Bruised HSBC shines in Mideast

Dubai: HSBC Holdings Plc, Europe's biggest bank by market value, said first-half net profit declined 29 per cent as it set aside more money for bad loans in the US.

Net profit for the six months ended June 30 fell to $7.7 billion from $10.9 billion last year. Loan impairment charges and other credit risk provisions were up by $3.71 billion to $10.05 billion from $6.34 billion in the first half of 2007.

The bank's North American business reported a $2.9 billion loss in the first half from a $2.4 billion profit last year, mainly due to $6.8 billion charges on bad loans.

In stark contrast to the global financial results, in the Middle East HSBC reported strong profit growth of 63 per cent to $990 million from $606 million in the same period last year.

The UAE reported the highest profit growth of 77 per cent to $522 million in the first half this year compared to $295 million last year. In Saudi Arabia the bank's joint venture Saudi British Bank (SABB) reported a net profit of $440 million. HSBCs' share in the profit $175 million was up by 58 per cent from $111 million last year.

While the profits from the Egyptian operations grew 60 per cent from $72 million in the first half last year to $115 million in the rest of the region the bank reported 40 per cent growth in profits from $128 million in the first half last year to $178 million in the first half this year.

"In terms of growth rates the Middle East tops other regions. Of course, the reason is obvious as the region is experiencing an unprecedented economic boom. Banking sector performance in the region is a reflection of the strength of the underlying economy," said Yousuf Nasr, CEO of HSBC Bank Middle East.

He said all divisions such as personal financial services, commercial banking, global banking and private banking reported equally good results.

"Although we expect the second half of the year to be positive, realistically it will be hard to repeat the first half performance," he said.

Commenting on the outlook for the UAE and the Gulf region, Nasr said the rising inflation and its impact on the overall cost structure and over stretching of customers in real estate sector could adversely affect the asset quality. However he said HSBC is fine-tuning its lending practices from time to time in line with the market dynamics.