HSBC profits sag to $10 bln on bad debts, writedown

By Steve Slater

LONDON (Reuters) - Europe's biggest bank HSBC met analysts' forecasts with a 28 percent fall in its first-half profit, as a $14 billion hit from bad debts on U.S. home loans and asset writedowns offset strong Asian growth.

HSBC said growth in Asia is threatened, however, by a potential recession in the United States and rising inflation which could leave emerging markets holding up "reasonably well" but with "less momentum than in the recent past".

The bank on Monday reported a pretax profit for the six months to the end of June of $10.2 billion, down from $14.2 billion a year before. The average forecast in a Reuters survey of seven analysts was $10.1 billion.

By 1445 GMT HSBC's London-listed shares were down 1. 8 percent at 822 pence, underperforming a fairly flat British share index. Analysts said a cautious outlook knocked the shares, which have strongly outperformed rivals this year due to its strong balance sheet and Asian exposure.

"The area that is causing some concern is that although their Asian growth is good, it is slower than it was and if you extrapolate from that, then growth is going to be really slow," said Jane Coffey, head of equities at Royal London Asset Management, a top 20 HSBC shareholder.

Chairman Stephen Green said tough market and economic conditions would persist well into next year.

"A recession (in the United States) is a real risk," Green said at a press conference. "The length and depth of that is uncertain. I think if a recession occurred it could be shallow ... but any meaningful recovery in the housing market is unlikely before next year."

HSBC's impairment charge was $10.1 billion for the six months, up 58 percent from a year ago, mainly due to losses from its book of U.S. mortgages.