HSBC encouraged by bad debt picture

10th Nov 2009 08:17

Giant global bank HSBC is seeing some stabilisation in its bad debts picture, especially in the US, while elsewhere business generally remains strong."Overall, loan impairment charges and other credit risk provisions declined in Q3 2009 from earlier in the year and were at their lowest quarterly level since Q2 2008," HSBC said. "In the US, loan impairment charges in the consumer finance business in Q3 2009 were encouragingly lower than the run-rate in the first half of the year," it added.As a result the bank said that profitability for the first nine months of 2009 was stronger than expectations at the start of the year.On a reported basis, though, the third quarter was lower than this time last year, "largely due to fair value movements on our own debt caused by tightening credit spreads", it said.Excluding these fair value debt adjustments, HSBC says pre-tax profit for the third quarter of 2009 was significantly ahead of last year. Global Banking and Markets maintained its record performance for the year to date. In the US consumer finance run-off portfolio, loan impairment allowances declined in the quarter, representing the first quarterly fall since the start of 2006, chief executive Michael Geoghegan said. In emerging markets, revenues in Personal Financial Services and Commercial Banking held up well and, with the exception of the Middle East, loan impairment charges were notably lower than in the preceding quarter as economic conditions improved, he added.On a wider perspective, Geoghegan added that emerging markets now offer significantly more potential than the traditional western world, which may struggle to recover from the credit crisis"I believe that the biggest jolt has now passed through the global economy. But it is too early to claim victory, especially while unemployment is still rising in the West. The world will likely experience a two-speed recovery and emerging markets currently offer the brightest prospects for growth. Indeed, it now seems clear that they will drive the global recovery," he said.