HSBC to almost treble profits as bad debts fall

A near trebling of annual profits by HSBC on Monday may not be enough for Europe's biggest bank to keep its profitability targets intact as its new management team faces up to tough regulatory costs.

HSBC is expected to report a pretax profit of USD 20.3 billion for 2010, according to the average forecast from analysts polled by Reuters Estimates, up from USD 7.1 billion in 2009. It could include e a return to profit for its troubled US business.

New Chief Executive Stuart Gulliver is set to say the bank missed its return on equity (RoE) target again in 2010, however, and could lower the bank's long-term target of 15-19% as banks are forced to hoard more capital to meet new global rules.

Rivals Barclays and Credit Suisse have both scaled back expectations, saying returns will be held in check by the need to hold more capital to make banks safer.

HSBC's RoE is likely to come in under 11% for 2010 and will struggle to climb above 13%  this year, analysts reckon.

Gulliver is set to report that profits have been swelled by a near halving in bad debts, as economies recover and the bank runs off its US loan book.

Impairments are expected to drop to USD 13.9 billion from USD 26.5 billion in 2009, according to the average of eight analyst forecasts.

The biggest improvement should be in the United States, where HSBC could make a profit after three years of hefty losses stemming from its controversial purchase of consumer finance company Household in 2003.

HSBC's investment bank arm is likely to show a similar trend to rivals, with income falling in the second half after capital markets activity slowed during the euro-zone debt crisis.

Gulliver -- who took the helm with Chairman Douglas Flint and Finance Director Iain MacKay after a boardroom power struggle erupted in September -- will face scrutiny on his pay packet for last year, when he ran investment banking. He was paid 9.8 million pounds in 2009. HSBC is expected to provide more disclosure than before on the pay of its top earners.