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LONDON - EUROPE'S biggest bank HSBC said its first-half profit fell 28 per cent, in line with forecasts, as a $14 billion (S$19 billion) hit on bad debts on U.S. home loans and asset writedowns offset strong Asian growth.
HSBC said pretax profit in the six months was $10.2 billion, down from $14.2 billion a year before. The average forecast in a Reuters poll of seven analysts was $10.1 billion.
By 0905 GMT on Monday HSBC's London-listed shares were down 1.6 per cent at 824 pence, paring earlier gains and underperforming a 0.6 per cent rise in the FTSE index.
The bank said the outlook for economies was 'highly challenging' after deteriorating progressively in the first half. It predicted growth in emerging markets would hold up 'reasonably well, albeit with less momentum than in the recent past'.
'Ultimately the real economy will recover from this crisis, although it may get worse before it gets better,' HSBC Chairman Stephen Green said in a statement.
The bank's impairment charge was $10.1 billion for the six months, up 58 per cent from a year ago, mainly due to losses from its book of U.S. mortgages.
Its U.S. impairment charge was $6.8 billion, up 85 per cent on the year but down from the previous six months and broadly in line with analysts forecasts after a $3.2 billion charge for the first quarter.
The charge dragged its North American business to a $2.9 billion loss in the first half, from a $2.4 billion profit.
HSBC's North American bad debts have topped $18 billion in the last 18 months. The problem stems from aggressive selling of U.S. subprime mortgages by HSBC Finance, formerly the Household business bought for $14.8 billion five years ago.
It is shrinking the mortgage book, no longer lends through intermediaries and has cut the branch network but has said it could take several years to work through.
It said on Monday it will run off its U.S. vehicle finance business after ceasing to originate new business in July.
HSBC's investment bank also wrote down $3.9 billion on its exposure to credit trading, monolines and leverage acquisition financing loans. Profits in Global Banking and Markets fell 35 per cent from a year before to $2.7 billion.
HSBC shares are down 2 per cent this year but have easily outperformed a 31 per cent tumble by Europe's bank sector, as its strong balance sheet and exposure to Asia has given it an advantage over rivals, and could see it pick up bargain assets.
Its tier 1 equity ratio was 8.8 per cent at the end of June, down from 9.3 per cent at the start of the year.
'We continue to have the capacity to deploy capital at a time when others may be constrained,' Mr Green said. -- REUTERS
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