Europe's largest bank announced that bad debts following the sub-prime lending crisis in the third quarter of 2007 had caused the loss after a 30 per cent rise in debts that could not be paid off in the third quarter.
HSBC is claiming that although the situation could worsen, its profit had exceeded expectations.
The bank said in a statement: "Deterioration in US housing markets is affecting consumer finance credit quality more broadly than hitherto and loan impairment charges are expected to remain high in these conditions.
"There is the probability of further deterioration if the current housing market distress continues and further impacts the broader economy."
Following the sub-prime crisis, HSBC has stopped its investment in mortgages from other lenders and only last week terminated its securities unit.
For the future, HSBC has earmarked over $13 billion to subsidise bad debts this year.
Despite this, HSBC has reported third-quarter profits in access of those achieved a year ago.