LONDON (Dow Jones) -- HSBC Holdings , one of the first banks to warn about thesubprime-mortgage woes, on Monday reported a 25% increase in first-half profitand, more importantly, said it didn't see any further rise in U.S. bad debts.
HSBC (HBC) said its profit rose to $10.9 billion during the first half, helpedby $1 billion in gains from trimming its stakes in Chinese holdings.
Excluding that gain, HSBC said its profit would've climbed 13%.
HSBC said it was helped by an unusually low 18.7% tax rate, as well as strongAsian and Latin American growth, notably in its corporate and investment bankingarm.
Those units offset rising consumer-finance charges in the U.S., a deliberatereduction in personal lending in Europe, and the waiving of $236 million inoverdraft fees amid a letter-writing campaign by British consumers.
The group recorded a 63% increase in bad debts during the first half to $6.35billion, in large part in the U.S. which led U.S. pretax profit to decline 43%.
But HSBC , which says it's the fastest-growing financial brand in the world,said the rise in bad debts was in line with its expectations and lower than itwas in the second half of last year.
HSBC , which has stop underwriting subprime mortgage loans, said impairments in North America were basically unchanged at $2.1 billion.
HSBC also pointed out that that acquisition customers were falling andcustomer retention was improving, because it's facing less competition in theindustry after the subprime mortgage problems.
In a market that was worried that HSBC was going to report further bad-debtwoes, shares rose 2.3% in London.
Going forward, HSBC said the world economy is "remarkably buoyant," citinggrowing evidence that U.S. weakness is not constraining economic activityelsewhere.
"Even in the U.S., which faces considerable housing and subprime-relateddifficulties, consumer spending has remained encouragingly robust and the labormarket has been firm," the company said.
U.S. growth may be as low as 2% but global growth should be close to lastyear's 3.8%, it said.
HSBC says it has a "cautious" risk appetite and noted that perceptions of riskcan change rapidly.
"Among the potential triggers are higher global interest rates with a returnto higher inflation, moves towards protectionism and greater spillover effectsfrom U.S. housing-market weakness," the group said.
(END) Dow Jones Newswires 07-30-07 1012ET Copyright (c) 2007 Dow Jones & Company, Inc.
