HSBC calm about rate rise effect

HSBC is concerned about the impact rising interest rates may have on unemployment because this could affect its customers' ability to repay their debts.

But Douglas Flint, finance director of Britain's biggest company, said the bank was not yet worried about the situation after commissioning six reviews during the year into the possible effects of increased borrowing costs.

Mr Flint said that, when the bank's customers were forced to admit they were in difficulty, HSBC found they had taken on a number of loans.

"We are finding when people do go into default... they do have more indebtedness from more lenders than we expected."

Last week Barclays predicted that the recent rise in interest rates could prove to be a "financial nemesis" for some consumers, raising concerns about a looming bad debt crisis.

In its trading update to the City, HSBC said credit quality was stable throughout the group. It has operations across the world, including Hong Kong and the United States where it recently bought Household, which specialises in providing loans to people on lower incomes.

Donald Tosh, analyst at financial firm Spears and Jeffrey, said: "They are pressing all the right buttons. How reliable are the earnings forecasts? They are pretty robust."

He predicted that HSBC's share price could soon top £9. The shares closed yesterday at 875.5p, up 1.5p.