HSBC warned that the subprime crisis could deepen and said further volatility as a result of the credit crunch was "more than a remote possibility"
"There is the probability of further deterioration if the current housing market distress continues and further impacts the broader economy," the company said.
The 2.3 billion-euro charge follows last year's $10.6 billion bad debt exposure, which led to HSBC's first-ever profit warning.
But HSBC said the losses were "more than offset by revenue growth in the group" as a whole and that third-quarter operating income was up compared with a year ago.
Pretax profit in the third quarter of 2007 was ahead of the same period a year ago, and its performance over nine months was also ahead of 2006, the company said without releasing specific figures.!
"In Asia-Pacific and the Middle East, the excellent operating and financial performance delivered in the first half of the year continued during the third quarter. Europe, driven by the U.K., was strongly ahead of the prior year quarter, though Latin America was lower as a result of higher loan impairment charges in Mexico," HSBC said.
The global credit crisis was sparked by rising defaults in the United States on subprime mortgages, home loans provided to borrowers with weak credit. Those problems spread to other areas as those debts were repackaged with other less risky debts and sold to investors. Banks worried about exposure then balked at taking on new debt, tightening liquidity.
HSBC shares gained 4 percent to 877 pence ($18.11) on the London Stock Exchange.
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