Banking giant HSBC has reported a 10% rise in pre-tax profits to $24.2 billion (£12.2 billion), despite writing off $17.2 billion (£8.7 billion) from bad debts and investments linked to the credit crunch.

The 63% year-on-year increase in impairment charges - write-offs - came as the fallout from the slowing US housing market crisis increased.
The group, which is the UK's largest banking business, said it was "continuing to face challenges" in North America as a result of the housing market troubles and associated credit crunch.

HSBC also warned that the credit outlook in the US may "get worse before it gets better".

City estimates for HSBC's pre-tax profits haul ranged between $23.4 billion (£11.8 billion) and $26.4 billion (£13.3 billion). In 2006 they came in at $22.1 billion (£11.1 billion).

HSBC said overall performance during 2007 was bolstered by "exceptionally strong" results in the emerging market regions of Asia Pacific, Latin America and the Middle East.

In the UK, profits from commercial banking topped the $2 billion (£1 billion) mark for the first time. But the group's US consumer business - comprising mortgages, credit cards and personal loans - suffered from high bad debt charges, with write-offs in this area increasing 80% during 2007 to $11.7 billion  (£5.9 billion).

The position worsened during the second half of the year, with a writedown of $7.9 billion (£4 billion) coming after the 3.8 billion US dollar (£1.9 billion) hit announced for the year's first six months.

HSBC said: "Our North American results continue to be adversely affected by high loan impairment charges as we respond to the impact on our portfolio of credit deterioration arising largely from housing market weakness in the US."

Directors said they had taken "vigorous action" to try to stem the losses, including the closure of 400 branches, tighter lending criteria and a reduction in the number of products.

Looking ahead, the group warned: "The outlook for the rest of 2008 is uncertain. The economic slowdown and the credit outlook in the US may well get worse before they get better.

"With significant parts of the international financial system in developed markets still in difficulties, HSBC's emphasis on faster growing emerging markets means that we are better positioned than many of our competitors."

Shares in the group were up nearly 1% today.