HSBC profits up on Asia boom

By Steve Slater

LONDON (Reuters) - HSBC Holdings (HSBA.L), Europe's biggest bank, posted higher first-half profit and struck an upbeat tone on the global economy on Monday, despite a big rise in bad debts linked to its problems in the U.S. housing market.

HSBC (0005.HK), which blamed bad U.S. mortgage loans for its first ever profit warning earlier this year, said pre-tax profit rose 13 percent to $14.16 billion in the six months to June 30, boosted by strong growth in Hong Kong, Asia-Pacific and record profits from its investment banking arm.

That was ahead of an average forecast of $13.27 billion (6.55 billion pounds) from a Reuters Estimates poll of nine analysts.

But the bank said it benefited from a gain of almost $1.1 billion from the dilution of its mainland Chinese holdings and that pre-tax profit was up 5 percent excluding that gain.

London-based HSBC said its charge for bad debts was $6.35 billion in the first half of the year, up 63 percent from $3.89 billion in the same period last year as it continued to suffer from past loans to the hard hit U.S. subprime mortgage sector.

By 1500 GMT its shares were up 2.3 percent at 900.5 pence, one of the best performing stocks in the FTSE 100 index and valuing the bank at 106 billion pounds ($216 billion).

"The shares are probably reacting to the fact that credit quality seems to be under control, it hasn't got any worse despite some of the concerns that have been coming out over the last two or three weeks," said Ian Poulter, analyst at stockbroker Teather & Greenwood.

"That gives a degree of confidence and they are showing good growth in a lot of other areas," he added.