HSBC ME's profits rose 34% last year

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PROFITABLE POSITION: HSBC ME has recorded a profit of $1.746m for 2008. (Getty Images)

HSBC Middle East's recorded profit before tax was $1.746m for 2008, representing a 34 percent increase compared with 2007, while net interest income increased by over 40 percent, it said on Tuesday.

However, it suffered a notable deterioration of credit quality in personal and corporate portfolios across the UAE in the final quarter of 2008, due to the global recession - that has forced the bank's European arm to announce it is selling off 12.6bn pounds worth of shares.

The downturn on credit quality in the Middle East led to an increase in loan impairment charges for the full year compared with 2007, the bank's annual report said.

Operating expenses of $956m were up by 24 percent, but the growth in operating expenses was 18 percent less than the growth in net operating income before loan impairment charges, it added.

CEO Youssef Nasr said the bank expected 2009 to be a tough year, adding that profitability in the Middle East region would come under pressure as the economy slowed.  

"We expect that 2009 will be a particularly challenging year as some parts of the world head into recession. Profitability in the Middle East will come under pressure as the economy slows, loan impairments increase and margins contract in a low interest rate environment," Nasr said.

"Despite these difficulties, we are in good shape….we are well-positioned to build on our strengths to ensure the region remains a key element of the group's strategic focus on fast-growing markets,” he added.

The bank also saw customer deposits increase $35.2bn in 2008, up by 14 percent from 2007.

This supported a strong rise in corporate and personal lending - driven by increased trade and infrastructure investment in the region, it said.

Meanwhile, loans and advances to customers accounted for $27.3bn, up 26 percent on 2007.

HSBC's share sale is due to be formally launched later this week, according to UK media reports.

The sale looks set to see the major shareholders of HSBC Middle East - Dubai International Capital and Saudi Arabia's Saad Investments - take up their rights as part of the fundraising.

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