Credit crunch hits HSBC's profits

3:37pm Monday 10th November 2008

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Britain's biggest bank HSBC has added to the gloom in the battered banking sector with news of more credit crunch pain and spiralling bad debts.

The group said losses from US loans and mortgages had soared to 4.3 billion dollars (£2.73 billion) in the third quarter as the world's biggest economy slides into recession.

Fellow lender Nationwide Building Society also revealed more woes for the sector, with an 18% drop in underlying interim profits and warnings of two more years of house price falls.

And Abbey-owner Santander, which also owns Bradford & Bingley's branch and savings business, became the latest bank to appeal to shareholders for a balance sheet boost.

Pressure was meanwhile mounting on the HBOS and Lloyds merger from former bank chiefs looking to derail the deal.

The third quarter trading update from HSBC marked the last to come from the big five UK banks.

The group confirmed that third quarter profits were up on a year ago thanks to growth in Asia, but said its pre-tax profits in the nine months of the year so far had suffered.

HSBC also signalled that there may be less support to come from its key Asian market as it said growth was beginning to slow.

Its troubled US consumer finance business saw losses from defaults rise by 700 million dollars (£443 million) in the third quarter alone.

HSBC said it was braced for even higher impairment charges as credit trends worsened.