HSBC's profit in Middle East plummets 74 per cent

HSBC Middle East profit before tax (PBT) fell by 74 per cent from $1.7 billion (Dh6.2bn) in 2008 to $455 million in 2009.

While personal financial services segment of UAE operations saw a loss of $177m, commercial banking posted a loss of $136m and private banking closed the year with a marginal loss of $2m.

The UAE operations of HSBC Bank (Holdings) have suffered a loss of $3m in 2009 against a profit before tax (PBT) of $861m the bank posted in 2008.

However, the Global Banking and Markets segment in the Middle East reported a decent profit before tax of $307m for the year ending December 31, 2009.

The personal financial services segment was the poorest performer for the Middle East operations, as it posted a loss of $126m for 2009 against a profit of $289m in 2008.

During the period, HSBC UAE's total loans and advances fell from $17.5bn to $13.8bn. Likewise, the UAE operations with eight branches also witnessed a drop in its customer accounts from.19, 808 to 17,498 accounts as at December-end 2009. The total net interest income from the Middle East operations during the period fell marginally from $1.5bn to $1.4bn in 2009.

The share of profit before tax of the Middle East operations has fallen by about two-thirds during this period – from 18.8 per cent to 6.4 per cent.

The statement from the bank said HSBC's Middle East operations suffered from a combination of factors – a severe contraction in the economy of Dubai, a fall in oil revenues for much of the year and investment losses incurred by many regional investors.

"This led to a decline in profit before tax primarily due to a significant increase in loan impairment charges. The regional economic downturn and continuing uncertainty affected both retail and corporate customers, particularly in the UAE," it said.

In the Middle East, loan impairment charges increased by about 78 per cent - from $280m to $1.3bn as the region experienced a significant economic contraction in activity, predominantly in real estate and construction, which particularly affected the UAE. Commercial Banking recorded a number of specific loan impairment charges and a significant increase in collective loan impairment charges.

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