The £3bn loss was better than expected and the group's shares closed the day up nearly two per cent at 882p.

The bank took the losses on bad debts from its US consumer finance business and write -downs on mortgage-backed investments hit by the financial turmoil.

Chairman Stephen Green reported a record quarter for the group's commercial banking and private banking division, despite problems in the US business.

HSBC expects higher losses across its US business as the economy veers towards recession, although bad debt levels are in line with management expectations.

It said it is increasingly likely the US economy will go into recession this year and a recovery in the American housing market is unlikely until at least 2009.

Chief executive Michael Geoghegan said the pace of growth in bad debts had slowed, but this could be due to seasonal factors. In 2007, the bank's total bad debt and credit provisions hit £8.7bn.

The bad-debt charge related to its US consumer finance business was £1.6bn in the first quarter and it wrote down almost as much again for a deterioration in the value of risky assets in its investment bank.

Its latest US home loan impairment charge was below many analyst forecasts and down from £2.3bn in the previous quarter, but it was double the level of the first quarter of 2007 as Americans struggle to repay mortgages.

HSBC said its capital ratios remain strong.

"That allows us to weather circumstances that might rock others and to invest in future growth," said Mr Geoghegan.

He was satisfied with progress on running down the US mortgage book and tackling bad debts.

But he warned about the impact of inflationary pressures, particularly food and energy price rises.

Underlying group revenue growth in the first quarter was "comfortably ahead" of a year earlier. Analysts said it was on track to meet forecasts for revenue growth of at least 10 per cent this year.

HSBC said it increased profits in all major countries in which it operates in Asia-Pacific, the Middle East and Latin America, which helped to offset the problems in the US. Hong Kong continued last year's strong performance, driven by growth in deposits and margins. The European business "performed well" and the UK retail arm increased profits as credit quality held stable.

The company is focused on growing its savings deposits in the UK.

HSBC brushed off speculation it will face pressure to consider a break-up after US giant Citigroup said it plans to sell around £200bn of assets. Mr Geoghegan said there was no need for HSBC to slim down.

"Our results last year and the trading statement today show that having diverse flows of business is the right way to run a bank. We feel comfortable and so do our regulators, that this is the right way to run the business," he said.

n Leeds-based First Direct, HSBC's telephone and internet banking arm, is expected to reopen its doors to new mortgage customers in the near future. It stopped selling mortgages to new customers last month following an unprecedented number of applications for its cheap two-year fixed rate at 4.95 per cent.

First Direct, which employs around 3,000 people at Stourton, Leeds, was the first high-profile lender to close its doors to new customers.