The bank put much of the improvement down to the merger of the treasury and capital markets activities of Midland and Hongkong & Shanghai Banking Corporation in New York, London and Tokyo.
Brian Pearse, chief executive, said: 'There is no doubt that the powerhouse that has developed has exceeded our expectations.' But the bank warned that the exceptional trading conditions in financial markets, from which other British banks have also benefited, might not be repeated in the second half of 1993.
Pre-tax profits at Midland jumped to pounds 385m from pounds 144m in the six months to 31 December and pounds 60m a year ago. Dealing income in the first half soared to pounds 296m from pounds 175m in the preceding six months.
Sir Peter Walters, chairman, said: 'This is a very encouraging start to the year and to the new owners.' HSBC's shares in London rose by 19p to 671p on the better-than-expected outcome.
Overall, Midland's bad debt provisions increased to pounds 321m from pounds 220m in the prior six months, when they were helped by a pounds 101m release of Third World debt provisions.
Midland's specific UK bad debt charges declined to pounds 279m from pounds 389m in the previous six months, reflecting credit quality improvements in the personal and small corporate market. But two large provisions, one believed to relate to the Queens Moat Houses hotel group, totalled pounds 65m and marred the improving trend.
Mr Pearse said a danger to banks in economic recoveries was that a few big corporate provisions could crop up unexpectedly and dent profits. He added: 'We have some big companies on our watch list, some household names.'
Loan demand remains sluggish. Business and personal customers are cautious, although the bank was encouraged by tentative customer approaches.
Sir Peter noted a marked reduction in customer complaints over the past 12 months after a campaign to improve relationships with personal customers. Midland's branches have dropped the charges most irritating to customers, especially those for overdraft letters, changed tariffs to monthly charging from quarterly and explained charges more clearly. This has reduced unauthorised borrowing.
New accounting standards and the transfer of Midland's merchant banking operations to HSBC in June altered the presentation of the results.
Commercial banking operating profits before provisions were pounds 654m compared with pounds 487m in the previous six months. Forward Trust, the leasing subsidiary, increased pre-tax profits to pounds 28m from pounds 18m a year ago after bad debts of pounds 20m.
Overseas offices increased operating income by 55 per cent to pounds 195m in the first half from a year ago. Firstdirect, Midland's telephone bank which started in 1989, increased accounts by 14 per cent from the end of last year to 400,000.
The cost-income ratio fell to 61 per cent from 68 per cent as income rose faster than costs, and the bank's capital position also strengthened.
Bottom Line, page 27