HSBC Holdings plc has advised investors that the global group's bad debt provisions for 2006 were likely to be higher than current market estimates.

The increased bad debts provisions are due mainly to higher defaults in its US household mortgage business, it said in a trading update issued in London on Wednesday.

The provisions in HSBC Group in the US will have no effect on HSBC's subsidiary in Malta, a spokesman said.

In the US, the group explained, slowing house price growth was being reflected in accelerated delinquency trends across the sub-prime mortgage market, particularly in more recent loans. As a result, analysts had expected HSBC Group's 2006 loan impairment charge to be $8.8 billion, according to the average of 11 analysts' forecasts compared to $7.8 billion in 2005. That figure is now expected to be about $1.8 billion higher, or near $10.6 billion. These provisions are before the HSBC Group's pre-tax profits of $21 billion in 2005. HSBC had assets of $1.5 trillion as at December 31, 2005.

HSBC said its chief executive, Michael Geoghegan, is taking direct action to manage the group's response to the US mortgage problem. "North America risk management is now centralised under two highly experienced HSBC executives and the specific sub-prime products from which problems originated have been discontinued," it explained.

"HSBC, the world's third largest bank by market value after Citigroup and Bank of America, was not alone with its US housing problems. It should be pointed out that the US household business, which was purchased for $14.8 billion, has already generated pre-tax profits of $9 billion since its acquisition in 2003," the group said.

HSBC Group said it offers investors "a unique and well diversified" earnings platform - both by geography and customer type - and the US mortgage services business "only forms a small part". Generally, performance of the group's businesses for 2006 was in line with HSBC Group's latest expectations, it said.