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Monday, 5 August, 2002, 16:22 GMT 17:22 UK
Profits fall at HSBC
HSBC logo
HSBC: "signs of recovery" in the global economy
The turmoil on the world's financial markets has hit profits at the global banking group HSBC.

Results were however better than most analysts' expectations, with pre-tax profits sliding 7% to $5.057bn (3.52bn) for the first half of 2002.

The bank said it had increased the amount of money it set aside to cover bad or doubtful debts by $274m to $715m.

Many banks have lent heavily to emerging markets in Latin America and around the world, and as markets tumble and the economy slows, fears are growing they not be able to recover all the money they lent.

HSBC however pointed out that this total of $715m was less than it had set aside in the second half of 2001, when it had to cover the financial crisis in Argentina.

Last week, UK High Street banks Barclays and Lloyds TSB both said they had made big increases in their provisions to cover bad debt.

Relief

HSBC's chairman Sir John Bond said the better-than-expected results demonstrated the "resilience of HSBC in difficult market conditions."

Pre-tax profits, including the writing off of the value of some assets, fell from to $5.057bn from $5.435bn for the same period last year.

Pre-tax profits before one-off items fell from $5.840bn to $5.458bn.

"The profits and bad debt charges look better than expected, and the overall impression is quite positive," said Canada Life fund manager Michael Gifford.

Despite the good reception for the results, shares in HSBC closed down 2 pence at 702p.

'Signs of recovery'

Sir John said that prospects for the rest of the year were uncertain but there were some glimmers of hope.

"The outlook for the rest of 2002 is more likely to be shaped by sentiment than economic fundamentals or by policy action although there are signs of recovery in the world economy," he said.

He said that consumers were becoming more cautious following the decline in personal wealth caused by falls in equity markets.

"The unfolding of a number of corporate scandals, particularly in the United States, drove investors to seek capital protection rather than capital growth."

And he added that HSBC was prepared for further tough market conditions.

"Without growth in corporate profitability and investment, a stock market rebound is unlikely.

"We continue to position HSBC for a subdued environment."

 WATCH/LISTEN
 ON THIS STORY
Sir Keith Whitson , chief executive, HSBC
"We entered Argentina when it was the IMF's darling."
The BBC's John Moylan
"The company does not expect a stock market rebound"
Jonathan Charley, banking strategist
"The US economy doesn't show any signs of recovering and that will have a ripple-on effect into the Far East."
See also:

18 Jul 02 | Business
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30 Dec 01 | Business
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