HSBC reports profits slowdown

Banking giant HSBC today reported lower profit growth in the third quarter and falling revenues in a further sign of a slowdown in the sector's bounceback.

HSBC also warned of easing growth in emerging markets, where the group generates a large slice of its profits.

But further falls in bad debts helped overall profits remain "well ahead" of a year earlier in the July-to-September quarter, although the bank did not provide detailed figures.

It said bad debts fell to their lowest levels since early 2007, before the credit crunch and financial crisis.

HSBC's update echoed those of its US and UK competitors as it said investment banking activity had slowed in the third quarter against an unusually strong performance in 2009.

Pay and bonuses set aside for staff in the third quarter remained consistent with 2009 as a percentage of income, according to the group.

However, it revealed a 39% hike in staff pay and bonuses in global banking and markets (GBM) division during the half year, to 2.5 billion dollars (£1.5 billion) since the end of 2009.

The group is preparing for an overhaul at the top after news that chairman Stephen Green is quitting to join the Government as Minister of Trade and Investment, while chief executive Michael Geoghegan is to be replaced by investment banking boss Stuart Gulliver.

Mr Geoghegan, who is to step down by the end of next month, said he left the group with the "right strategy in place to navigate the economic uncertainty".

October trading was in line with the third quarter, he added, but said the bank faced headwinds both in the West and emerging economies.

The outgoing boss also took the opportunity to hit out at European and UK tax plans, saying Britain's bank levy on global balance sheets "effectively places a tax on their emerging market growth" and risked disadvantaging UK players.

On the issue of breaking up big banks, he said regulators needed to ensure banks were less systemically damaging if they went bust, but stressed this was "not the same as making them smaller".

HSBC is benefiting from sharply lower bad debts as the global economic recovery sees less borrowers struggle with repayments.

Profits more than doubled in the half-year - up 121% to 11.1 billion dollars (£6.8 billion) as a result of the lower loan hit, particularly in the US.

In the UK, it said it saw strong retail earnings despite "subdued" demand for lending as households and businesses rein in borrowing amid economic uncertainty.

However, the UK performance did not stop profits across its European business falling against a year earlier as debt-laden countries such as Spain and Greece suffered.

Shares in the group fell 2% as banks across the board eased back after strong gains yesterday.