HSBC's bad debt provisions more than doubled in the first six months of the year to $6.3 billion (£3.1 billion) as it predicted more fallout from the collapse of America's sub-prime mortgage market.

The UK's largest bank gave its forecast as it admitted it had spent $236 million on refunding unauthorised overdraft fees after a backlash by UK customers against paying large sums for exceeding their borrowing limit. The charges contributed to HSBC's UK retail business reporting a 34 per cent fall in profits.

In the US, HSBC has now stopped underwriting those sub-prime mortgages – home loans provided to consumers with a poor credit history – that are sold through brokers, but it still sells them directly to customers. HSBC no longer buys portfolios of sub-prime mortgages from other banks and it announced today that it has cut its exposure to mortgages by $8 billion to $41.4 billion.

HSBC's bad debt provision leapt from $2.4 billion to $6.3 billion in the six months to June 30. Profits from its American business fell 20 per cent from $5.9 billion last year to $4.7 billion.

In February the impact of the US home loans debacle forced HSBC to issue its first profit warning in its 142-year history. The bank said today: "The weakness in the housing market is likely to hold back US growth for 2007, which may be as low as 2 per cent."

HSBC also said that overall global growth would be "close to" 3.8 per cent – the same rate as last year.

The bank said that group interim pre-tax profit rose by 13 per cent to $14.1 billion. However, this includes $1 billion from HSBC divesting its holdings in its mainland China associates. Stripping out that sum means that the bank's pre-tax profits grew by 5 per cent. Total operating income over the six month period increased by 23 per cent to $42 billion.

Pre-tax profit from HSBC's corporate and investment banking business rose from $3.1 billion to $4.1 billion while income from commercial banking increased from $2.8 billion to $3.4 billion.

The bank's shares were among the biggest risers of the day, up almost 3 per cent by mid-morning to 903.5p.

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