HSBC Q3 profit up yoy, but US biz hurts

But, the US unit declines markedly because of rising loan defaults in the consumer and corporate units, and writedowns in the securities division HSBC said on Monday that its third-quarter profit rose as asset sales and growth in Asia offset a worsening US economy. Europe’s biggest bank set aside more than estimated amount to cover bad loans in the US and forecast further deterioration.

Pretax profit in the third quarter was higher than last year after the Anglo-Asian banking major reported a US$3.4bn gain on the changing value of its own debt and re-classified US$13bn of assets under new accounting rules.

Without the reclassification of those assets, HSBC said that it’s pretax profit would have been reduced by US$835mn.

The US unit declined markedly because of rising loan defaults in the consumer and corporate units, and writedowns in the securities division, the London-based bank said today in a statement.

The bank took a write-down of US$600mn on its credit trading positions and also wrote down the value of asset-backed securities by US$4.8bn in its available-for-sale portfolio, which doesn’t affect the bottom line.

At the end of September, the Tier 1 capital ratio was 8.9%.

source: Indiainfoline

HSBC said that the global economic slowdown will continue during the next few quarters. Asia should remain relatively more resilient, but will be hit by reduced export demand, it added.

“It is not yet apparent to what extent governments will succeed in encouraging stronger domestic demand to counterbalance export weakness,” HSBC said.

HSBC gets more than three quarters of its profit in emerging markets.

Shares of HSBC fell 0.5% to 742.4 pence at 9 a.m. in London, valuing the company at almost 90bn billion pounds (US$142bn). The shares have declined 12% in London trading this year.

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