Profits at Hongkong and Shanghai Banking Corp fell 19.5 per cent for the first six months this year, but the bank's chief executive expressed some hope yesterday that the surging loan provision in Asia that dampened earnings had peaked. Net profit at HSBC Holdings' Asia-Pacific unit fell to HK$22.3 billion from HK$27.7 billion a year earlier, partly because of loan impairment charges surging to HK$6.4 billion from HK$2.98 billion, as well as lower net interest and fee income. Vincent Cheng Hoi-chuen, the chairman of the Asia-Pacific unit, said the global economic downturn and margin squeeze in the low-interest-rate environment hurt earnings. In Hong Kong, where the bank records earnings in US dollars, pre-tax profit slid 18.61 per cent in the first half to US$2.5 billion as net interest income fell 22 per cent, driven by lower margins in personal financial services and commercial banking. The net interest margin in Hong Kong fell 64 basis points to 1.67 per cent during the period. Loan impairment charges in Hong Kong rose to US$273 million from US$81 million a year earlier. However, Mr Cheng said the bank had expanded its customer networks in Taiwan and on the mainland. Chief executive Sandy Flockhart said the loan impairment charges rose from a low base and were driven largely by the impact of a weaker global economy. The mainland and India had seen a pick-up in non-performing loans, while Hong Kong also was affected by an increase in bankruptcy petitions. 'I would hope perhaps [we have] seen the peak of impairment charges in Asia,' Mr Flockhart said. However, whether HSBC's loan impairment would peak still depended on the economic condition in the United States and Europe, said Louis Tse Ming-kwong, a director at VC Brokerage. Mr Tse said HSBC's second-half performance in the Asia-Pacific was unlikely to rally sharply if interest rates remained low. However, he said the strong property and stock markets in Hong Kong, as well as the resilient economy on the mainland, would support Hong Kong earnings. 'There will be some improvement for the full year but not substantially,' Mr Tse said. Because of the significant losses in the US, Hong Kong and the rest of the Asia-Pacific were the major profit contributors to HSBC, accounting for 49.8 per cent and 40.3 per cent, respectively, of the group's pre-tax profit in the first half. Mr Cheng said the bank remained optimistic about Asia's prospects. 'For HSBC, Asia remains a relative economic oasis of opportunities that we have not yet fully tapped,' he added. Stephen Green, the chairman of HSBC, said the group would continue to focus on expanding in emerging markets. 'The financial crisis underscored the wealth shifting from the West to the East, particularly in Asia,' he said. Mr Green said the bank continued to make progress with its plans to list HSBC shares on the Shanghai stock exchange and wanted to be the first foreign company to list on the mainland, although he did not disclose further details. 'China is our natural home,' he said. The bank said the mainland had already contributed materially to the group even though its pre-tax profit there fell 17.09 per cent to US$752 million in the first six months. It added that the market value of its three largest strategic investments on the mainland - Bank of Communications, Ping An Insurance (Group) and Industrial Bank - had grown significantly since it acquired them and increased by US$8.2 billion in the first half of this year.