HSBC 1H profit down 57 percent

[August 03, 2009]  LONDON (AP) -- HSBC Holdings PLC, the world's fifth-largest bank in terms of assets, reported a 57 percent fall in first-half profit as provisions for bad loans increased, one symptom of the world recession.

The bank said first-half net profit was $3.35 billion compared to $7.7 billion in the first half of 2008.

Loan impairment charges and other credit risk provisions were up 40 percent to $13.9 billion in the first half.

Still, the results were better than expected and HSBC shares were up 5.5 percent to 639 pence on the London Stock Exchange.

The company announced a dividend of 18 cents per share, down from 57 cents a year earlier.

HSBC, like Barclays PLC, has not turned to the British government for a bailouts. HSBC raised $18 billion in a rights issue in March to bolster its balance sheet.

"By attracting core deposits, we have maintained a conservative advances-to-deposits ratio, which was 79.5 percent at the end of the period," said Chief Executive Michael Geoghegan.

"Although deposit spreads remained compressed in the challenging economic environment, HSBC is fully committed to its strong and distinctive liquidity position."

In the Personal Financial Services unit in the United States, where HSBC has shut down its Household International Inc. consumer lending operation, it reported a pretax loss of $2.9 billion compared to $2.2 billion a year earlier. In the second half of last year, HSBC reported a loss of $15.2 billion for Household International including a $10 billion goodwill impairment.

HSBC bought the Illinois-based Household International, which operated the Beneficial and Household Finance brands, in 2002, an acquisition which made HSBC the biggest subprime mortgage lender in the United States.

The company said it is not yet able to estimate losses from lawsuits, now at an early stage, related to the collapse of Madoff Securities. Various HSBC group companies outside the United States provided services to a number of U.S.-based funds which had invested money in Madoff Securities.

As of Nov. 30, the aggregate net asset value of these funds was $8.4 billion.

"HSBC considers that it has good defenses to these claims and will continue to defend them vigorously," the company said.

In the United Kingdom, HSBC said it made 6.7 billion pounds ($11.3 billion) of new mortgage loans in the first half, and increased its market share from 4.5 percent to 9.5 percent. It aims for a full-year total of 15 billion pounds.

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On the Net:
http://www.hsbc.com/1/2/investor-relations/

[Associated Press; By ROBERT BARR]

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