HSBC warns over emerging market growth

5th Nov 2010 08:20

HSBC has warned the pace of growth in emerging markets is slowing and recovery from recession may take longer than in previous downturns."Our latest data from emerging markets points to a slowdown in the rate of recovery and the likelihood of some bumps in the road ahead," the banking giant said.Growth in emerging markets has been one of the key planks of the global recovery so far and HSBC's comments will spark renewed concern over a possible double-dip recession.Chief executive Michael Geoghegan said even if a double-dip did not occur recovery could be slower than expected."While fears of a double-dip in the West may be overplayed, the passage from downturn to upturn is clearly taking longer than previous cycles," he said. The comments accompanied a generally upbeat third quarter statement with lower bad debt charges boosting profits.HSBC said its impairment charges fell to their lowest level since 2007 in the last three months enabling profits to come in 'well ahead' of this time last year despite lower revenues as loan demand remained weak."Muted demand for credit, reflecting concerns over the US recovery and measures taken to address European fiscal and debt burdens, meant revenues in developed markets remained generally constrained," HSBC commented."This was also reflected in a less buoyant trading environment which, together with lower balance sheet management income, contributed to a reduction in total group revenues for Q3 2010 and the year to date compared with the equivalent periods in 2009," it added.Loan impairment charges were lower in all regions and customer groups compared with the third quarter of 2009. The US accounted for the largest share of the improvement in the quarter, with delinquency volumes declining as loan balances were managed down and early-stage delinquency improved, most notably in the cards business. Personal Financial Services did better that expected, driven by lower loan impairment charges. In Commercial Banking, emerging markets, and lower loan impairment charges drove improved profitability year on year. Global Banking and Markets' performance in the quarter was robust, although trading activity was lower. Outside North America, Asia accounted for the largest share of pre-tax profits in the quarter.