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.
HSBC said its handling of U.S. housing problems was on track, although it acknowledged the rest of this year will stay tough due to an expected rise in the number of homeowners on adjustable rate mortgages shifting to a higher repayment.
“We’re ahead of expectations at this stage,” HSBC Chief Executive Michael Geoghegan said at a press conference, adding the deterioration in impairments was as expected.
HSBC estimated it will see $5.3 billion of mortgage resets in the second half, but it had previously expected $10 billion of resets in 2007, including $7 billion in the second half.
HSBC Chairman Stephen Green said the bank was not interested in bidding for ABN AMRO AAH.AS, the Dutch bank at the heart of the world’s biggest bank takeover battle between Barclays (BARC.L) and a consortium led by Royal Bank of Scotland (RBS.L).
He said ABN’s core business was not where HSBC was targeting its growth, but the bank is willing to spend on acquisitions and organically to accelerate growth in Asia.
“We will not shy away from investment opportunities in the region ... we intend to boost our number one position in Asia and the Middle East,” Geoghegan added, saying he would also look at deals in Latin America.
HSBC sounded an upbeat note on the global economy, saying weakness in the United States was not constraining economic activity elsewhere.
It said there were risks to the world economic outlook — and excess liquidity in global financial markets could lead to further asset price dislocation — and it remained cautious in its risk appetite.
Underlying revenues rose 16 percent in the first half, just outpacing cost growth of 15 percent.
The bank said growth was driven by an “excellent performance” in Asia — where profits in Hong Kong rose by a quarter and in the rest of Asia-Pacific by 37 percent.
Profits in its CIBM investment bank arm rose by almost one-third to a record $4.2 billion.
HSBC has scaled back its ambitions for CIBM this year and now says it will be emerging markets-led and financing focused, rather than trying to take on Wall Street’s biggest banks in merger and acquisition advisory.
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(Additional reporting by Clara Ferreira Marques, Mark Potter)
(Editing by Jane Baird/Sue Thomas
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