HSBC Holdings, Europe's biggest bank, said its third-quarter profits were ahead of a year ago and revenue growth across the group had offset a higher charge for bad debts in the United States.
The trading update reassured investors that HSBC wasn't further exposed to big debts in mortgage-related financial products and was benefiting from its broad spread, and its shares jumped over 4 per cent.
The bank does not report quarterly results and is not due to announce annual results until March 3rd, 2008.
HSBC increased its bad debt charge related to its US consumer finance business to $3.4 billion for the third quarter, which it said was $1.4 billion more than implied by extending first-half trends and reflected a deterioration in the subprime housing market in recent months.
Finance Director Douglas Flint said the impairment charge "will stay elevated and could increase" if the housing market continues to weaken, but the bank said the outlook was "genuinely uncertain".
"There's been a broader deterioration of the housing market and associated credit, but I don't think anybody knows if we've reached the bottom," Chairman Stephen Green told reporters on a conference call.
Unlike big writedowns announced by several Wall Street banks, HSBC's loss is related to mortgages it has on its books, and it said it had little exposure to US mortgage-backed collateralised debt obligations (CDOs).
Rivals including Citigroup, Merrill Lynch and UBS have announced about $45 billion of losses and writedowns in the past month after a meltdown in mortgage securities and troubles in the CDO market.
Continued growth in Asia-Pacific and the Middle East and an improvement in Europe, led by Britain, underpinned growth across the group and "reinforces the benefits of HSBC's strong and liquid balance sheet and diversified revenue streams," the bank said.
By 9.40am HSBC shares were up 4.3 per cent at 879.5 pence, one of the top performing UK shares and lifting the bank's market value to £104 billion sterling.