First Direct, HBSC's UK online and Internet banking operation, said it has grown its mortgage book by 40 per cent compared to a year ago, as rivals reduce their exposure to mortgages and the credit crunch tightens.

Speaking as HSBC reported a 28 per cent drop in half-year profits to £5.22bn, after a £5.13bn hit from bad debts and writedowns, First Direct chief executive Chris Pilling said the Leeds-based bank has given a "solid performance".

"We have had an opportunity, which some of our rivals have not, to expand our mortgage sales quite significantly," said Mr Pilling.

First Direct, which does not report separate figures to the overall HSBC group, saw new customers increase by between 30 to 40 per cent. Mr Pilling said this was down to a strong marketing campaign and the competitiveness of its packages.

Earlier this year First Direct was forced to suspend taking on new mortgage customers when it became swamped with applications. It has since reopened to new mortgage customers after clearing a backlog of applications.

"We have been helped by the mortgage offering and mortgage competitiveness," said Mr Pilling. "A significant number of people are coming to us because of our strength in the mortgage market."

Mr Pilling added the quality of its customers is "good and improving" and bad debts have shown "very positive results". There has also been no increase in mortgage arrears. First Direct has a maximum loan to value (LTV) of 80 per cent on mortgages.

"It's down to an inherent strength or conservatism in how we lend and who we lend to," he said.

"We have put even more resources into it (managing bad debt) and are blessed to a have a strong credit counselling team.

"There's no variation in mortgage arrears whatsoever, and recruitment of new customers is high quality."

HSBC's total share of new mortgage lending in the UK, across all channels, rose from three per cent in the first half of 2007 to six per cent in 2008, peaking at 12 per cent in May.

Mr Pilling said First Direct has so far taken on about 200 new staff this year, with about 140 of these at Stourton, in Leeds, to cope with the increase in business. First Direct, which next year celebrates 20 years in operation, now employs about 3,500 staff, with 2,300 of these in Leeds.

"We are in a pretty solid position and that means we can recruit people," said Mr Pilling. He added he expected the bank to continue to increasing its share during the remainder of the year.

Mr Pilling's optimism came despite a tubulent set of half-year results for First Direct's parent bank. HSBC's impairment charges and writedowns were £5.13bn for the six months of the year, up 58 per cent from a year ago, mainly due to losses from its book of United States mortgages. This meant its North American business took a £1.5bn loss in the first half, from a £1.2bn profit.

HSBC's UK operations performed strongly, with pre-tax profit up 45 per cent to £1.7bn. However, HSBC is seeing declines in corporate activity in the Asian market, as well as a slump in demand for equity-related products.

Group chairman Stephen Green insisted: "In the prevailing market conditions this was a resilient performance which enables us to maintain our capital strength, continue with our dividend policy and balance the need to conserve capital with our commitment to make it available for investment in our fast growing business."

HSBC's Tier 1 equity ratio – a key measure of financial strength – was 8.8 per cent at the end of June, down from 9.3 per cent at the start of the year.

HSBC's results were broadly in line with analysts' expectations. Brokerage Charles Stanley said: "The most damaging area is North America and in particular the personal financial services division. In a very tough operating environment, HSBC's performance once again highlights the benefits of its geographic diversification."