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May 13, 2008    

HSBC reveals further write-downs

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by Kay Murchie

HSBC, the UK’s largest bank, has announced it is to write-down a further $2.6 billion (£1.3 billion) in addition to the $12.2 billion of write-downs last year.

However, profit in the first three months of 2008 exceeded that of a year ago, as growth in Asia helped counter some $5 billion in hits from bad debts on the US sub-prime mortgage crisis.

Michael Geoghegan, the bank’s chief executive, warned that it is likely that the deterioration in the US housing market will continue into next year.

Mr Geoghegan added that it is clear that US economic growth has slowed and there is an increased likelihood of a recession this year.

In investment banking, Mr Geoghegan said pre-tax profits were down compared with 12 months ago but better than the third and final quarters of last year.

There had been higher trading in the first quarter as institutions rebalanced their portfolios as a result of the credit squeeze which could mean dealing volumes will be more subdued for the remainder of the year, added Mr Geoghegan.

HSBC still has its sights on Korea Exchange Bank. However, the purchase has been delayed due to regulators. The transaction is expected to be completed in July.

According to analysts, HSBC is on target to meet forecasts for revenue growth of at least 10% this year.

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