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Monday, 4 March, 2002, 17:40 GMT
Argentina hits HSBC profits
HSBC logo
Profits were down 14% in 2001
Profits at the global banking group HSBC have fallen after it made provisions of more than $1bn to cover losses from the economic crisis in Argentina.

Pre-tax profits at the group slipped 14% to $8.81bn (6.2bn) after it doubled its bad debt provisions to $2bn.

The Argentine crisis accounted for $1.12bn of the write-down - which was slightly higher than analysts had forecast.

HSBC said the past year had been a "challenging" one and that it remained "cautious" about the next 12 months.

"Much will depend on the pace of recovery in the US. Recent economic indicators provide mixed signals," chairman John Bond said in a statement.

The figures were in line with analysts' expectations and this helped push shares in HSBC 59p higher to close at 837p.

Global downturn

HSBC said the business environment had "deteriorated" during the year, as the worldwide economic slowdown took hold.

"Globally, the credit environment weakened in line with economic conditions as corporate profitability fell and the availability of funding for investment declined," Mr Bond said.

Last year Argentina descended into chaos as people protested against draconian policies introduced to try and avoid default on overseas debt and devaluation of the peso.

Eventually the pressures became too strong, and Argentina defaulted on its debts and floated the peso against the dollar.

HSBC took a $520m charge to cover losses stemming from the change in value of the peso, and a general provision of $600m for losses in Argentina.

HSBC said its business in Argentina accounted for only 0.5% of its assets, so the problems there posed no great risk to the bank.

But it added that the situation in the country remained "both fluid and disturbing".

The provisions helped push HSBC's overall charge for bad or doubtful debts up to $2.04bn.

UK 'strong'

While many countries were struggling with the global slowdown, HSBC said the UK economy remained "fundamentally strong" despite the effects of the foot and mouth outbreak and the recession in manufacturing.

It said its new mortgage strategy helped it to gain its largest ever share of net new mortgage lending last year, climbing to 4.4% from 3% the previous year.

It also said it managed to grow its savings balances by more than 30% in both the HSBC Bank and First Direct.

The BBC's Manuela Saragosa
"HSBC has banking operations in most continents"
See also:

04 Feb 02 | Business
Q&A: Argentina's economic crisis
30 Dec 01 | Business
HSBC buys into China mainland bank
03 Sep 01 | Business
HSBC to shake up analysts' advice
06 Aug 01 | Business
HSBC confounds doomsayers
06 Mar 01 | Business
Big banks 'operate monopoly'
26 Feb 01 | Business
HSBC reports 7.1bn profit
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