HSBC today abandoned offering car loans to poor and credit-impaired Americans as it revealed the credit crisis wiped a further $10.1 billion (£5.1 billion) from its profits.

Britain's biggest bank posted a 28 per cent slide in first half pre-tax profits to $10.2 billion and said it planned to put its $13 billion US car finance operation into orderly run-off.

HSBC declined to say whether the losses from its disastrous push into lending to poorer Americans had definitely peaked, but the latest half year provision of $6.8 billion for US consumer finance, up 85 per cent up on the first half of last year, was down 15 per cent from the second half.

The bank said bad debts in the auto finance arm were actually down in the first half, but that the division did not have sufficient critical mass or pricing power, "So we will not be originating further loans."

After scaling back mortgage lending and now auto finance, the US consumer finance business is now focused on credit cards and personal loans.

HSBC aggressively pushed into lending to people with impaired credit records in the US with the £9 billion acquisition of Household International in 2003. Today, it wrote down the value of that purchase by a further $527 million.

HSBC also wrote down an additional $3.9 billion on credit trading, exposures to monoline insurers and leveraged buy-out debt in the first half, sending profits in its global banking and markets division 35 per cent lower.

Profits in Europe, which includes the core UK high-street bank, were up 51 per cent to $5.2 billion and they also rose in all regions except North America.

HSBC chairman, Stephen Green, described financial markets as "the most difficult for several decades" and warned that the global economy could get worse before it got better. "HSBC was not immune from the turmoil," he said, though he rated the overall performance as resilient.

The outlook was challenging, he said, but he expected activity in the bank's emerging markets heartlands to hold up reasonably well. HSBC, because of its strong balance sheet, had the opportunity to deploy capital when rivals were constrained.

Traders gave the figures a lukewarm reception, marking the shares 14.5p lower to 822.5p.

A second interim dividend was set at 18 cents. Together with the first interim dividend, the pay-out is up 6 per cent on the first half of 2007.

Michael Geoghegan, chief executive at HSBC, said the bank met its targets on cost efficiency, total shareholder return and capital strength.

It missed its total shareholders' equity target of 15-19 per cent, achieving only 12.1 per cent, "but we would expect that in these difficult times," he said.

Mr Geoghegan said that 80 per cent of the $13 billion US auto loan portfolio would be run off within three years. The US mortgage book was reduced by 13 per cent to $31 billion during the half year.

Ahead of the figures, analysts had forecast pre-tax profits between $8.9 billion and $11.7 billion, down from $14.2 billion last time. HSBC had already taken $15.4 billion of provisions in the past 15 months.

It also emerged today that HSBC is pushing for a cut in the $6.3 billion price it agreed to pay for control of Korean Exchange Bank.

Sources close to the proposed deal confirmed HSBC was attempting to renegotiate the purchase price after a July 31 deal deadline expired with no approval from the South Korean Government.

HSBC first struck a deal to buy a 51 per cent stake in KEB last September from Lone Star, the US private equity group, but the transaction has been plagued by regulatory problems.

The passing of last Thursday's deadline with no approval from the Korean Financial Services Commission leaves HSBC and Lone Star each free to walk away.

HSBC said it was discussing with Lone Star how the transaction might be taken forward. It said it had not terminated the acquisition agreement and had not received notice of termination from Lone Star.

However, HSBC is understood to want to wrest a significant cut in the purchase price to reflect the deterioration in conditions in the banking sector over the last 11 months. KEB shares have fallen around 13 per cent since last September, including a 3 per cent drop in trading today.

The proposed KEB acquisition would give HSBC a major foothold in Asia's fourth biggest economy and demonstrate its commitment to returning to its emerging markets roots.



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