HSBC yesterday forecast that emerging markets will spearhead the economic recovery as the world banking giant said its third-quarter profits were "significantly" higher compared with a year earlier.
In an HSBC trading update, group chief executive Michael Geoghegan said that emerging markets would "drive the global recovery."
In an eventful day for Britain's banking sector, Barclays bank also posted a drop in earnings and state-controlled lender Lloyds Banking Group said it planned to cut 5,000 more jobs.
"Banking issues are dominating traders' thoughts today," said IG Index chief market strategist David Jones.
Britain's banking sector has suffered massively in the wake of the financial crisis, forcing the government to pump billion of pounds into major lenders such as Royal Bank of Scotland, LBG and Northern Rock.
But HSBC and Barclays have avoided the clutches of the state - the former by raising billions of pounds on the stock market and the latter by securing large investment from Gulf nations.
HSBC, Europe's biggest bank, reported that underlying quarterly pre-tax profit was "significantly ahead" of figures a year earlier, saying the global economy was over its "biggest jolt." HSBC also said that its expenses linked to loan defaults fell to the lowest quarterly level for more than a year.
"Pre-tax profit for the third quarter of 2009 was significantly ahead of the third quarter 2008," HSBC said in a statement that did not provide figures.
Mr Geoghegan added: "Driven by stabilised credit performance in the US, loan impairment charges have fallen to their lowest quarterly level for over a year." Stripping out debt costs however, HSBC said third-quarter profits were lower compared with a year earlier.
"I believe that the biggest jolt has now passed through the global economy," Mr Geoghegan said.
"But it is too early to claim victory, especially while unemployment is still rising in the West.
"The world will likely experience a two-speed recovery and emerging markets currently offer the brightest prospects for growth. Indeed, it now seems clear that they will drive the global recovery."
Mr Geoghegan added that in Asia, HSBC has been "encouraged by renewed activity" in equity markets and increased demand for wealth management products.
"In Hong Kong, we increased commercial lending and maintained our leading position in mortgage lending," he also said. HSBC in September announced plans to move Geoghegan to Hong Kong from London as the "centre of economic gravity" shifts from West to East. HSBC, founded in Hong Kong and Shanghai in 1865, will remain headquartered in London and regulated by Britain but Mr Geoghegan will relocate in February to be nearer the group's "largest and most important region" of operation.
Barclays meanwhile yesterday reported sharp falls in third-quarter net profits as the banking group's bad debts soared.
Barclays said profit after tax slumped 54 per cent to £1.075 billion in the three months to September 30 compared with the outcome for the third quarter in 2008.
Net profits slumped 29 per cent to £2.73 billion in the first nine months of the year.
Barclays said bad debt charges surged 63 per cent to £1.4 billion in the third quarter and by 65 per cent to £6.2 billion in the first nine months. Shrugging off the falls in profit, Barclays' chief executive John Varley said the group had "maintained strong income momentum in the third quarter," particularly at its investment banking arm Barclays Capital.
Barclays last year won a £7 billion capital injection largely backed by Abu Dhabi and Qatar, as it survived the credit crunch without government aid. But Abu Dhabi has since sold most of its holding.
In addition, Qatar's sovereign wealth fund, the Qatar Investment Authority, recent trimmed its Barclays stake.