HSBC's half-year profit more than doubled from a year ago to easily beat analysts' expectations as bad debts at Europe's biggest bank fell to their lowest level since the start of the financial crisis.

HSBC <0005.HK> reported a pretax profit of $11.1 billion for the six months to the end of June, up from $5 billion a year ago and above the average forecast of $9.1 billion from eight analysts polled by Thomson Reuters.

Loan impairment charges and other credit risk provisions fell to $7.5 billion in half-year, down $6.4 billion from the year ago level.

The drivers of the lower bad debt performance continue to be in place, Douglas Flint, finance director, said on a conference call. Obviously if we have a double dip then things will be different, but at the moment the drivers of the first half continue to be in place.

He cited an improvement among companies, which have refinanced and raised capital, and in retail banking. On the personal side the troubled portfolios in Latin America, the Middle East and India are running off quite fast and the U.S. position is running off steadily, he added.

By 0900 GMT HSBC's London-listed shares were up 3.6 percent, and together with strong results from BNP Paribas helped lift the European bank sector <.SX7P> 2.4 percent.


HSBC's investment bank made a profit of $5.6 billion, its second best half ever, but down 11 percent from the record level of a year ago.

Income slowed in the second quarter from the first quarter, in line with rivals, and Flint said he expected a slower second half of the year as appetite has reduced, coupled with seasonal factors. We expect slightly reduced appetite and therefore slightly lower volumes in the second half, he said.

HSBC said it continued to benefit from its increasing focus on Asia and other emerging markets, which have led global economic recovery. Asia accounted for $5.9 billion of profits, or 58 percent of the group.

Its North American business swung to a profit of $492 million from a loss of $3.7 billion a year ago, thanks to a sharp fall in bad debts in its troubled U.S. business.

HSBC said its Tier 1 ratio was 11.5 percent at the end of June, well above its target range, and its core Tier 1 ratios was 9.9 percent. The bank easily passed a so-called stress test of European banks' capital conducted last month.

(Additional reporting by Sudip Kar-Gupta; Editing by Myles Neligan and Andrew Callus)