HSBC Holdings Plc, Europe's biggest bank by market value, said yesterday that emerging markets may grow more slowly this year and first-half profit fell 29 percent as bad loans rose in the United States.
Net income for the six months ending on June 30 fell to US$7.7 billion, or 65 cents a share, from US$10.9 billion, or 94 cents, a year earlier, the company said. HSBC fell as much as 2.8 percent in London trading yesterday after the bank said the outlook was "highly challenging with significant uncertainty," Bloomberg News reported.
HSBC has put US$10.1 billion this year into loan-loss reserves, adding to charges of US$17.2 billion in 2007 and US$10.6 billion in 2006 for bad loans. While the London-based bank's profit rose in Europe, Latin America and most of Asia, Chairman Stephen Green said emerging markets would grow "with less momentum" than before.
"There's some pretty negative news," said Alan Beaney, investment head at Principal Asset Management Ltd in Sevenoaks, England. "Asia is slowing as was to be expected, and the US took a hit."
HSBC was down 18.5 pence at 818.5 pence yesterday in London, valuing the bank at 98.4 billion pounds (US$193 billion). The stock is down 2.8 percent this year, making it the best-performing bank in the 71-member Bloomberg Europe Banks & Financial Services index, which fell 32 percent.
Mortgage watch
HSBC reported a loss in the North American unit and declining profit in the Hong Kong market. Pretax profit rose in the rest of Asia, Latin America and Europe.
"We are monitoring the mortgage market carefully" in the United Kingdom, Chief Executive Officer Michael Geoghegan, 54, told analysts in London.
Credit quality on loans didn't deteriorate in the first half, he said. The bank increased first-half mortgage lending in the UK as other lenders pulled back, Geoghegan said.
"In Asia, compared with the buoyant conditions of last year, it is apparent that corporate activity in some sectors is slowing and demand for equity-related and wealth products has reduced as equity markets have declined," Green, 59, said.
HSBC's profit in Hong Kong was hurt by "significant falls" in share prices, which reduced the value of the bank's investments, it said in the half-year report.
Hang Seng Bank Ltd, the Hong Kong lender that is 62 percent owned by HSBC, said first-half profit rose 2 percent. Hang Seng increased lending and expanded in wealth management to overcome a cooling economy. The bank said China's mainland and Hong Kong SAR would be "affected" by the slowing US economy and accelerating global inflation.
Pretax profit in China's mainland fell 41 percent to US$907 million because year-earlier stake sales were not repeated, HSBC said.