HSBC bank profits more than doubled in 2010

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The Independent Online

Banking giant HSBC revealed its annual profits more than doubled today as its results recover to levels not seen since before the financial crisis.

The group posted pre-tax profits of 19 billion US dollars (£12 billion) last year, up from 7.1 billion dollars (£4.4 billion) in 2009.

Its 2010 haul - the biggest of the UK players - marks a return to pre-crisis profits, coming close to the 24.2 billion dollars (£15 billion) seen in 2007.

HSBC revealed its highest paid banker, who was not named, was paid between £8.4 million and £8.5 million for 2010 - more than the chief executive's package.

The bank said the compensation ratio of its Global Banking and Markets (GBM) investment banking division - given as a percentage of revenues - remained unchanged at 23%, despite a 9% drop in the division's profits.

However, HSBC said its GBM global bonus pool was down 10% and added UK bonuses were 15% lower, although it did not provide figures.

New chief executive Stuart Gulliver - former head of the investment bank - was awarded a £5.2 million bonus for 2010, which he will take in deferred shares, taking his total package for the year to £6.2 million.

The bank's former boss Michael Geoghegan - who stepped down as chief executive on December 31 - picked up a £3.8 million bonus and a total package of £5.8 million for the year.

He will continue to work for the group until he retires on March 31, landing more than £1.4 million in pay and pension this year.

Mr Geoghegan is also entitled to £200,000 for three months' consultancy work after he retires, although he will donate this to charity.

Despite the hefty rise in profits last year, shares fell 5% as the figure came in shy of the 20 billion dollars (£12.3 billion) expected.

Investors were also disappointed at HSBC's move to cut its profitability targets due to the cost of tougher global banking regulations.

Mr Gulliver reduced the bank's long-term return on equity target to 12-15% from a previous 15-19% goal.

It will cut costs to offset tough markets in countries such as the UK, where demand remains constrained and interest rates at historically low levels.

Mr Gulliver said he will outline more details in a strategy review scheduled for May.

HSBC is the last of the major UK banks to report in this year's earnings season.

As with many of its rivals, the group's figures were helped by significant falls in bad debt losses, almost halving to 14 billion dollars (£8.6 billion) in 2010.

But HSBC's new chairman Douglas Flint said the group will "not forget" the financial crisis and support provided by governments around the world, adding the group entered 2011 "with humility".

In the UK, profits edged higher to 2.4 billion dollars (£1.5 billion) from 2.1 billion (£1.3 billion) a year earlier.

On corporation tax, which has been in the public eye after Barclays revealed recently it paid just £113 million in 2009, HSBC said it paid 750 million dollars in the UK (£463 million) last year.

The group said this was 27% of UK taxable profits.

HSBC - which has a heavy focus on emerging markets - saw profits growth driven by Hong Kong and Asia Pacific last year.

On an underlying basis, HSBC said group-wide profits rose 36% to 18.4 billion dollars (£11.4 billion).

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said HSBC's "performance and guidance have fallen short of investor expectations".

While he said the bank remains well placed thanks to its scale geographic spread, he added: "The shares may be suffering from failing to have met high expectations, something which has been a factor of their performance over the last year - a gain of just 0.2% as compared to a wider FTSE 100 appreciation of 12%."

HSBC's disclosure on pay today was the most detailed of its peers as it seeks to meet new standards under the Project Merlin deal struck with the Government, as well as Hong Kong rules.

It said of its top five earners - which includes two executives, Mr Gulliver and Mr Geoghegan - three bankers were paid up to £6.4 million, one up to £6.9 million and another up to £8.5 million.

The group also revealed the bonus details for its key staff, with 186 UK employees sharing a windfall pot of 172.4 million US dollars (£107 million) for 2010.

Salaries for the 186 employees, which include senior management and those in important roles as defined by the City regulator, was 55.3 million US dollars (£34 million) last year.

HSBC also used today's results as an opportunity to hit out at the impact of the UK's new banking levy on international banking groups.

The levy, introduced in January, would have seen HSBC pay around £600 million dollars (£370 million) if it was in place last year, according to HSBC.

Of this, its overseas business would have accounted for the bulk of its annual charge, with just a third coming from the UK.