* Q1 pretax $6.8 bln, down 20 pct on year
* Latin America revenue weak, Asia stronger
* Investment bank profits dip 20 pct
* Shares down 1.4 pct (Adds comments from CEO, finance director, analyst, details)
By Steve Slater
LONDON, May 7 (Reuters) - HSBC's first-quarterpretax profit fell 20 percent from a year ago to just under $7billion, as revenue dropped in Brazil and at its investmentbank, while last year's earnings were swelled by asset sales.
Europe's biggest bank, which operates across 75 countries,said revenue prospects were decent in Asia but weaker in LatinAmerica, where it has retreated from many markets after adifficult few years.
"Latin America is under a bit of pressure, particularly inBrazil. Overall Asia remains broadly constructive and everywhereelse is generally stable," Finance Director Iain Mackay toldanalysts and reporters on a conference call.
Earnings in Latin America fell to $310 million in the quarter, down a third from a year ago despite a 17 percent dropin losses from bad debts there.
Chief Executive Stuart Gulliver has said he is in the secondphase of a turnaround aimed at making his bank less complex,more nimble and efficient and able to deliver better returns anddividends for shareholders.
HSBC's cost-efficiency ratio was 55.7 percent in the firstquarter, close to its target of mid-50s, but its return onequity slipped to 11.7 percent, below its target of between 12and 15 percent.
HSBC's London-listed shares were down 1.4 percent by 1050GMT. Its shares are down 10 percent this year, underperforming a2 percent rise by European banks as a whole.
"There are good bits going on in Asia, but not as good asthey once were, and there's revenue stability in Europe, butrevenue falls in Latin America and still a bit of a drag fromrun-off portfolios," said Alex Potter, analyst at MirabaudSecurities in London.
"It's a good company and there's a big yield, but HSBC isone of those stocks for a rainy day and it's not raining thathard at the moment," Potter said.
"NO LET UP" IN COST CUTS
Profits at HSBC's investment banking arm fell by a fifthfrom a year ago to $2.9 billion, and are expected to drop fromthat level this quarter due to what the bank said was mutedcustomer activity.
Analysts said that represented a resilient performance,however, as most investment banks have seen a steeper drop inprofits after a grim start to the year for bond andinterest-rate trading, which HSBC is less reliant on. The banksaid it won market share in several areas, including equity anddebt capital markets and advisory.
Gulliver said profits at the investment bank - known as GBMor Global Banking and Markets - in the second quarter werelikely to be near last year's $2.1 billion "because conditionsare tricky for most people and there's a seasonality to ourbusiness."
HSBC reported a group pretax profit of $6.8 billion, downfrom $8.4 billion a year ago but just above the average forecastof $6.6 billion from 13 analysts polled by the company.
Underlying profits, stripping out gains from disposals andmovement in the value of its own debt, reached $6.6 billion,down 13 percent from a year ago.
The bank said it made $275 million of sustainable savings inthe first quarter, taking annual cost savings in the last threeyears to more than $5 billion. It is aiming for further cuts ofbetween $2 billion and $3 billion in annual costs.
The bank has axed more than 40,000 jobs and sold or closed60 businesses to lower costs, but said it added 1,100 jobs inthe first quarter, mainly due to beefing up compliance andadding staff where it sees growth potential.
It said underlying operating costs rose by 2 percent from ayear ago, partly due to $100 million extra spent on risk andcompliance - mainly in Latin America and Asia. (Editing by Matt Scuffham and David Holmes)
HSBC Holdings (HSBA)