HSBC announced yesterday that net profits surged 66 per cent to $5.22 billion during the third quarter on changes to the size of debt held by Europe’s biggest bank, but underlying earnings slumped.

Profit after tax rocketed to $5.22 billion (€3.79 billion) in the three months to September 30 compared with $3.15 billion in the third quarter of 2010, HSBC said in a statement.

However underlying pretax profits slid 35 per cent to $3 billion as revenues dropped and the bank’s bad loans rose in the United States.

“The (banking) sector faces significant headwinds,” HSBC chief executive Stuart Gulliver said in the statement.

“The continuing macroeconomic, regulatory and political uncertainty, particularly in Europe, adversely affected our industry’s performance in the quarter. Against this backdrop, HSBC remains resilient, with a strong balance sheet and robust liquidity,” he added. HSBC said that its exposure to the debt of Greece, Ireland, Italy, Portugal and Spain stood at $5.5 billion at the end of the third quarter, down from $8.2 billion on June 30.

HSBC is undergoing major changes under Gulliver, who became chief executive in January.

He plans to axe 30,000 posts by 2013 and create another 15,000 jobs in emerging markets over roughly the same period. It forms part of plans to save $2.5-3.5 billion in costs by 2013.

HSBC also recently agreed to sell its US credit card and retail services business to Capital One Financial Corp. in a deal worth $32.7 billion.

HSBC, founded in Hong Kong and Shanghai in 1865, sees Asia as its most important region although it remains headquartered in London. More than a third of its current workforce of about 300,000 are based in Asia.