LONDON (Reuters) ? Europe?s biggest bank, HSBC Holdings, beat analysts? median forecast with an 18 percent rise in first-half profit yesterday, spearheaded by strong growth at its investment bank and in emerging markets.

The London-headquartered bank ? which owns the Bank of Bermuda ? said it made a pre-tax profit of $12.52 billion in the six months to the end of June, well above the median forecast of $11.52 billion from 11 analysts polled by Reuters.

HSBC, whose operations span 76 countries, said pretax profit at its investment banking business (CIBM) jumped 37 percent, with a gap of 12 percent between revenue growth and cost growth.

?CIBM was probably the stand-out performer. The investment phase that came to a peak last year moved into the execution phase this year, which had a very significant impact on profits,? finance director Douglas Flint told reporters.

CIBM?s revenue jumped by a quarter to $6.86 billion, outpacing a 13 percent rise in costs to $3.74 billion, which was mainly due to higher bonuses to staff.

HSBC has already said cost growth in the unit would slow after four years of heavy investment.

?These are forecast-busting figures, and management looks to have answered doubters of its move into investment banking in fine style,? said analyst Keith Bowman at stockbrokers Hargreaves Lansdown.

HSBC?s London-listed shares were up 0.6 percent at 980 pence, valuing the bank at about ?112 billion ($208 billion), making it the world?s third-biggest. The DJ Stoxx European banking index was down 0.4 percent. HSBC and the index are up about 6 percent so far this year.

?It?s a kind of steady as she goes, slightly better performance in corporate and investment banking and generally a reasonable set of results with a positive outlook for the world economy,? said Simon Maughan, analyst at independent research firm Blue Oak Capital.

HSBC said a positive outlook for the world economy left it well positioned to sustain growth.

?We think the global economy remains fundamentally strong. The US is growing, Japan is growing, China is moving intensely. We?re dependent on what happens with the global economy, but we?re very pleased with the way we?re positioned,? Flint said.

But HSBC?s bad debt charge jumped $613 million, or 19 percent, to $3.89 billion in the first half.

Flint said the credit outlook was ?broadly satisfactory? but that there were ?one or two areas of deterioration?, notably US real estate and UK unsecured lending.

Slowing residential housing sales in the United States were a concern, he said, but were offset by more favourable credit conditions in other parts of the US business.

The bank said a considerably higher UK bad debt charge was mainly due to last year?s change in bankruptcy rules.

Flint said it had become harder to predict this trend but that the bank had tightened unsecured lending and the credit quality of more recent originations had improved.

HSBC also said it planned to open five bank ?megastores? in the UK as part of a ?400 million branch investment, the first by mid-2007.

Away from its core markets of Britain, the United States and Hong Kong, the bank said Mexico was the next largest contributor to profits after a 20 percent jump in the first half, while France and Middle East profits were also running at over $1 billion each on an annualised basis.

Its first two interim dividend payouts this year will total 30 cents a share, up seven percent from last year.