International banking group HSBC Holdings yesterday revealed record profits while announcing strong action to protect itself against the impact of the Asian financial crisis. The company said it was raising by GBP231 million, or more than 60 per cent, to GBP615 million (HK$7.8 billion) the amount of cash it would put aside to cover bad and doubtful debts. The figure includes a special general provision of GBP175 million to cover potential problems in the current year as the fallout from the crisis continues. The group's results are the latest example of how major international banks have been hit by the turmoil, although the effect on HSBC has so far been less severe than on several of its European rivals. The group's pre-tax profits rose 10 per cent to GBP4.9 billion, boosted by strong results at its leading British subsidiary, Midland Bank. Net attributable profit rose eight per cent to GBP3.35 billion. Chairman Sir William Purves, presenting his final set of annual results before retirement, described the second half of last year and the early part of this year as dominated by 'economic difficulties'. 'The coincidence of weak exchange rates, significantly lower stock exchange levels and high interest rates in many countries has led to a deterioration in credit quality, the full impact of which is only beginning to emerge,' he said. Directors of the group said the future still looked uncertain and that they were looking for other ways to strengthen earnings while the crisis dragged on. Sir William said the group had decided to set aside the special general provision 'reflecting this unusual level of uncertainty', while other general provisions had been increased by GBP116 million to GBP1.05 billion. Hongkong Bank warned that the regional turmoil was far from over, and that its attributable profits last year had only grown three per cent to $19.8 billion. In the meantime, it said its charge against bad debts had vaulted 215 per cent to $4.54 billion, and that it had taken a $2.99 billion general provision and a $1.6 billion special provision against any more of its loans going sour. At Hang Seng Bank, which is 62.1 per cent owned by Hongkong Bank, directors said they were preparing for a tough year. Net profit grew by 10.3 per cent to $9.36 billion, far lower than investment analysts had expected. It also revealed a surprise $250 million in extra general provisions because of the financial crisis. In early stock market trading in London, investors welcomed the announcement. HSBC shares initially surged 2.03 per cent, or 36 pence to 1805.5 pence, as investors took comfort from the size of the large bad debt charge. But they later fell back to settle near their opening level. Analysts said the market became more cautions when note was taken of the company's refusal to rule out further problems later in the year. Several investment houses said they were downgrading recommendations on the group's shares to a hold until they saw how much further problems might develop. 'There is a large question mark over what risk there is in HSBC. People are taking a cautious stance.' one said.