CitiGroup will reveal an early glimpse of the impact on United States banks and insurers of the September 11 terrorist attacks when it reports its third-quarter result today. The report may have a bearing on the immediate outlook for the share price of Hong Kong's biggest lender HSBC, which last year generated 12 per cent of its cash earnings (or US$962 million) from its North American operations. HSBC Securities bank analyst Anna Borzi said: 'The share price of HSBC correlates more closely with the CitiGroup share price than any other equity or index. 'I will be looking in particular at what happened to revenues, investment gains and dealing profits to determine whether the result contains implications for HSBC.' Indosuez W I Carr analyst Richard Duncan warned: 'The concern is that if CitiGroup is de-rated and its price-to-book valuation goes down, this will spill over into market ratings for HSBC's share price.' Mr Duncan said HSBC was trading at about 2.1 times book, notwithstanding recent retreats in its share price, and this remained high in historical terms. 'The fact is that for nine out of 10 years in the 1990s, it traded at or below 1.5 times book, and it was as low as 0.6 times book in the early 1990s. 'All stocks were revalued upward during the bubble mania years and were left trading on higher valuations. The big risk now is that they may be de-rated,' Mr Duncan said. Capitalised at US$226.7 billion, CitiGroup is the No 1 financial services group in the US and owns leading insurers Travelers Life & Annuity and Travelers Property Casualty. In a statement to the market on September 17, the group warned analysts and investors that insurance losses related to the terrorist attacks could total US$500 million after tax; while the effect of branch closures and the closing of the stock exchange in the immediate aftermath of the attack could reduce earnings for the quarter by a further US$100 million to US$200 million. At an earnings per share level, this could trim the pre-attack quarter result by between 12 and 14 US cents, it warned. The First Call consensus forecast for the group's earnings for the quarter was 75 HK cents. CitiGroup said it might have exceeded this forecast by two cents 'excluding the financial impact of the September 11 attack'. Another item which will be closely watched by the market will be the trend in non-performing loans as a result of the slowdown in the US economy. Data released by US regulators last week showed a disturbing trend in credit quality of large syndicated loans. The 2001 Shared National Credit review released on October 5 showed that classified loans as a proportion of total loans jumped to 5.7 per cent in the second quarter of the year, from 3.7 per cent earlier. The total amount of 'adversely rated' credits rose to US$193 billion, the highest on record. 'There is little surprise that credit quality is deteriorating. However, the speed and magnitude of the deterioration is alarming,' Mr Duncan told Indosuez clients. He said this suggested HSBC 'would need to make much higher provisions for deteriorating asset quality in the US and around the world as the global economic slowdown worsens'. Most analysts who track the fortunes of HSBC have downgraded the group's earnings forecasts for this reason and the downgrades have contributed to the roller-coaster ride taken by the HSBC share price - which fell to a 52-week closing low of HK$68.50 on September 21. Yesterday, the price ended in Hong Kong trade at HK$85.75, but this remains 31.7 per cent below its 52-week closing high of HK$121.50 on January 31.