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It’s been billed as a week of banking succour. HSBC kicked proceedings off on Monday.

HSBC’s bad debt impairments in its US consumer lending business were $3.2bn in the first quarter, down from $4.6bn in the final quarter of last year. Elsewhere, the bank’s global banking and capital markets division wrote-down $2.6bn against mortgage-backed assets, leveraged loans and monoline exposures.

All as - if not slightly better than - expected. Shares in HSBC immediately rose 2 per cent in response.

The trouble is, as chairman Stephen Green put it, “the outlook for the rest of the year remains unusually difficult to foresee in the current environment.”

In the US, where HSBC has already written off more in bad debts that it cost to acquire Household five years ago, the forecast is rather clearer.

It seems likely that the deterioration in the US housing market will extend into 2009; it is also clear that US economic growth has slowed and there is an increased likelihood of a recession this year. Against this economic backdrop, we continued to experience higher delinquencies across our major lending portfolios, though these were broadly in line with our expectations at the end of 2007. 

Delinquency ratios in HSBC’s mortgage business in the US continue to rise - while the rot has spread somewhat into credit cards, where curtailed lending has accentuated the share of those falling more than two months behind with payments.

HSBC - boosted by strength in Asia-Pacific, the Middle East and Latin America - can boast Q1 profit ahead of last year’s first quarter haul - despite the problems in its US business.

Snap analyst reaction - Bruce Packard at Pali International:

Statement looks a little ahead of expectations, particularly positive as revenues are continuing to hold up in Asian markets.  Huge amounts of detail in the Household quarterly releases still to look through.  Last 3M HSBC has outperformed UK banks by 10%, but is flat against HK banks.  Stock is trading on 10.2x 2009 consensus, which is a similar level to RBS post rights issue, but has much stronger capital ratios (core tier 1 7.8% 2007A).  Our REC is Neutral, TP 835p, but would expect the shares to go up today.

No unrestrained market euphoria though on the numbers from the UK’s largest bank. Data showing soaring factory gate inflation in April, released on Monday, helped temper enthusiasm - as the annual rise in input prices hit a record high.

Related links
HSBC Q1 release
HSBC US 10Q

FTSE holds gains as HSBC reassures - FT story