HSBC shrugs off bad debts with forecast-topping profits of £7bn

HSBC said that pre-tax profit rose 13 per cent to $14.2 billion (7bn) in the six months to the end of June.

The main drivers were strong growth in Hong Kong and Asia-Pacific and record profits from its investment banking arm - with profits from those divisions up 25, 37 and 29 per cent respectively. The performance outpaced a City consensus profits forecast of $13.27bn.

HSBC's shares rose 12p to 892.5p in response, despite the bank's charge for bad debts soaring to $6.35bn from $3.89bn in the same half of 2006.

The bank also announced it had refunded 116 million to customers for unfair overdraft charges for the period, currently the subject of an Office of Fair Trading industry-wide probe.

"The shares are probably reacting to the fact that credit quality seems to be under control. It hasn't got any worse despite some of the concerns that have been coming out over the last two or three weeks," said Ian Poulter, analyst at stockbroker Teather & Greenwood.

HSBC said its handling of US housing problems was on track, although it acknowledged the rest of this year would stay tough as a result of an expected rise in the number of homeowners on adjustable rate mortgages shifting to a higher repayment.

Michael Geoghegan, chief executive, said: "We're ahead of expectations at this stage."

Stephen Green, the chairman, said the bank was not interested in bidding for ABN Amro, the Dutch bank at the heart of the world's biggest bank takeover battle between Barclays and a consortium led by Royal Bank of Scotland.

He said ABN's core business was not where HSBC was targeting its growth, but the bank was willing to spend on acquisitions and organically to accelerate growth in Asia.

Geoghegan said: "We will not shy away from investment opportunities in the region ... we intend to boost our number-one position in Asia and the Middle East."

HSBC sounded an upbeat note on the global economy, saying weakness in the US was not constraining economic activity elsewhere.

Underlying revenues rose 16 per cent in the first half, just outpacing cost growth of 15 per cent.

Profits in its CIBM investment bank arm rose by almost one-third to a record $4.2bn.