HSBC has reported a 37 per cent rise to $14.4 billion (£7.68 billion) in its annual pre-tax profit, breaking a record for a UK bank set three weeks ago by Royal Bank of Scotland.

Sir John Bond, the HSBC chairman, said the increase in the bank's earnings last year reflected its broad footprint at a time of global economic recovery.

"Our results owe much to the improved geographical distribution of profits that has characterised HSBC's progress in recent years," Sir John said.

Takeovers, including the $14.8 billion acquisition of Household, the US consumer credit business, had also supported growth.

The ingestion of Household had, however, prompted HSBC to raise to $6.09 billion its provision for bad debt, a fourfold increase over the 2002 figure.

HSBC said the quality of Household's credit book, which has been of particular concern to analysts, had improved in the last three months of the year.

"There are ground for optimism that these trends will continue," Sir John said, adding that Household was central to HSBC's efforts to exploit a US market set to benefit from the weaker dollar.

The bank, which has operations 79 countries, cited China, India, Brazil and Mexico as those countries with particular economic potential and said it would continue to be supported by its geographic diversity.

Sir John said: "We have built a capital strength that allows us to develop our businesses where we see opportunities."

However, he cautioned over the impact of a rising property values worldwide.

"While such rises are understandable in the context of low interest rates and limited appetite for alternative investment opportunities, in the long run property prices have to be linked to income growth," he said.

A market slowdown could, by undermining consumer sentiment and domestic spending, "lead to economic weakness or dislocation".

HSBC shares stood 13.5p lower at 862p in afternoon trade.

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