HSBC profits soar as loan losses halve

FALLING toxic loan charges, booming growth in Asia, and the second best ever performance by HSBC’s investment banking division have lifted the bank’s profits more than twofold since the first half of 2009.

HSBC smashed expectations yesterday with a 121 per cent rise in first-half pre-tax profit to $11.1bn (£6.98bn), comfortably above forecasts of a $8.6bn earnings haul.

The results were largely thanks to a 46 per cent reduction in loan impairment charges and provisions, which have now hit their lowest level since the beginning of the financial crisis.

HSBC chief Michael Geoghegan, who relocated to Hong Kong earlier this year, reiterated the bank’s strategic focus on the fast-growing markets of Asia, which he dubbed the “bedrock” of group profits. He said HSBC would focus on expanding in mainland China and India in the future, noting the two countries’ exceptional potential for growth.

The global banking and markets arm posted a pre-tax profit of $5.6bn, a record for the division save for the bumper first half of 2009, despite the impact of reduced activity in the second quarter of the year due to Eurozone sovereign debt worries.

HSBC also hit back at the challenge laid down for the sector by chancellor George Osborne, who is on the warpath over lending to small businesses. The bank said it had increased new lending to SMEs in the UK by 38 per cent since the first half of last year, adding that many customers were choosing to repay their debts rather than take out new loans because of the ongoing economic uncertainty.

HSBC’s results set the tone for the rest of the UK banks reporting this week. Part-state-owned leviathans Lloyds Banking Group and Royal Bank of Scotland are both expected to have moved back into the black over the first half, while analysts forecast profit growth of around a third at Barclays, to £3.5bn.