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August 3, 2009    

HSBC profits hit by rising bad debts

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by Kay Murchie

Banking giant HSBC, which has so far turned down financial help from the Government, has today announced that first-half profit has fallen 51% to $5 billion (£2.98 billion) compared with the same period a year ago.

The bank, which is Europe’s largest, said it was hit by rising bad debts in the USA, Europe and Asia, which forced it to write off $13.9 billion - almost 40% more than in the same period last year.

The news comes shortly after Barclays announced pre-tax profits of £2.98 billion for the first six months of the year - up 8% compared with the same period a year earlier.

Following the news from both banks, shares in HSBC were up 4.4% at 632p, while Barclays were up 6.3%.

Like Barclays, HSBC has not sought financial help from the Government, instead it asked existing shareholders for extra funds via a rights issue earlier this year - and raised £12.5 billion - the largest cash call in UK history.

The bank said it is cautiously optimistic on economic prospects but said it was uncertain about the short-term outlook.

However, its Tier 1 capital ratio has strengthened to 10.% at the end of June, up from 8.3% at the end of last year.

Royal Bank of Scotland and Lloyds Banking Group are set to announce figures later this week.

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