HSBC Profits Rise, But Bad U.S. Debt Weighs

Global banking behemoth HSBC Holdings today announced a 25 percent increase in profits in the first half of 2007 amid rising bad loan charges in the U.S.

HSBC said that its pretax profits from January through June of this year rose 13 percent compared to the same period last year. With its tax rate at near record lows, HSBC earned $10.9 billion, up 25 percent from the $8.7 billion reported for the first half of 2006.

Most of the gains came on strong performance in emerging markets in Asia and Latin America. The U.S. market, specifically the subprime mortgage market, was seen as a drag on earnings.

HSBC said its charge for bad debts was $6.4 billion in the first half of the year, up 63 percent from $3.9 billion in the same period last year, and attributed most of the increase to the U.S. mortgage market. HSBC said that it has gotten a better grip on the subprime mortgage issue and that it expects the market to weigh less heavily beginning in 2008.

"We’re very pleased with progress in mortgage services, although clearly there’s a long way to go," Douglas Flint, HSBC finance director, said in a conference call.

HSBC also said it was helped in the first half by a one-time recognition of $1 billion in profits from the dilution of its holdings in China.