HSBC's asset sales seen hurting first half profits

* HSBC to report first half results Monday 0815 GMT

* Profits seen at $12.5 bln, down 11 pct on yr after weak Q1

LONDON, Aug 4 (Reuters) - HSBC is expected toreport an 11 percent fall in profit on Monday for the first halfof this year, hurt by falling revenues in a pared down businessand lower income from Latin America and investment banking atthe start of the year.

HSBC's pretax profit fell 20 percent year-on-year in thefirst quarter and Europe's biggest bank, which operates across75 countries, should make a second quarter pretax profit ofabout $5.7 billion, similar to a year ago, underpinned by bettermargins in Hong Kong and growth in commercial banking profits.

But that will leave earnings in the first six months overallat $12.5 billion, down from $14.1 billion a year ago, accordingto the average of 15 analysts polled by the bank. Last year'sprofits were swelled by asset sales.

Chief Executive Stuart Gulliver is in the second phase of aturnaround plan that began in 2011 to make the bank lesscomplex, more efficient and able to deliver better returns anddividends for shareholders.

He has axed more than 40,000 jobs and sold or closed 60businesses, which the bank said has delivered annual costsavings of more than $5 billion.

But the asset sales have hurt revenues, which will be downabout 9 percent to $31.3 billion in the first half, according toanalysts' forecasts. A jump in spending on compliance has alsolimited the impact of the cost-savings, and first-half operatingcosts are expected to be $18 billion, down 2 percent on theyear.

Return on equity will still lag Gulliver's target level ofabove 12 percent; it was 11.7 percent in the first quarter.

HSBC's investment bank profit fell by a fifth in the firstquarter but revenues in the second quarter should have improvedon that, analysts said. European investment banks haveoutperformed U.S. rivals in the second quarter, and analystssaid HSBC should extend that trend as it is less reliant on bondand interest rate trading, where activity has been depressed formore than a year.

HSBC's London-listed shares are down 5 percent this year,underperforming a flat European bank index. (Reporting by Steve Slater; Editing by Elaine Hardcastle)