HSBC suffers as recovery in emerging markets falters

London: HSBC Holdings Plc, the UK's biggest bank, said profit growth slowed in the third quarter and that recovery in emerging markets may be faltering.

The rate of profit growth declined from the first half, the London-based lender said in a statement yesterday. Third-quarter profit was still "well ahead" of the year-earlier period as bad-loan provisions in the US declined, HSBC said.

"Our latest data from emerging markets points to a slowdown in the rate of recovery and the likelihood of some bumps in the road ahead," chief executive officer Michael Geoghegan said in the statement.

"We believe the long-term fundamentals for emerging economies are as compelling as ever."

HSBC, which gets about two thirds of its revenue from outside Europe, said loan impairments dropped to their lowest level since early 2007 after it shut its US consumer finance unit.

The bank follows Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc in reporting a decline in provisions.

HSBC declined 2.1 per cent to 680.7 pence as of 9.54am in London, for a market value of £121 billion (Dh718.8 billion). The stock has gained 13 per cent since the start of the third quarter, lagging behind Standard Chartered Plc, a rival that makes most of its profit in Asia, which has climbed 23 per cent.

Low-growth company

"This should be interpreted negatively and reinforces our view that HSBC is a low growth company which is already fully valued," said Andrew Lim, a financial analyst at Matrix Corporate Capital LLP with a "hold" rating on HSBC.

"We would expect downgrades to full-year 2010 estimates."

The bank in August said its North American unit returned to profit for the first time in three years as bad-debt provisions fell. Following a succession struggle, HSBC named investment banking head Stuart Gulliver as CEO in September to replace Geoghegan, who will retire at the end of the year.

HSBC yesterday said it hasn't delayed taking action against householders amid the US foreclosure crisis. Under pressure from lawmakers, US banks have delayed action to review filings that some borrowers claim were marred by so-called robo-signing, in which employees vouched for the accuracy of court statements without personally checking loan records.

"We have found no systemic concerns with our foreclosure processes, nor have we found instances of ‘robo-signing'," the London-based lender said in a statement yesterday.

"Officials are requiring additional verification of information filed prior to the foreclosure proceeding. If these trends continue there could be an extended delay in the processing of foreclosures, which could have an adverse impact upon housing prices."

RBS, which is mostly owned by the government since the recession, said its third-quarter net loss narrowed by 36 per cent to £1.15 billion. Impairments fell 40 per cent in the period.