Two top European banks, HSBC and BNP Paribas, excel their earnings outlooks as bad debts fell sharply to make up for slowing investment banking growth.

During the latest quarter, both banks revealed a slide in investment banking income, following the trend shown by most US and European rivals after the euro-zone debt crisis.  The rise was possible thanks to lower loan provisions and strong retail banking, offsetting volatile financial market conditions that hit investment banking.

Half-year profits for the largest European bank HSBC hit $11.1 billion, that’s more than doubled the $5 billion of a year ago and above the average forecast of $9.1 billion. 

Its loan impairment charges and other credit risk provisions fell to $7.5 billion for the half-year, down $6.4 billion from the year ago level.

BNP Paribas, the euro-zone's second biggest bank after Santander reported its net profits to rise by 31% to 2.1 billion euros ($2.7 billion) in the second quarter.

HSBC said the positive trends should remain, citing improving corporate health as companies refinance and raised capital and better conditions in retail banking.

Monday, by about 9:00 GMT HSBC's London-listed shares were 3.5% up, while BNP's shares were 4% up, helping lift the European bank sector .SX7P by 2.5%.