HSBC to unveil its profits

Banking giant HSBC will unveil its profits haul today with the main focus on the impact of the credit crunch.

Analysts expect the UK’s biggest bank to report a total write-off of US$16bn (€10.56bn) during 2007, with most of the hit coming from its US mortgage and consumer lending arm.

It follows a US$10.6bn (€6.6bn) total impairment charge for the previous year.

City estimates for HSBC’s pre-tax profits haul range between US$23.4bn (€15.3bn) and US$26.4bn (€17.4bn). Last year they came in at UA$22.1bn (€14.5bn).

The bank is the last of the “big five” British banks to report its earnings for 2007, and has been by far the worst affected by the financial crisis in the US housing market.

It has seen high-risk or sub-prime US borrowers struggle to meet loan repayments over the past year as interest rates have increased, leading to record default rates and repossessions.

HSBC has shut hundreds of branches in its US consumer banking division, HSBC Finance Corporation, (HFC), over the past year as the credit crunch took its toll.

Reports over the weekend suggested that HSBC will hike its dividend by 10% in a bid to reassure investors about its prospects amid the continuing fallout from the credit crunch.

But the scale of the losses is expected to increase pressure on the bank’s management from activist shareholders to overhaul its policy with regard to its troubled US arm.

Knight Vinke Asset Management, owner of less than 1% of HSBC, has called on the bank to sever all ties with HFC. The investment group wants directors to focus instead on growing markets in Asia.

In November, HSBC gave an upbeat upbeat view on trading in the UK, which it said was driving a strong performance in its European arm, and UK lending was seeing signs of improvement in the third quarter.

The UK’s other major banks – Barclays, Royal Bank of Scotland (RBS), Lloyds TSB and Halifax and Bank of Scotland – have already reported their annual results.

Together with a number of smaller High Street lenders, they have made an estimated collective loss of about £5bn (€6.5bn) from the US sub prime meltdown.