HSBC says profit up but bad debts jump

Europe's biggest bank, HSBC Holdings, said its profit in the first quarter was ahead of a year earlier as growth in Asia and elsewhere helped counter another big hit for bad debts on US home loans.

HSBC said in a trading statement yesterday it was increasingly likely the US economy will go into recession this year.

It said the bad debt charge related to its US consumer finance business was $3.2 billion (€2.23 billion) for the first quarter and it wrote down almost as much for a deterioration in the value of risky assets amid the credit crunch.

The latest US home-loan impairment charge was in line with expectations and down from $4.6 billion in the previous quarter but double the level of the first quarter of last year as problems in the subprime housing market work through its loan book.

HSBC said its underlying revenue growth in the first quarter was comfortably ahead of a year earlier, even after absorbing a $2.6 billion writedown in its global banking and markets investment banking unit.

Group revenue growth remained positive after also excluding a $2.7 billion gain on the fair value of debt it carries on its own books.

Underlying cost growth during the quarter was modest, it said, and its capital ratios remained broadly in line with those at the end of last year.