Business | Banking
HSBC posts record profit despite massive $17b credit crunch hit
HSBC's profits rose 10 per cent last year as buoyant growth in Hong Kong and elsewhere in Asia helped Europe's biggest bank absorb $17.2 billion in bad debts as the US housing crisis deepened.
- Reuters
- Published: 00:31 March 4, 2008
London: HSBC's profits rose 10 per cent last year as buoyant growth in Hong Kong and elsewhere in Asia helped Europe's biggest bank absorb $17.2 billion in bad debts as the US housing crisis deepened.
Profits in Hong Kong rose 42 per cent and earnings jumped 70 per cent in the rest of Asia, but the bank's North American arm barely scraped a profit as past risky loans to US homeowners now in trouble hit it hard.
The London-headquartered bank reported record pretax profit of $24.2 billion for 2007, up from $22.1 billion in 2006. This was below an average forecast of $24.7 billion from a Reuters Estimates poll of analysts, but results were distorted by some one-off items and did not include a $1.3 billion property gain expected by many analysts.
Forecasts
Underlying profit growth was five per cent for the year, which analysts said was in line with forecasts.
The bank's impairment charge jumped $6.7 billion from 2006, or 63 per cent. Bad debts had been expected to come in at $15.8 billion, based on the average of forecasts from eight analysts. By 1135 GMT HSBC shares were up 0.8 per cent at 772 pence, one of the top performing stocks in a weak UK share market and lifting the bank's value over £91 billion ($181 billion).
"If ever proof were needed about the benefits of diversification, these numbers from HSBC fall squarely into that category," said Richard Hunter, head of UK Equities at Hargreaves Lansdown. "Its performance in the ever-strengthening markets of China, India and Hong Kong proved a more than ample buffer against its US subprime woes."
HSBC said the outlook for 2008 was uncertain and that the US economic slowdown and credit outlook "may well get worse".
It said its conservative balance sheet and international spread left it well positioned and it expects to improve margins and will "continue to invest in building market presence at a time when others with weaker capital positions are constrained".
The bank has said it may sell half its branches in France for $3.2 billion and redeploy proceeds towards emerging markets, and other businesses could follow.
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