Britons typically have 5 per cent less money in their bank accounts than a year ago, HSBC revealed yesterday in one of the most graphic illustrations of the rising cost of living. Increasing utility and food bills were responsible for the decline in average balances of the bank’s 8.2 million current account holders in the UK, HSBC said.

Joe Garner, head of HSBC’s personal financial services in the UK, said: “People are really feeling the squeeze. There is definitely some strain there.”

He said that some of the decline might be due to people being more energetic about transferring money to higher-interest savings accounts, but he believed that the bulk was due to the higher cost of living. There was no sign of more people going overdrawn.

HSBC customers are thought to keep an average daily balance of about £1,000 in their current accounts, suggesting that their typical balances have shrunk by £50 over the past year. The bank, which yesterday reported a 30 per cent surge in underlying UK profits to £1.4 billion in the first half, said that it was also braced for a pick-up in problem loans to small firms in the UK, albeit from a low base.

Globally the bank was hit by $10.1 billion (£5.14 billion) of problem loans and losses from credit investments, which pushed first-half profits 28 per cent lower to $10.2 billion. The bank has set aside an extra $6.8 billion for souring loans to American borrowers with poor credit histories. It also announced that it is to stop offering car loans in the United States.

Stephen Green, chairman, stopped short of saying the problems in the US had peaked, but pointed out that the latest provision, while up 85 per cent on the first half of 2007, was 15 per cent down on the second half.

After scaling back mortgage lending and now car finance, the US consumer finance business is focused on credit cards and personal loans. Michael Geoghegan, chief executive, said that 80 per cent of the US car loan portfolio would be run off within three years. The US mortgage book was reduced by 13 per cent to $31 billion during the half year.

HSBC aggressively pushed into lending to people with impaired credit records in the US with the £9 billion acquisition of Household International in 2003. Yesterday it wrote down the value of that purchase by a further $527 million.

HSBC also wrote down an additional $3.9 billion on credit trading, exposures to monoline insurers and leveraged buy-out debt in the first half, sending profits in its global banking and markets division down 35 per cent.

Mr Green gave a warning that the global economy could get worse before it got better. “HSBC was not immune from the turmoil,” he said, though he rated the overall performance as resilient. The outlook was challenging, he said, though he expected activity in the bank’s emerging markets heartlands to hold up reasonably well.

Traders gave the figures a lukewarm reception, marking the shares 9p lower to 828p. A second interim dividend was set at 18 cents. Together with the first interim dividend, the payout is up 6 per cent on the first half of 2007, as foreshadowed last year.

Rock’s £500m losses

Northern Rock will today report losses of about £500 million, largely from charges taken to cover losses as customers struggled to meet mortgage repayments.

The larger-than-anticipated losses are also from one-off charges, including the cost of 1,300 redundancies. Northern Rock will also announce that it is repaying the £25 billion loan that it was given last September by the Bank of England faster than it had expected.

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