HSBC profits advance

August 6, 2001 Posted: 0939 GMT

LONDON (CNN) -- HSBC, the UK's largest bank, posted a 4 percent rise in net profit but made cautious comments abouts the likely impact of economic slowdown.

The bank, with business concentrated in Asia and the UK, said net income in the six months to June 30 rose to $3.67 billion, or $0.39 per share, from $3.52 billion, or $0.41 a share, a year earlier.

"The outlook for the financial services industry is unclear," HSBC said in its earnings statement on Monday. "There is evidence of increasingly fragile economic conditions in certain emerging markets. It has yet to be seen what the full effects of the corporate slowdown will be."

HSBC said it set aside $441 million in the first half to meet possible losses on bad or doubtful loans, a 20 percent rise in provisions made a year earlier. Operating profit before provisions edged up 1 percent to $5.65 billion.

Pretax profit increased 9 percent to $5.84 billion, the bank said. HSBC said the group's total assets during the six months increased by 3 percent, or $18 billion, to $692 billion.

HSBC managed to push up net profit even as stiffer competition in the UK financial services market bit into the earnings of rivals such as Barclays and Lloyds TSB.

UK banks hit by competition

Barclays, (BARC) the UK's fourth-largest bank, last week announced a 1 percent fall in net income. But it outperformed its closest rival Lloyds TSB (LLOY)), the UK's No. 3 bank, which posted a 12 percent fall in first-half profit on July 27, citing cut-throat competition in UK financial services.

HSBC has grown by expanding from its former base of Hong Kong since the late 1980s, when it acquired the UK's Midland Bank. Its latest significant acquisition was last year's purchase of French bank Credit Commercial de France for $10.6 billion, giving it a foothold in the euro zone.

"The integration of CCF into HSBC has proceeded smoothly," the bank said. "Virtually all of CCF's international network, including its operations in Brazil and in international private banking, have been merged with the larger HSBC operations, generating some significant cost savings."

HSBC said operating expenses for the year's first six months, excluding charges relating to acquisitions such as CCF for which the bank paid more than the asset value, rose 12 percent to $745 million.

The bank said this expenditure included e-commerce ventures such as its online banking and investment joint venture with Merrill Lynch, the world's largest brokerage, for which it took a charge of $48 million in the six months.

The Merrill-HSBC venture, known as MLHSBC.com,  was launched in the UK in May. Aimed at clients willing to deposit a minimum of $14,500, it offers a share dealing service, accounts in different currencies and a cheque book and debit card.

HSBC (HSBA) shares rose 2.7 percent to 838.5 pence in London after the results were released.

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