HSBC, Europe's biggest bank, said yesterday that first-half net profits slumped by 57 per cent to $3.35 billion (€2.35 billion) as bad debts ballooned to nearly $14 billion.
Impairment charges and other credit provisions soared by 39 per cent to $13.9 billion in the six months to June, compared with the figure in the same period of last year, HSBC said in a results statement.
The bank added that it was "strongly positioned for the upturn" but warned that the "economic outlook remains uncertain".
Pre-tax profits sank by 51 per cent to $5.019 billion in the reporting period, while group net operating income fell 12 per cent to $34.741 billion.
"Our performance proves our ability to deliver profit, generate capital and make distributions to our shareholders throughout the business cycle - even in challenging market conditions," HSBC chairman Stephen Green said in the earnings release.
"We are pleased with our results and profitability overall is ahead of the expectations we had at the outset of this year. In large part this reflects an excellent performance in our Global Banking and Markets business.
"It also reflects progress made in the US, where we announced our decision to run off a major part of our consumer finance business in March."
The group said its consumer lending business in the United States posted a $2.9 billion pre-tax loss for the first half. The division was devastated by the collapse of the subprime home loan market and is being wound down.
HSBC added that the deep downturn could be bottoming out amid international efforts to repair the shattered global financial system.
"Operating conditions in the financial sector have continued to improve as the effects of government and central bank policies work through the system and it may be that we have passed, or are about to pass, the bottom of the cycle in the financial markets," Mr Green added.
"Nonetheless, the timing, shape and scale of any recovery in the wider economy remains highly uncertain. Our view continues to be cautious as long as a number of serious impediments to growth remain."
HSBC, while escaping the need for a British government bailout, raised £12.5 billion ($18 billion, €13.7 billion) earlier this year via a sale of new shares to bolster its finances.
"The proceeds from the rights issue have reinforced our capital strength, allowing us to navigate the economic and regulatory environment, take long-term decisions in support of our brand and customer relationships and look confidently at expansion opportunities consistent with our strategy," it added yesterday.