There are all sorts of reasons why HSBC's mis-selling of long-term care bonds wasserious enough to warrant the largest fine ever levied by the Financial ServicesAuthority on a retail bank, though just one of them says it all. The bank routinely sold savings plans with a five-year investment horizon to elderly customers who did not expect to live for as long as five years.
This is one of those cases where one wonders how City regulators everallowed them to get away with it, soobvious do the transgressions seem. Worse, HSBC might still be getting away with it today as far as the Financial Services Authority is concerned, for it was the bank that brought the problem to the attention of the regulator, rather than vice versa.
The regulator said yesterday that the size of its fine "should serve as a warning to firms". Well, maybe, though £40m (the cost of the penalty plus compensation for those affected) is loose change in the context of the £11.8bn profit that HSBC made during 2010 alone. A more useful deterrent would be regulatory action against some of the individuals concerned.
To start with, what has happened to the financial advisers who used to work for the HSBC subsidiary at the centre of this scandal, NHFA? Since these salesmen and women ruthlessly exploited vulnerable customers over a five-year period, it would be good to know they are now prevented from behaving in similar fashion at another company – the FSA can offer us no reassurance that this is the case. None of them has faced personal disciplinary action.
Then there is the man with whom the buck stops, the chief executive of HSBC during the period in which the mis-selling took place. That would be Michael Geoghegan, who stood down as chief executive of the bank at the end of last year.
HSBC should already be thinking hard about Mr Geoghegan, for half of the bonus it awarded him for 2010, worth a total of £3.8m, was deferred. On Friday, it emerged that Lloyds Banking Group is seeking to withhold some of the deferred bonus it had promised its former chief executive Eric Daniels, to reflect the exposure to payment protection insurance mis-selling that it has had to declare since his departure. HSBC's PPI exposure is much smaller than that of Lloyds – £270m compared with £3.2bn – but still substantial.
It may be that the bank does not consider its PPI problem serious enough to justify the clawback of some of Mr Geoghegan's bonus. If so this latest mis-selling scandal should trigger a change of heart. It is only when bank bosses pay a personal price for the misdeeds of their subordinates that they willreally start to take this sort of issueseriously enough.
Tui's performance flattered by Thomas Cook's failures
With Tui Travel's results coming so soon after the latest profits warning from Thomas Cook, the easy option is to characterise the story as a tale of two tour operators: the modernising, upbeat and profitable Tui versus the old-fashioned, depressed and in-need-of-a-handout Thomas Cook.
There is a bit of truth in that analysis. Tui is quick to point to the way it has refreshed its offer, with a morediversified and specialist range of holidays, many of which are gratifyingly high margin. It has also avoided piling on the debt, unlike its struggling rival, and is reaping the benefit of greater cost-consciousness, too. No doubt Tui will also get a lift from Thomas Cook's very public problems, on which it has sought to capitalise with some rather unsporting advertising.
Still, do not fall into the trap of thinking that all is rosy at Tui. For the detail of its trading makes miserable reading: in all but one of its key markets, winter bookings have slowed since the last time it updated investors at the end of September. In the UK, Germany and France, the decline in bookings compared to this stage last year is 12, 10 and 14 per cent – in September, the respective figures were 11, 2 and 7 per cent, so the decline is accelerating.
Nor does the picture look better for the summer of 2012. Bookings are off 11 per cent in the UK and 14 per cent in Tui's Nordic markets.
There is some bright news – the move to higher-margin deals is continuing, for average selling prices are stillrising. Tui also has encouraging news on further cost savings to come.
Still, this company is clearly notimmune from the recessionary headwinds buffeting customers in all its markets (not to mention the trend in the travel sector towards consumers booking their own holidays online, rather than through a tour operator). That sounds like a statement of the obvious, but the travel trade has long insisted – and Tui was again yesterday – that holidays are the last thing people give up when their household finances are squeezed. Even if the analysis is correct, Tui's numbers suggest we are reaching that time.
High street heading for a dismal festive season
No wonder so many retailers are running sales already. The headline number from the British Retail Consortium – a 1.6 per cent fall in like-for-like retail sales in November – is bad enough, but it understates very significantly the collapse on the high street. Remember that shop price inflation is running at about 2 per cent, which means real terms sales were even lower. And the groceries sector rose 1.5 per cent last month, so the decline across the rest of the retail sector must have been correspondingly worse.
Even in the online sector, the picture is deteriorating – notwithstanding the successful PR campaign to brand yesterday as "Cyber Monday" by retailers. Sales growth was a third slower last month. This is not going to be a merry Christmas for many.