Midland's pre-tax profits rose by 27 per cent to pounds 1.28bn. It has reduced the number of staff in its branches by 19.1 per cent in the last three years, but at First Direct, its pioneering telephone banking operation, staff numbers have increased by more than 50 per cent.
"Staff are incensed by the freeze," said Alan Scrimgour, assistant secretary at Bifu, the banking union. "They can't understand why a bank can treat staff so badly at a time of record profits and when shareholders are doing very nicely."
The bank is thought to have dished out generous bonuses to its investment bankers. City bonuses are concerning at the Bank of England, which warned yesterday that some reward structures could have destabilising effects on financial institutions.
John Bond, group chief executive of HSBC Holdings, said yesterday that the bank avoided these pitfalls. He revealed that any investment banker receiving a bonus of more than pounds 100,000 will be paid half in stock, with deferred conversion rights.
"We work all the time to improve the control environment," Mr Bond said, adding the bank would analyse the problems experienced by NatWest Markets, which has discovered a pounds 50m hole in its options trading book.
"We don't like to see our competitors hurt in this way," said Mr Bond. "What we will do is as the facts become known, we will see how we would have coped in a similar situation."
HSBC made dealing profits of pounds 515m in 1996, down from pounds 533m the previous year. Net fees and commission increased 15 per cent to pounds 2.75bn and rose in investment banking as a result of increased advisory business in Asia Pacific and continental Europe, more funds under management and higher equity market volumes.
Commercial banking is the group's primary business, however. It derives 55 per cent of its profits from the Asia Pacific region, where it owns or has stakes in a number of banking groups.