HSBC slashes bad debt charges

The bank's North American operation delivered the most significant impairment shift, with the charge there falling to $4.6bn from $8.6bn in the first half last year. This largely reflects the continued loan book run-off at its struggling personal finance unit, the former Household International, rather than any sharp credit quality improvement. And, at 61 per cent of the group charge, North American bad debts remain a big drag. On an underlying basis, the region delivered an $80m loss for the six month period.

Meanwhile, the European bad debt charge fell 47 per cent to $1.5bn, reflecting an overall credit quality improvement - that helped European pre-tax profits to rise 18 per cent year-on-year to $3.5bn. But, with Eurozone economic growth having reached just 0.2 per cent in the first quarter, long-term prospects remain unexciting.

It's a very different story, however, in HSBC's Asian markets. In Hong Kong, the economy grew 2.4 per cent in the first quarter - helping HSBC to cut its bad debt charge there to just $63m from last year's $273m and to grow pre-tax profit 15 per cent to $2.9bn. It's as similar picture in the group's rest-of-Asia unit. Supported by Chinese economic growth of over 10 per cent, divisional pre-tax profits rose 48 per cent to $3bn and the bad debt charge fell to $147m from $531m. "We remain bullish on the outlook for emerging markets - both short and long-term," remarked chief executive Michael Geoghegan. In sharp contrast, he expects "anaemic growth in various western markets."

Prior to these figures, Charles Stanley expected full-year pre-tax profits of $17.3bn giving EPS of 70c (2009: $7.1bn/34c).

.

More analysis of company results