HSBC's profits increase in the Middle East as the global banking giant sets aside smaller amounts of funds to cover bad debts from large UAE corporations.
HSBC Middle East's profits surge 67% to $1.4bn
HSBC reported strongly improved earnings for 2011 as it shifted away from developed economies towards faster growing emerging markets, with its Middle East business generating sharply increased profits after lower than expected levels of bad debts.
The global banking giant reported full-year pre-tax profits of $21.8 billion, an increase of 14.8 per cent on a year earlier.
HSBC Middle East reported a 67 per cent surge in profits to $1.4bn as money set aside to cover bad debts halved.
Provisions fell 53.2 per cent to $293m, which the bank attributed to lower numbers of restructurings among its large corporate customers in the UAE.
"Loan impairment charges and other credit risk provisions fell in the Middle East… due to the non-recurrence of restructuring activity for a small number of large customers," the bank said in a statement.
However, renegotiated loans increased by 42.2 per cent to $2.6bn, the third-highest regional total worldwide after Europe and North America. HSBC was among the banks that signed a $25 billion restructuring deal with Dubai World in March last year.
The bank reported little impact from the Arab Spring during the opening months of the year.
"Although significant unrest and political changes were witnessed in the Middle East and North Africa in 2011, the majority of the group's exposures in the region were concentrated in our associate investment in Saudi Arabia and in the UAE, where the respective political landscapes remained stable and economic growth continued to recover."
HSBC made two rounds of layoffs during the year in the region, closing its retail banking operations in Kuwait and its retail brokerage in the UAE after trading volumes collapsed.