Europe's biggest bank is in the process of its record takeover of Household International, the US consumer finance firm, which it expects to complete by the end of March.

HSBC reported profits of $9.65bn (�6.1bn) for the year to December 2002 - at the lower end of analysts' forecasts - and raised its dividend by 10%.

The bank said consumers and small businesses had proved surprisingly resilient during the year but that the corporate business remained difficult.

And it said the cost of bad or doubtful debts had fallen by $716m to $1.3bn (�826m).

Slow recovery

HSBC said falling stock markets had dampened demand for equity products.

But it said this was offset by low borrowing rates.

"Interest rates were held low to stimulate consumption and we achieved strong growth in personal lending."

However, the group's chairman John Bond warned that any economic recovery would be slow.

"Our view is that there will be modest growth in the world economy, but lower than we've experienced in the past decade by quite a way," he told Reuters.

Bad timing?

Mr Bond dismissed suggestions that its acquisition of Household International had come at a bad time.

The deal was worth $14bn (�9bn) when announced in November and is intended to raise HSBC's profile in the consumer market.

It comes at a time when the US economy is struggling but Mr Bond predicted the company would weather the storm.

"It is a fairly predictable business model and it is a big business."

HSBC shares closed up 7 pence at 691p in London on Monday.