It is not just white trailer trash HSBC is on the lookout for.Sir John describes the Household acquisition as HSBC's most important deal since it bought Midland a decade ago and indeed it is, provided the bad debt provisions can be kept to manageable proportions.Royal Mail disputeSuing your biggest union may not be best way of resolving an industrial dispute but it is easy to see why the Royal Mail chairman, Allan Leighton, is so agitated. Consumer finance, as the division is called, accounts for 10 per cent of business and HSBC clearly sees scope to expand both by introducing the format to developing countries and exploiting the influx of migrant workers into developed economies such as the US. Sir John reckons that HSBC can extract a further $1.2bn in cost savings out of Household.While the rest of the UK's Big Five banks struggle to sell more savings and loan products into a finite and unreceptive retail market and business lending remains subdued by slow growth, HSBC is ploughing its own furrow The Household operation is part of the way forward. But the returns are also much higher, with a cost to income ratio which is almost half that of HSBC's conventional personal account business. Indeed, in some ways it is smaller since the bank's eggs are in a great many more baskets and it is dealing with a much more predictable bunch of customers.Household's bad debt provisions as a percentage of advances may far outstrip those in personal, commercial and investment banking.

In the three months that Household has actually been part of the HSBC stable, the group's bad debt provisions have more than tripled to $2.4bn. Almost all of the increase is due to the 50 million Household customers now on its books.Need this be a worry for a trillion dollar bank such as HSBC, now the world's second biggest lender after Citigroup? In many ways, it is no bigger a risk than lending to a corporation like Enron. The deal brought with it a US chief executive who was on a package worth $37m (£23m), including free dental care for life for him and his wife. Those with longer memories could recall the days when HSBC was known, at least in this country, as Midland Bank and it bought a US crock called Crocker and paid dearly for its mistake.Household specialises in what is euphemistically termed the "sub-prime" sector of the market - customers who lack the credit history to open a conventional bank account and, by definition, are therefore a bigger credit risk.HSBC's half-year results demonstrate how much more of a risk. America has proved a graveyard for too many UK corporate reputations to count and so there was a sharp intake of breath when HSBC's Sir John Bond splashed out £10bn on the takeover of Household last November. But investors want to see the underlying performance pick up with stronger organic growth.". Often the significantly under-banked are younger people, while elsewhere the population is ageing, and there is an obvious need for service to be more to do with retirement provision," Mr Green said.The Household deal has been controversial for HSBC.

Businesses which lend money to the "sub prime" market are often criticised for charging customers very high rates of interest. He highlighted Mexico, where HSBC recently bought the fifth largest bank, Bital, and France, which has a large immigrant population, as areas where Household could be introduced."We want to exploit opportunities from changing demographics. It said it would target opportunities to lend money and offer other banking services to immigrant populations who find it difficult to qualify for accounts with mainstream banks."This is a market which is going to grow and grow, and will offer attractive opportunities for the next few years," Mr Green said. That included its UK mortgages, savings and credit cards arm.Stephen Green, who took over as chief executive of HSBC in May, said he was "cautious" about prospects for a revival in the global economy, but added that he believed "the worst was behind us".He dampened concerns about the growing debt mountain private individuals are taking on, saying: "No one believes borrowing will continue at the level it has been doing, but we don't see any alarm bells ringing in our business."HSBC said it would expand Household to new markets, in developing economies and mature ones. HSBC's shares rose 13p to 777.5p.The lender, which is one of the UK's "Big Four" and the second largest bank in the world after Citigroup, said personal financial services' profits rose 18 per cent to $2.1bn.

Once acquisitions and other exceptional items were stripped out, profits were up 4 per cent. Provisions have been made on the basis that 5.5 per cent of advances turn sour, so for every £100 loaned, the bank expects to lose just over £5.In comparison, only 0.75 per cent of loans in its personal financial services business are not paid back and in commercial banking, traditionally a risky area, only 0.2 per cent did not perform in the first six months.Douglas Flint, finance director of HSBC, said that Household, which has 50 million customers, had "broadly performed in line with expectations". Household is on track to deliver $200m of synergies every year within two years and contributed $649m to HSBC's pre-tax profit in the first half.Overall profits rose 26 per cent to $6.88bn, ahead of expectations. HSBC paid the price yesterday for its £10bn acquisition of Household International, the US loans business for people with poor credit histories, when it more than tripled its bad debt charge to $2.37bn (£1.47bn) in the six months to 30 June. Household, which HSBC swallowed in March, accounted for $1.5bn of the charge for bad and doubtful debts.