Profits to drop at HSBC, analysts claim

28 July 2008

HSBC is to report a steep decline in first half profits next week, analysts at JPMorgan have suggested.

The firm, which is due to announce its results on August 4th, is expected to say that net income has decreased by 28 per cent to $10.3 billion.

Last year, with the credit crunch only beginning to take hold of the markets, this total stood at $14.2 billion.

Writedowns of credit-crunch hit assets at the bank were blamed by JPMorgan for the predicted profits slide.

According to the analysts, HSBC held around $8 billion of collatoralized debt obligations - a type of financial instrument whose value has been particularly negatively affected by the crunch - as of December 2007.

"A recent charge taken by National Australia Bank on its asset-backed securities, collateralized debt obligations has revived concerns on conduit/special investment vehicle assets," the analysts commented.

This is a reference to the increase in provisions for property market losses announced by the Australian bank last week - which signalled wider troubles for financial firms.

HSBC is Europe's biggest bank.

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