HSBC profits double after debt levels shrivel

HSBC, Europe's biggest bank, said half-year profits had more than doubled after bad debts fell to their lowest level since the start of the financial crisis.

It beat earnings forecasts after bad debts on personal and corporate loans fell sharply, more than offsetting slowing investment banking growth. Half-year profits for HSBC hit 7bn, or a 34 per cent rise to 6.3bn on an underlying basis.

HSBC's Leeds-based internet and phone bank operation First Direct increased its presence in the mortgage market over the half.

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First Direct's chief executive Matt Colebrook said: "As the housing and mortgage market begin to recover, we see mortgages as a growth opportunity. First Direct is strengthening its mortgage team to deal with the increased demand."

First Direct said customer service remained a key strength with the proportion of satisfied customers remaining at 90 per cent, 20 percentage points above the industry average.

"Offset mortgages continue to prove very popular with customers looking to make their savings work harder for them in the low base environment," said Mr Colebrook. The total value of savings balances customers chose to offset was 584m higher at the end of June.

HSBC said growth could remain sluggish in Western countries but it is confident about prospects for emerging markets despite a possible cooling off in China's economy.

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HSBC's investment bank made a profit of 3.5bn, the second-best half-year ever, although it was down 11 per cent from the record level of a year ago.

Income slowed in the second quarter, in line with rivals, and HSBC said it expected a slower second half of the year.

The result sets the foundation for improved results from other UK banks this week.

Lloyds is due to report tomorrow, followed by Barclays on Thursday and RBS on Friday.