HSBC Holdings Plc said yesterday that first-half profit rose 25 percent, helped by lower taxes and asset sales in China.
The earnings rise beat analysts' forecasts, but costs for potential loan losses gained more than expected.
Net income climbed to US$10.9 billion, or 94 cents a share, from US$8.73 billion, or 77 cents, a year earlier, the London-based bank said in a statement. The result was buoyed by US$1 billion from the sale of stakes in banks and insurers in China.
The median earnings estimate from nine analysts surveyed by Bloomberg News was US$9.34 billion. Provisions for bad loans were almost US$6.4 billion, more than analysts' estimates of US$5.65 billion.
HSBC shares have lagged behind New York-based Citigroup Inc, the largest US bank, since the US$15.5 billion takeover of US consumer-finance company Household International Inc almost five years ago. An increase in loan defaults by people with patchy credit histories has overshadowed HSBC's accelerating growth in Asia and commercial lending in the first half of 2007.
Subprime challenge
The bank, which is the world's fourth-biggest lender, is "working through the challenges of subprime lending," Chief Executive Officer Michael Geoghegan said in the statement. "Our emerging markets operations continue to perform exceptionally well."
Revenue climbed 23 percent to US$42.1 billion. Pretax profit at HSBC's consumer-banking unit fell 20 percent to US$4.73 billion, and investment-banking profit increased 32 percent to US$4.16 billion.
Corporate-banking profit advanced 20 percent to US$3.42 billion. Private-banking profit rose 30 percent to $780 million.
In North America, first-half earnings slumped 35 percent to US$2.44 billion because of loan defaults by subprime borrowers. That missed the median estimate of US$2.49 billion from five analysts surveyed by Bloomberg. Bad debts in North America rose 76 percent to US$3.82 billion.
Geoghegan ousted US managers, including North American CEO Bobby Mehta, in February and scaled back home-equity loans. Geoghegan has spent more than US$5 billion to expand in Asia since 2004.