But the group insisted it intended to remain independent, left its dividend unchanged at 7.5p a share and announced an pounds 8m cost-saving programme that will lead to another 100 job losses over the next 18 months.
This is on top of a 400 fall in the workforce in the latest financial year to 1,600; 100 were job losses and the rest a result of the sale of businesses.
Although there have been repeated rumours that Hambros might be snapped up by a predator during the restructuring of London investment banking under way, the bank made clear it planned to exploit the attractions to clients of independent advice. There have been no bid approaches serious enough to warrant an announcement, the group said.
Michael Sorkin, deputy chairman, said Hambros was seeking to expand its fund management business through a joint venture or an acquisition. The bank wanted to find a "high-class team with a first-class record".
Hambros said the corporate finance business had a record year, including the sale of British Rail's rolling stock leasing companies.
With its balance sheet contracting as it shed unprofitable business, Hambros' capital strength improved in spite of bucking the buoyant trend in most of the rest of the investment banking industry.
The bad debt charge was substantial in relation to loans to customers of only pounds 1.16bn, but was spread over about 20 loans.
The provisions came as most other banks reported sharply lower bad debts. But Sir Chips Keswick, chief executive, rejected any suggestion the provisions had been delayed or were misleading, saying Hambros had in previous years built up a substantial reserve of non- specific bad debt provisions in the expectation of problems.
Before the bad debts, group profits were up nearly 40 per cent to pounds 69.7m. But exceptional charges of pounds 12.9m - the cost of disposals - together with the bad debt provisions reduced pre-tax profits to pounds 20.6m against pounds 37.1m the year before.
After tax and minorities the net result was a loss of pounds 3.8m against a profit of pounds 16.6m last year. A key reason for the swing into the red was an increase in the tax charge from pounds 18m to pounds 22m as profits fell, partly because of a sharp rise in irrecoverable advance corporation tax.
Hambros' quoted offshoots are improving performances, with Hambro Countrywide, the estate agency, trading profitably after a loss last year and Hambro Insurance Services making a record profit of pounds 11m.