The good news: HSBC is setting aside $3.2 billion for cruddy loans it made in the U.S. The bad news: HSBC is setting aside $3.2 billion for cruddy loans it made in the U.S. Truth be told, this amount is less than what many had feared and expected, so we’re going to just go out on a limb here and say it’s a good kind of bad (you know…rather than the bad kind). Also, this duality of good/bad news happens to be arriving with a silver lining that, coming from Europe’s biggest bank, may bring hope back to all. Except, for course, for the U.S., which, HSBC notes, is doomed.

HSBC Holdings Plc, Europe's biggest bank by market value, set aside a smaller-than-estimated $3.2 billion for bad loans in the U.S. and said first-quarter profit was higher than a year earlier.

"The outlook for the rest of the year remains unusually difficult to foresee in the current environment," Chairman Stephen Green said today in a statement.

London-based HSBC expects the U.S. economy to slip into a recession as deterioration in the housing market extends into 2009. While first-quarter earnings declined in the U.S., where the bank lost 1.1 billion in 2007, HSBC reported higher pretax profit from the Asia-Pacific region, the Middle East and Latin America. HSBC rose 2.1 percent in London trading.

"The U.S. provisions are less than some of the more aggressive forecasts," said Simon Maughan, a London-based analyst at MF Global Securities Ltd. "People need remember how strong Asia can be," said Maughan, who rates the stock "buy."

HSBC gained 18.5 pence to 884.5 pence at 10 a.m. in London, valuing the bank at almost 115 billion pounds ($224 billion). The stock has gained 3.9 percent this year, the best-performance in the eight-member FTSE 350 Banks Index, which declined 8.7 percent.

Financial companies worldwide have posted losses of $323 billion related to the collapse of the U.S. subprime mortgage market.

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