HSBC, Europe's biggest bank, has written off $3.2bn in the first quarter of 2008 as a result of the US sub-prime mortgage crisis and credit turmoil.

The banking giant also announced that first-quarter profit was better than the same period in 2007.

The writedowns were in line with what the bank had predicted.

Group chairman Stephen Green said he was happy with the bank's first-quarter results.

"Our performance so far in 2008 demonstrates that HSBC's business resilience in difficult financial markets, our global distribution network, diversified earnings streams and strong capital position are allowing us to support our customers in today's challenging market conditions," Mr Green commented.

"These factors enable us to invest for growth, particularly in emerging markets, and focus on long-term value creation for our shareholders."

But Mr Green also said the outlook for the US economy in 2008 was depressing.

"It seems increasingly likely that the US will enter a recession in 2008, the length and depth of which is uncertain," he explained.

"The timing of any recovery in the US housing market, which is likely to be the primary stimulus in restoring confidence to the US economy, is also unclear.

"While illiquidity in financial markets remains of continuing concern, the major economic risks facing the global economy now include inflationary pressures, particularly from rises in food and energy prices."

Lenders worldwide have written off more than $200bn hit by the credit crisis.

The US sub-prime problems have hit the profits of banks worldwide, as rising mortgage defaults and falling US property prices have meant loans bought by banks are worth less than thought.

The article HSBC profits rise despite write-downs originally appeared on 999 Today