Banks' profits boom

2 August 2010

HSBC has reported pre-tax profits of £7 billion for the first six months of 2010 - more than double its profits for the same time last year.

The bank said it was profitable in every region, except for North America where it saw losses of $80 million.

HSBC shareholders will receive a second dividend this year, totalling $1.4 billion. But the release of its profits, the first in a week of banking results, has prompted questions on whether the banks will pass on the benefits and boost their lending.

While conditions in the banking sector are improving, lending to businesses remains down and this has come under fire by critics.

HSBC said the amount of money it had set aside to cover bad loans had fallen to $7.5 billion - the lowest level since the crisis began in 2008.

The bank has paid dividends of $2.8 billion in the first half, including a second interim dividend of eight cents per ordinary share, unchanged on the year.

Unlike rivals Lloyds Banking Group and Royal Bank of Scotland, HSBC survived the financial crisis without receiving direct government support.

But all big banks are under pressure to step up their lending to businesses.

Chancellor George Osborne yesterday said this should be a priority for banks ahead of bonuses, in order to sustain the economic recovery.

"Not since February 2009 has a set of banking results been more eagerly awaited than those reported this week, starting with HSBC today," commented BGC Partners' David Buik.

"These results will be presented in the wake of unclear global policies on regulation including capital requirements, the implementation of potentially penal taxation at a time to suit HM's government, open frustration expressed by such an august and respected authority as g[Bank of England] governor [Mervyn] King aided and abetted by crippling uncertainty over sovereign debt," he said.

HSBC shares in London rose as much as 5% following the profits announcement.

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