Europe's biggest bank HSBC yesterday beat analysts' fore-casts with an 18 per cent rise in first-half profit - helped by a strong performance at its investment bank and in emerging markets.
The London-based organisation said it made a pre-tax profit of £6.73 billion in the six months to the end of June, up from £5.72 billion a year ago and above a median forecast of £6.19 billion from a poll of 11 analysts.
HSBC, whose operations span 77 countries, said pre-tax profit at its investment banking business (CIBM) jumped 37 per cent, with a gap of 12 per cent between revenue growth and cost growth.
Finance director Douglas Flint said: "CIBM was probably the stand-out performer. The investment phase that came to a peak last year moved into the execution phase this year, which had a very significant impact on profits."
CIBM's revenue jumped by a quarter, outpacing a 13 per cent rise in costs, which were mainly due to higher bonuses.
But while the investment bank delivered strong results, the retail bank was hit by an increase in bad debts, particularly in the UK.
HSBC said: "In the UK, the unsecured personal sector again contributed the major portion of the impairment charge in the period, largely as a result of rising bankruptcy filings and individual voluntary arrangements.
"Although the charge was considerably higher than the first half of 2005, it was in line with that incurred in the second half of last year.
"We are seeing an improvement in the credit quality of more recent originations."
HSBC added that the "serious" and "excessive" levels of consumer debt in the UK was a growing issue.
Simon Maughan, analyst at independent research firm Blue Oak Capital, said: "It's a kind of steady as she goes, slightly better performance in corporate and investment banking and generally a reasonable set of results with a positive outlook for the world economy."
HSBC said its loan impairment charge was up £329.6 million to £2.09 billion in the first half.
"The credit picture around the world is broadly satisfactory," Mr Flint said. "We're seeing one or two areas of deterioration, which we're watching carefully," he added, highlighting US real estate and UK unsecured lending.
While retail credit conditions in the United States remained generally favourable, higher interest rates were starting to affect that market, the bank said.
The impairment charge on UK unsecured personal loans was also up sharply on the year, though in line with the second half of last year.
Results from Britain's biggest five banks this week are expected to show strong profit growth on the back of buoyant corporate business and mortgage lending, though bad debts were expected to rise sharply as more UK consumers struggle to pay back unsecured loans.
HSBC said most of its growth had been organic and indicated that valuations for emerging market and takeover targets had run ahead of their true value.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "These are forecast-busting figures and management looks to have answered doubters of its move into investment banking in fine style."
HSBC said its half time results had been underpinned by a strong performance in the Midlands.
Graham Craddock, the bank's regional director in the Midlands, said: "HSBC has continued to grow in the Midlands where we are investing heavily in our branch network and are showing strong results from our retail and commercial banking operations, while our commitment to our local communities is as strong as ever."