HSBC Holdings Plc, Europe's biggest bank by market value, yesterday set aside a smaller-than-estimated US$3.2 billion for bad loans in the United States and said its first-quarter profit was higher than a year earlier.
HSBC rose as much as 2.7 percent in London trading after chairman Stephen Green said there had been a "lull" in US delinquencies. The outlook for the rest of the year "remains unusually difficult to foresee in the current environment," he said in a statement reported by Bloomberg News.
The London-based company expects the US economy to slip into a recession as deterioration in the housing market extends into 2009. While first-quarter earnings declined in the US on the heels of last year's US$1.1 billion loss, HSBC reported higher pretax profit in the Asia-Pacific region, the Middle East and Latin America.
"People need to remember how strong Asia can be," said Simon Maughan, a London-based analyst at MF Global Securities Ltd. "The US provisions are less than some of the more aggressive forecasts," added Maughan, who rates the stock "buy."
HSBC gained as much as 23 pence and traded up 2 percent 883.5 pence in London early yesterday, valuing the bank at almost 105 billion pounds (US$206 billion).
The stock has gained 4.9 percent this year - the best performance in the eight-member FTSE 350 Banks Index, which declined 8.7 percent.
Analysts had predicted first-quarter loan losses of US$4.6 billion in the US consumer finance business, according to the median estimate of three analysts surveyed by Bloomberg.
Yesterday's report indicated HSBC's defaults didn't worsen more than earlier forecasts in the US and improved in the United Kingdom.
Financial companies worldwide have posted losses of US$323 billion related to the collapse of the US subprime mortgage market.
Royal Bank of Scotland Group Plc, the UK's second-biggest bank, wrote down 5.9 billion pounds of credit-related assets this year, including collateralized debt obligations tied to the US subprime housing market and leveraged buyout loans.
It is raising 12 billion pounds in a rights offer and selling about 4 billion pounds of assets to shore up capital eroded by credit writedowns and the acquisition of ABN Amro Holding NV assets.