HSBC profits soar to $12.52bn

Banking giant HSBC today posted an 18% hike in first-half profits of $12.52bn (€9.8bn).

The London-based bank said it was boosted by business in emerging markets while operations in mature economies such as the UK “continued to perform well”.

But HSBC warned that bad debts reached $3.89bn (€3bn) in the six months to June 30 – 19% more than in the first half last year.

Shares in HSBC lifted more than 1% as the pre-tax profits figure came in ahead of expectations in the City.

HSBC was the first of Britain’s five biggest banks to report results this week - with the rest expected to follow HSBC’s lead with strong profits growth on the back of buoyant corporate business.

Analysts also expect Halifax Bank of Scotland, Barclays, Lloyds TSB and Royal Bank of Scotland to post higher levels of bad debts as people in the UK struggle to pay off unsecured loans.

Last year’s profits haul from the banking sector amounted to more than £33bn (€48bn), the equivalent of £1,000 (€1,500) a second and higher than the annual GDP of countries including Kuwait, Bangladesh, Morocco and Luxembourg.

HSBC, which is Europe's biggest bank and has operations around the world, today said it benefited from a strong performance at its investment bank where pre-tax profits jumped 37%.

The bank said revenues at the investment bank grew by $1.37bn (€1bn) in the first six months compared with a flat performance a year ago. At the same time, costs rose by just $429m (€336m) compared with $650m (€509m) in the first half of 2005.

“This translated into a positive gap between revenue growth and cost growth,” HSBC said.

But while the investment bank delivered strong results, the retail bank was hit by an increase in bad debts, particularly in the UK.

HSBC said: “In the UK, the unsecured personal sector again contributed the major portion of the impairment charge in the period, largely as a result of rising bankruptcy filings and individual voluntary arrangements.

“Although the charge was considerably higher than the first half of 2005, it was in line with that incurred in the second half of last year. We are seeing an improvement in the credit quality of more recent originations.”

HSBC added that the “serious” and “excessive” levels of consumer debt in the UK was a growing issue.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “These are forecast-busting figures and management looks to have answered doubters of its move into investment banking in fine style.

“Overall, HSBC remains a solid, diverse and well-managed bank with a growth strategy for investing in emerging markets, although not at any price.

“Today’s figures are likely to be well received and the market consensus opinion should continue trending positive.”