HSBC Holdings PLC, the world's fifth-largest bank by assets, reported a 57% fall in first-half profit as bad loans increased due to the global economic downturn.
HSBC Holdings PLC, the world's fifth-largest bank by assets, reported a 57 percent fall in first-half profit as bad loans increased due to the global economic downturn.
The bank said first-half net profit was $3.35 billion compared to $7.7 billion in the first half of 2008.
Loan impairment charges and other credit risk provisions were up 40 percent to $13.9 billion in the first half.
Still, the results were better than expected and HSBC shares were up 5.5 percent to 639 pence on the London Stock Exchange.
The company announced a dividend of 18 cents per share, down from 57 cents a year earlier.
"Profits have surpassed expectations, questions over the bank's financial strength have been laid to rest via a substantial fund raising, whilst management direction remains unimpeded by government intervention," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.
HSBC was the second big U.K. bank to report earnings this week. Barclays PLC earlier announced a 10 percent increase in net profit to 1.888 billion pounds in the first half.
HSBC, like Barclays PLC, has not turned to the British government for a bailouts. HSBC raised $18 billion in a rights issue in March to bolster its balance sheet.
"By attracting core deposits, we have maintained a conservative advances-to-deposits ratio, which was 79.5 percent at the end of the period," said Chief Executive Michael Geoghegan.
"Although deposit spreads remained compressed in the challenging economic environment, HSBC is fully committed to its strong and distinctive liquidity position."
In the Personal Financial Services unit in the United States, where HSBC has shut down its Household International Inc. consumer lending operation, it reported a pretax loss of $2.9 billion compared to $2.2 billion a year earlier. In the second half of last year, HSBC reported a loss of $15.2 billion for Household International including a $10 billion goodwill impairment.
HSBC bought the Illinois-based Household International, which operated the Beneficial and Household Finance brands, in 2002, an acquisition which made HSBC the biggest subprime mortgage lender in the United States.
Analyst Bowman said that the Household International debacle may be making HSBC overly cautious in contrast to Barclays, which is profiting from its acquisitions of Lehman Brothers' business in the United States.
The company said it is not yet able to estimate losses from lawsuits, now at an early stage, related to the collapse of Madoff Securities. Various HSBC group companies outside the United States provided services to a number of U.S.-based funds which had invested money in Madoff Securities.
As of Nov. 30, the aggregate net asset value of these funds was $8.4 billion.
"HSBC considers that it has good defenses to these claims and will continue to defend them vigorously," the company said.
In the United Kingdom, HSBC said it made 6.7 billion pounds ($11.3 billion) of new mortgage loans in the first half, and increased its market share from 4.5 percent to 9.5 percent. It aims for a full-year total of 15 billion pounds.
