HSBC today revealed that charges on consumer loans that have gone sour soared by $700 million to $4.3 billion during the third quarter as Europe's biggest bank by assets felt the pain of America's nosedive into recession.

Michael Geoghegan, HSBC's chief executive, also said the bank had not yet made up its mind whether to pass on the Bank of England's 1.5 per cent cut in interest rates in the UK last week as part of its efforts to revive the nation's economy.

Mr Geoghegan said HSBC had immediately passed on the cut to holders of the bank's tracker mortgages, but was still making its mind up about what to do for variable rate policies.

He pointed out that HSBC was still facing high wholesale funding costs and denied coming under pressure from Government to reduce borrowing charges to help relieve the pressure on millions of homeowners.

"I haven't come under any pressure in that regard. I doubt if there has been any pressure and I doubt if we would respond to any pressure," he said.

In an update to investors today, HSBC said that the $700 million increase in loan impairment charges at its US business was mainly due to increased problems in its residential mortgage and credit card portfolio. Shares in HSBC fell by 1 per cent to 738.5p in early trading.

The bank was among the first to highlight the soaring repayment difficulties suffered by US sub-prime mortgage borrowers last February - one of the initial signs that sparked the current financial crisis wreaking havoc throughout the world's largest economies.

Today, HSBC said repayment arrears were rising on loans extended during 2006 and 2007.

"These trends reflected the continuing weak housing market and higher unemployment and under-employment, particularly in states that had enjoyed the fastest rate of home price appreciation," the bank said.

HSBC said today that third quarter profits were ahead of the same period last year, helped by strong gains in Asia. However, over the nine-month period, profits were below 2007.

Mr Geoghegan refused to call the end to the bank's woes in America. "Clearly, our business is a reflection of the economy in the US. The fact is our credit card business is linked to the economy. If unemployment is going to increase then we have to take account of that in our businesses," he said.

Douglas Flint, HSBC's finance director, also declined to commit the bank to a dividend payment next quarter. He said HSBC would decide at its full-year results whether to make another payout to shareholders but noted that it had paid dividends over each of the past three quarters.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive