MIDLAND Bank's 1992 final pre-tax profit of 178 million Pounds Sterling (about HK$1.97 billion) is ''encouraging'', says Sir William Purves, the chairman of parent company HSBC Holdings. However, Sir William last night warned that the clearing bank's performance this year would depend on the state of the UK economy. Midland, taken over by HSBC in July last year, posted the pre-tax figure after an exceptional item of 122 million Pounds Sterling for associated restructuring costs. This compared with a pre-tax profit of 36 million Pounds Sterling following an exceptional item of 21 million Pounds Sterling in 1991. Earnings per share were 9.6 pence, after a loss of 6.2 pence for 1991. No dividend was recommended. The result was well above market expectations, which were in the range of 100 million Pounds Sterling for pre-tax profit, and meant that parent HSBC would reap a pre-tax profit from Midland of 211 million Pounds Sterling. It was seen as confirming the view of some observers that HSBC had made the Midland acquisition at the right time in the banking cycle. It may also convince sceptics that a recovery in HSBC's UK operation may come sooner rather than later. ''Well, it's an improvement from last year,'' Sir William said. ''It's encouraging in a number of ways, but there's a long way to go and much depends on the UK economy in 1993.'' He noted that Midland chief executive Brian Pearse was hopeful that there were now some signs of an economic recovery in UK. ''It's still very fragile but there just may be some signs of the beginning of a healthier situation,'' Sir William said. ''I feel it will be the second half of 1993 before we see really any significant pick-up, and into 1994.'' S.G. Warburg analyst Chris Ellerton said from London that the results supported a fairly optimistic outlook for Midland Bank in 1993. Profits before bad debts were substantially higher than market expectations at 529 million Pounds Sterling, more than 20 per cent higher than in the first half of the year. The charge for bad debts was slightly lower than expectations, falling to 676 million Pounds Sterling from 903 million Pounds Sterling for 1991. S.G. Warburg is looking for a pre-tax profit of 450 million Pounds Sterling for 1993. Sir William suggested the fall in UK interest rates would help prospects for the coming year, and the depreciation in sterling should help UK exporters sell their goods. ''Let's hope 1993 is better,'' he said. ''The bad debt provisioning in all UK banks has been very severe in 1992 and although Midland themselves had a little less provisioning in the second half, their merchant bank had some significant provisioning. ''This will go on as you come out of the recession, but hopefully the provisioning will be somewhat less in 1993 and hopefully a good bit less in 1994.'' During the year there was a release of provisions relating to less developed countries of 89 million Pounds Sterling. Commercial banking operations recorded pre-tax profit of 138 million Pounds Sterling against a loss of 50 million Pounds Sterling in 1991. Trading profit, before bad debts and exceptional items of 791 million Pounds Sterling, was up three per cent from 1991. Bad debt charges for commercial businesses were 31 per cent down at 557 million Pounds Sterling. The bank's merchant banking operation saw a pre-tax loss of 33 million Pounds Sterling, against a profit of 34 million Pounds Sterling. Bad debt charges were 77 million Pounds Sterling, up 45 million Pounds Sterling, resulting largely from provisions against smaller UK accounts. Trading profits fell to 51 million Pounds Sterling from the 1991 figure of 66 million Pounds Sterling. This included Samuel Montagu's trading profit before bad debts of 48 million Pounds Sterling, compared with a 65 million Pounds Sterling profit in 1991. In London, Midland group chief executive Brian Pearse said the bank was going to continue its present strategy to increase its business, ruling out any new devices to bring that recovery closer. ''We have nothing up our sleeves to offer customers at the moment which will make banking with us more attractive,'' Mr Pearse said. ''We have just got to be better at using our distribution system to a greater effect.'' Mr Pearse indicated Midland was still trying to recover from a ''number of false starts'', which he said he was ''now monitoring more closely''. He said he regretted that while the group had reduced its bad debt exposure, it had recorded only a one per cent increase in trading profits. However, he indicated that the signs of an upturn were imminent: ''Although the bank has endured an exceptional year, with the economy very depressed, we are now seeing vital signs of improvement.'' Of the losses in merchant banking incurred over the year, Mr Pearse emphasised that if it had not been for ''one or two substantial losses'' this sector would have performed much better. Sir William said of Hongkong Bank of Australia's chief Richard Orgill, who was appointed to Midland Bank as chief operating officer yesterday: ''It's an important appointment and he'll bring considerable experience to bear. ''Strengthening the top team in Midland Bank is the aim.''