HSBC profits jump to ?6bn

Annual profits at banking giant HSBC surged 20% to more than ?6bn after a reduction in bad and doubtful debts, the company reported today.

Despite the results, which were at the lower end of analyst expectations, HSBC said prospects for this year were hard to predict, with the beginning of the year characterised by a high degree of economic uncertainty.

The group added that it would also contribute an extra ?500m to its pension scheme in 2003 because of the impact of weaker investment returns.

Chairman Sir John Bond described today's figures as a solid set of results and added: "Our performance reflected the resilience of our local businesses and our ability to generate reasonable returns in them."

Operating profits before exceptional items in 2002 rose 3.2% to $11.64bn (?7.4bn) as HSBC benefited from strong growth in its commercial banking division and solid progress in personal finance services.

At the bottom line, figures were helped by a reduction of ?455m in bad debt charges because last year's figure included provision for HSBC's exposure to the Argentinian financial crisis. However, bad debt provisions in the UK rose during 2002 in line with other banks, HSBC said.

The group is one of the world's largest banking and financial services organisations, with 7,000 offices in 81 countries and territories. About a third of profits are generated in Hong Kong.

Across the group, pre-tax profits after exceptional items rose 20.6% to $9.65bn (?6.13bn).

In the UK banking business, HSBC said pre-tax profits grew 6% to ?2.28bn before the proceeds from the sale of a business in 2001 are included. Operating profits rose 12% to ?2.69bn, but provisions for bad debt charges accounted for ?377m - up from ?308m the previous year.

The bad debt increase in the UK was blamed on a small number of large corporate provisions in the telecommunications sector, although HSBC said personal banking improved its performance in this area in 2002.

In personal banking, operating profits before provisions rose 11% to ?688m following strong growth in sales of both lending and savings products.

Gross new mortgage lending increased by 57% as a result of the buoyant housing market while the bank's share of the overall increase in UK mortgage lending rose from 4.4% in 2001 to 5.8% in 2002.

Sales of general insurance, life, critical illness and income protection grew strongly but overall wealth management income reduced as a result of the fall in investment markets.

In commercial banking, operating profits before provisions were 14% higher at ?727m as the bank increased its share of business start-ups, with more than 87,000 new accounts opened in 2002.