LONDON (Bloomberg) - HSBC Holdings Plc, Europe's largest bank by market value, may post lower earnings next year as bad-debt provisions and losses rise more than estimated in the US, analysts at Merrill Lynch & Co. said.

Net income at the London-based bank may fall 13 percent to $14.6 billion next year from an estimated $16.7 billion in 2007, the London-based analysts said in a research note to clients. HSBC set aside $3.4 billion in third quarter to cover US defaults, $1.4 billion more than it forecast in July, amid a "broader deterioration" in the US, the bank said on November 14.

Though the bank's Asia businesses "continue to perform extremely well," the US business "appears to be going from bad to worse," said Merrill analysts led by Alistair Scarff. They reduced their estimated earnings per share for this year and 2008 and reiterated a "sell" rating on the stock.

"With a negative earnings trajectory and the risk of more negative news flow from the US overshadowing the strong performance in Asia, we contend it is still too early to turn more positive on HSBC," the analysts said.

HSBC's third-quarter pretax profit was ahead of last year as gains in Asia and a $1.3 billion accounting gain offset third- quarter losses at the US sub-prime unit, the bank said last week.