HSBC said it was increasingly likely the United States economy will go into recession this year and a recovery in the U.S. housing market was unlikely until at least 2009, but its trading statement was more positive than those from many banks battered by the credit crunch.
LONDON (Reuters) - Europe's biggest bank HSBC Holdings <HSBA.L> said its profit in the first quarter was ahead of a year ago as growth in Asia helped counter over $5 billion in hits from bad debts on U.S. home loans and asset writedowns.
HSBC said it was increasingly likely the United States economy will go into recession this year and a recovery in the U.S. housing market was unlikely until at least 2009, but its trading statement was more positive than those from many banks battered by the credit crunch.
The bank said on Monday its bad debt charge related to its U.S. consumer finance business was $3.2 billion for the first quarter and it wrote down almost as much for a deterioration in the value of risky assets.
HSBC will report interim results on August 4.
!ADVERTISEMENT!Its latest U.S. home loan impairment charge was in line with expectations and down from $4.6 billion in the previous quarter but double the level of the first quarter of 2007 as problems in the subprime housing market work through its loan book.
HSBC shares were up 1.9 percent at 882 pence as of 4:40 a.m. EDT (0840 GMT).
"Group profit up on Q1 2007 ... is a claim few banks in Europe will be able to make," said Alex Potter analyst at Collins Stewart. Underlying revenue growth, the scale of writedowns on assets and profits at HSBC Finance were all better than expected, he said.
U.S PROBLEMS CONTINUE
HSBC said it was satisfied with the progress it is making in running down its U.S. mortgage book and tackling bad debts, but HSBC Chief Executive Michael Geoghegan predicted an improvement in the U.S. housing market will be "a 2009 event" and won't occur this year.
"It is a slowing (in bad debts) rather than a stopping," Geoghegan told reporters on a conference call.
"We don't know whether that is a slowing because the economy is improving or whether it is a seasonal thing. I suspect it is more seasonal," he added, saying tax rebates and other issues could distort the situation this year.
HSBC said its underlying revenue growth in the first quarter was "comfortably ahead" of a year earlier, even after absorbing a $2.6 billion writedown in its global banking and markets (GBM) investment banking unit.
Group revenue growth remained positive after also excluding a $2.7 billion gain on the fair value of debt it carries on its own books. It said most of this gain reversed in April, however.
Underlying cost growth during the quarter was modest, it said, and its capital ratios remained broadly in line with those at the end of 2007.
It increased profits in all major countries in which it operates in Asia-Pacific, the Middle East and Latin America. GBM's profits were ahead of the previous two quarters on the back of a strong emerging markets focus, it said.
(Reporting by Steve Slater and Clara Ferreira-Marques; Editing by Quentin Bryar and Jason Neely)
