HSBC Holdings said first quarter profits were well ahead of last year, swelled by record results in its investment bank and resilience in Asia, but would have been down without accounting gains on its debt.

The chief executive of Europe's biggest bank said there had been green shoots (of recovery) in confidence but few early signs of recovery across the broader economy.

The reality is it (recession) has got some time to go, said CEO Michael Geoghegan.

HSBC <0005.HK>, which has weathered the financial crisis better than most rivals thanks to a traditionally strong balance sheet, said excluding a $6.6 billion fair value gain on its own debt, first quarter profit was below a year ago. It was still significantly higher than in the fourth quarter, it said.

About two thirds of the debt gain reversed in April, said Finance Director Douglas Flint.

Bad debts in the first three months of the year rose from a year ago but were lower than in the previous quarter, the bank said in a trading update on Monday. It does not issue full quarterly results.

It's broadly what you'd expect given what's come from other banks, said Simon Maughan, analyst at MF Global. It's a very strong investment bank, but a sluggish performance elsewhere. It's done a little bit better as Asia seems to have been weathering the storm pretty well, particularly on the impairment side.

By 8:30 a.m. EDT, HSBC shares were down 1.7 percent at 567 pence, in line with a 2 percent drop in the DJ Stoxx European banking sector <.SX7P>. Its shares have lost 2 percent this year, but have surged over 60 percent in the last two months.

Impairments in the bank's troubled U.S. consumer finance business, which HSBC is in the process of running down after losing billions in the last three years on soured subprime housing loans, totaled $3.9 billion.

That was up from $3.2 billion a year ago but down from $4.6 billion in the fourth quarter of 2008, and better than had been expected. Some analysts had forecast U.S. Q1 bad debts would be between $4 billion and $5 billion.

In the U.S. we have been pleasantly surprised in regard to the first quarter but we don't think that's a trend and need to look at it for the next four quarters, Geoghegan told reporters on a conference call.

He said bad debts in Britain were likely to rise for some time to come and many other markets were deteriorating but were proving more resilient in Asia, the bank's traditional stronghold.

OPPORTUNITIES...

HSBC has not taken any taxpayer bailouts and raised 12.5 billion pounds in a rights issue last month to restore its balance sheet advantage over rivals.

That left it well positioned to ride out the economic uncertainty and to take advantage of opportunities, it said.

HSBC is one of three banks considering buying the Asian retail banking of Royal Bank of Scotland but that may cost less than $1.5 billion, people familiar with the matter have said.

We need to focus on our organic growth business. If there are opportunities we will take them but at the moment I don't see anything on the horizon, Geoghegan said.

The rights issue proceeds lifted HSBC's core equity tier 1 capital ratio to 8.6 percent at the end of March.

Global Banking and Markets (GBM), the investment bank unit, delivered record first quarter results on the back of strong trading in foreign exchange and interest rates.

That included writedowns of about $900 million on the value of structured credit assets and impairments on available for sale securities.

GBM's performance, which echoed strong performance among most other investment banks amid buoyant capital markets in the first quarter, continued in April, the bank said.

(Editing by David Cowell)

Investment HSBC