Europe's biggest bank HSBC said its first quarter profit was ahead of a year earlier as growth in Asia and elsewhere helped counter another big hit for bad debts on US home loans.

HSBC said in a trading statement today it was increasingly likely the US economy will go into recession this year.

It said the bad debt charge related to its US consumer finance business was $3.2 billion for the first quarter and it wrote down almost as much for a deterioration in the value of risky assets amid the credit crunch.

The latest US home-loan impairment charge was in line with expectations and down from $4.6 billion in the previous quarter. But it was double the level of the first quarter of 2007 as problems in the sub-prime housing market work through its loan book.

HSBC said its underlying revenue growth in the first quarter was comfortably ahead of a year earlier, even after absorbing a $2.6 billion writedown in its global banking and markets investment banking unit.

Group revenue growth remained positive after also excluding a $2.7 billion gain on the fair value of debt it carries on its own books. Underlying cost growth during the quarter was modest, it said, and its capital ratios remained broadly in line with those at the end of 2007.

HSBC chairman Stephen Green said the bank's global presence and range of businesses 'are allowing us to support our customers in today's challenging market conditions'. The update was also well-received by investors.

Mr Green was upbeat after record quarters for the group's commercial banking and private banking division, despite the continued problems in the US business, HFC.

HSBC said it saw higher losses across its US business as the economy veers towards recession, although bad debt levels were in line with management expectations.

The bank's CEO Michael Geoghegan said the pace of growth in bad debts had slowed, but this could be due to seasonal factors. In 2007, the bank's total bad debt and credit provisions hit $17.2 billion.

But the bank remains gloomy on the prospects for the US housing market, where soaring defaults among borrowers shattered confidence in investments based on the loans last summer - sparking the current credit crisis.

'It seems likely that the deterioration in the US housing market will extend into 2009. There is an increased likelihood of a recession this year,' the bank said.