HSBC has reported a 28 per cent drop in pre-tax half-yearly profits as a result of the global credit crisis.

The UK's largest bank saw profits slip by $3.9bn to $10.2bn in the six months to the end of June, as its North American arm reported a $2.8bn loss.

The company also announced $3.7bn in fresh credit writedowns as a result of the global credit crunch.

Chairman Stephen Green described the first half of 2008 as “the most difficult financial markets for several decades”.

He added that financial markets "will not and should not" return to the situation they were in before the credit crisis struck.

"Ultimately, the real economy will recover from this crisis, although it may get worse before it gets better," Mr Green said.

"While the near term poses real uncertainties and difficulties, it may also create opportunities for HSBC to accelerate the execution of our strategy.”

However, the bank's profits were much better than many economists had predicted.

Shares in HSBC dropped by nearly 1.5 per cent in early morning trading after the announcement.

HSBC has been severely hit by the credit crunch. Writedowns on investments hit by the crisis in the US housing market have now surpassed the $17bn mark.

Lenders worldwide have written off more than $250bn.