-tier share structure and replacing the current Hong Kong dollar and sterling shares with one class of US dollar denominated stock. HSBC will, for the first time in its history, be seeking authorisation to buy back its shares.
HSBC yesterday denied suggestions that the decision to go for a US quote signalled that the bank was limbering up for a major American banking deal.
Mr Bond said the New York listing would give the bank access to the largest pool of capital in the world and enhance the liquidity of the bank's shares.
HSBC has suffered considerable share price volatility in the past because of technical shortages in Hong Kong dollar denominated stock.
The move should also increase the proportion of US institutional shareholders on HSBC's register.
Mr Bond said the bank was seeking to learn the lessons of last year's losses by tightening up on credit control procedures and centralising risk control.
The group has set itself a target of doubling total shareholders return within five years. The group will "benchmark" itself against a peer group of nine major international banks including Citigroup, Lloyds-TSB, Deutsche Bank and Chase.
It is also taking a $180m provision to cover the cost of relocating staff from its 12 sites around the City of London to its new home in Canary Wharf.
Bill Dalton, the chief executive of Midland Bank, which is being rebranded as HSBC, said that the tough year in Asia "was a strong vindication" of HSBC's decision to buy Midland in 1992.
While at group level the rise in bad debt provisions more than wiped out the growth at operating level, in the UK, Midland reported a 7 per cent rise to pounds 1.745bn.
That was despite a pounds 60m provision to cover the impact of the pensions review and a pounds 72m rise in bad and doubtful debts. With these and other one-offs stripped out underlying profits were up 22 per cent, Mr Dalton said.
Midland contributed 38 per cent of profits, up from 31 per cent last year, taking over from Hong Kong Bank for the first time as the largest single profits generator within the group.