HSBC, Europe's largest bank, insisted yesterday that it is getting to grips with its well-publicised problems in the US subprime mortgage market, while declining to be drawn on whether it could be pulled into the battle for ABN Amro.

At the annual meeting in London, chief executive Michael Geoghegan dismissed critics who continue to question HSBC's $14.8bn (£7.5bn) purchase of US consumer credit firm Household International in 2003, which many believe has exposed the bank to too much risky lending.

In March, HSBC published record profits of $22bn, a rise of 5%, despite taking a provision to cover bad debts of $10.5bn, largely because of mistakes with US mortgages.

"Some commentators have asked should you be in this business?'," he told shareholders. "Well, let me give you some numbers. We paid $14.8bn and this business has generated profits for the group of over $9bn. In my book, this is good business for us."

Chairman Stephen Green, meanwhile, reiterated that problems in the US mortgage business will take "two to three years" to work through.

HSBC has been cited as a possible latecomer in the battle for Dutch bank ABN Amro, with potential cost savings and the latter's Brazilian assets in particular seen as attractive.

"People have made offers, and I watch with interest," Geoghegan said.

Asked if he had looked at ABN, Geoghegan added: "I put the slide rule over everything, but I am not going to comment."

HSBC said in a trading update that it has made a "good start" to 2007, with "particularly strong performances in Hong Kong and generally in Asia".

Revenue growth in Europe has been constrained, however, amid strong competition and as the bank reduced its credit appetite. Bad debts in the UK were broadly in line with the previous quarter.

The board faced hostile questioning from the floor about directors' pay rises during a period which has seen HSBC's share price lag its peers.

A clergyman shareholder asked chairman Green if he shared growing concern about the impact of widening income disparities on society.

Geoghegan, who was promoted to group chief executive in May, received £2.8m in 2006 and was awarded £5m of share options and £2m in shares which are yet to pay out.

Of the £2.8m, £1.5m was in the form of a cash bonus. Green, who was chief executive until he become chairman in May, took home £2.9m for 2006, £1.7m of which was a cash bonus.

"Anyone with a heart will resonate with (your point) about income disparity," Green responded.

"But the reality is we operate in a market and we will lose people if we do not pay at the market rates."

Green brushed aside a report this week from Credit Suisse suggesting that HSBC could be worth more if it were broken up, with one shareholder suggesting this might be a good idea.

"In the end that report (backed) our strategy of building global connectivity and I don't believe that there's any reason to expect us to fail to deliver," said the chairman.