Business - HSBC's profit up on year, takes $4.9 billion hit

LONDON (Reuters) - Europe's biggest bank HSBC Holdings said its profit in the third quarter was ahead of a year earlier as growth in Asia helped offset almost $5 billion in bad debts on U.S. home loans and asset writedowns.

HSBC said its profits in the nine months to the end of September was lower than the same period of 2007.

Its tier 1 capital ratio was 8.9 percent at the end of September, near the top of the bank's 7.5-9 percent targeted range, and the bank said it was "a major recipient" of deposit inflows in the current financial market turmoil.

HSBC said global economic growth will continue to slow during "the next few quarters as recession takes hold in several mature economies." Asian growth will slow but is likely to remain "relatively more resilient," it said.

By 0905 GMT its shares were up 0.1 percent at 747 pence.

HSBC said its charge for bad loans in personal financial services in the U.S. rose to $4.3 billion in the quarter, up by $700 million from the previous quarter.

It had been expected to report another near $4 billion on bad U.S. home loans as its mortgage book is run down and unsecured losses pick up as unemployment rises.

It wrote down the value of credit trading positions by $600 million in the quarter, lower than writedowns in the previous two quarters partly due to changes in accounting rules.

HSBC and other banks have reclassified how some assets are accounted for under new rules. Without the reclassification HSBC said its third-quarter writedown would have been $835 million higher.

Bad debts also rose in its European retail business.

However, HSBC said its investment banking arm, Global Banking and Markets, was profitable in the third quarter.

HSBC is expected to post one of the biggest profits of any bank this year. It should report a 2008 pretax profit of $21.7 billion, according to the median of 11 estimates compiled by Thomson Reuters, down 10 percent from its record $24.2 billion in 2007.

(Reporting by Steve Slater; Editing by Greg Mahlich)