HSBC reports steep fall in profits

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The Independent Online

HSBC today revealed a 28 per cent fall in first-half profits as the impact of US bad debts and credit crunch losses continued to weigh on the banking giant.

The company's pre-tax profits of 10.25 billion US dollars (£5.2bn) came as it wrote off a total of 10.5 billion (£5.3bn) on its struggling US business and investments hit by the credit turmoil.

Chairman Stephen Green said the first half of 2008 saw "the most difficult financial markets for several decades".

He added: "HSBC was not immune from the turmoil" before adding that the company faced "real uncertainties and difficulties" in the near term, but the figures were broadly in line with City hopes.



Green also stressed the strength of its balance sheet - in contrast with the fund-raising needed this year by rivals such as Barclays, Royal Bank of Scotland and Halifax Bank of Scotland.



HSBC has a broad geographical spread and a major presence in fast-growing emerging markets such as Asia and Latin America. It remained profitable in all regions except North America in the first half of this year.



The US consumer finance business crashed to a loss of 2.2 billion US dollars (£1.1bn) with bad debt provisions amounting to 6.6 billion (£3.4bn). HSBC described the US as a "difficult market, with rising unemployment and falling house prices".



The group's investment banking business also wrote off 3.9 billion (£2bn) on the mortgage-backed investments hit by the credit crunch.



In the UK, the company said it had doubled its share of the new mortgage market from 3% to 6% after the launch of a product that offers to match the previous interest rates of homeowners facing a big bill to remortgage their properties. This share peaked at 12% in May.



HSBC's commercial banking business meanwhile lifted pre-tax profits 23% in the UK, and said arrears rates were "broadly unchanged" despite growing lending by 13%.



HSBC's shares eased 1% following the results.



Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown, said: "These results are something of a mixed bag, with some further hefty writedowns continuing to negate the progress being made in certain parts of HSBC's global portfolio.



"Whilst there were resilient performances in Asia in particular, even growth here is likely to lose a little momentum in the nearer term."

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