HSBC reports profits up in 2006
by Elaine Frei
HSBC (LSE: HSBA; SEHK: 005; NYSE: HBC; Euronext: HSBC) reported Monday that its profits were 5 percent higher last year. The bank, Europe’s largest, said that its before-tax profits were at $22.1 billion, against analyst projections of $22.4 billion.
The report came after a February 7 profits warning, its first ever, based on problems in the bank’s problems with mortgage lending in the United States. Pre-tax profits there fell by $725 million. The problems go back to HSBC’s purchase of Household International and have to do with second mortgages which are not being paid off. $6.8 billion of the $10.6 billion in bad debts HSBC had to cover related to the US problems.
The chairman of the bank, Stepehn Green, said that the fact that its pre-tax profits grew during the year despite the US mortgage issues illustrates the strength and diversity of the bank’s business. He said that the US mortgage business is being restructured to deal with the problem. In addition to the restructuring, two executives were removed and replaced in the US.
HSBC shares were one of the few gainers on the FTSE 100 Monday morning after the report was issued.
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