HSBC sets aside $4.3 bn more for US bad loans

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Nov 10 : HSBC Holdings Plc, Europe’s biggest bank, said third-quarter profit rose even as it set aside a more- than-estimated $4.3 billion to cover bad loans in the US and forecast “further deterioration.”

The US unit “declined markedly” because of consumer and corporate loan defaults, the London-based company said in a statement today. Pretax profit in the quarter was helped by lending in Asia, $3.4 billion in accounting gains on its debt and the sale of assets in France.

HSBC, the first European bank to report losses on US subprime assets, has set aside $42.3 billion for bad loans since the start of 2006. The latest provisions, needed to cover rising late payments on mortgage loans and credit cards, exceeded the $3.7 billion median estimate of three analysts surveyed by Bloomberg. Still, business in Asia is resilient and the bank won’t cut the dividend or seek government help to raise capital, Chief Executive Officer Michael Geoghegan said on Monday.

“The US is weaker again, though the outlook for Asia is not too bad, whereas potentially I thought it could have been a horror show,” said Leigh Goodwin, an analyst at Fox-Pitt Kelton Ltd. in London who has a “sell” rating on the stock. “It”s a mixed bag.''

HSBC rose 0.5 per cent to 750 pence at 11:45 a.m., valuing the bank at 91 billion pounds ($144 billion). The shares have declined 11 per cent in London trading this year, making them the second- best performer in the 69-member Bloomberg European Banks index.

Asian markets excluding Japan will grow by 7 per cent next year, Geoghegan said. “We expect Asian growth to remain relatively more resilient, although it is not yet apparent to what extent governments will succeed in encouraging stronger domestic demand to counterbalance export weakness.''