HSBC has reported a five per cent rise in annual profits, as the banking giant failed to achieve analysts’ expectations.
The bank posted a profit of $22.1 billion, which was up from 2005’s figure of $21 billion, but failed to meet the $22.4 billion that analysts had predicted.
It is thought that profits were hit by $10.6 billion worth of bad debts in the sub-prime sector of the US mortgage market, leading to a 36 per cent rise in the bank’s group impairment charge to $2.8 billion.
However, much of the debt was offset by growth in investment banking in overseas markets, such as Latin America and the Middle East, which this year accounted for nearly half of total revenue.
A statement for the bank suggested that ongoing changes in its personnel, procedures and risk controls would mitigate against a similar performance in the second-half of the year.
“We are restructuring this business to avoid any repetition of the risk concentration that built up over the past two years,” says the statement.