HSBC launched a thinly-veiled attack on the Government's banking levy yesterday, saying it would have cost the company $600m (£370m) last year – with two-thirds of the bill related to businesses based outside the UK.
The bank, which is conducting one of its regular reviews into whether it should continue to be headquartered in Britain, said the Government was entitled to impose a levy after bailing out a number of institutions but pointed out that HSBC had not taken any money from the state.
"One curious consequence [of the levy] is an explicit incremental cost of being headquartered in the UK for any global bank," said Stuart Gulliver, the chief executive.
His warning followed last month's decision by the Chancellor, George Osborne, to increase the banking levy for this year by £800m to £2.5bn. The HSBC chairman, Douglas Flint, said the charge came from shareholders' profits and that any reduction would be paid out to investors.
Meanwhile, HSBC announced that it had doubled its pre-tax profit in 2010 to $19bn (£12bn) as bad debts fell by $12bn. The bank highlighted the £1.2bn it will pay in UK taxes for 2010, including £490m of corporation tax.
Mr Gulliver said HSBC "hopes to remain" headquartered in Britain but that policymakers "must not destroy London's competitive position". The bank's 2010 profit was £1bn less than analysts had forecast. There was more disappointment in the City when Mr Gulliver said he was cutting financial targets and revealed rising costs that he branded unacceptable.
In his first results presentation as chief executive, Mr Gulliver said tougher government regulation would reduce returns to shareholders by making banks hold more cash instead of lending it to borrowers.
Mr Gulliver took over from Michael Geoghegan at the start of 2011 after a boardroom bust-up last year that also saw the former finance director, Douglas Flint, replace Stephen Green as chairman.
Mr Gulliver said the jump in the cost-income ratio, from 52 per cent to 55 per cent, was "completely unacceptable" and that cuts could be made in IT costs and by reducing the number of data centres. Asked whether HSBC's UK operation faced major cuts, its head of UK retail and commercial banking, Joe Garner, said its costs had been steady for three years and were "sustainable".
Revenues also came in below analysts' forecasts as the bank grappled with low interest rates that made deposits less profitable. Ian Gordon, an analyst at Exane BNP Paribas, said: "The primary area of disappointment, yet again, was revenues."
Mr Gulliver said the bank would be less cautious in lending as the financial crisis receded. It lends 78p for every £1 on deposit but Mr Gulliver said this could be relaxed to 90p in the pound as HSBC lent more in Asia.
HSBC's shares fell 33.1p to close at 678p last night, a fall of 4.5 per cent, amid concern about the lower targets it announced.
Hundreds enjoy £1m-plus paydays
HSBC revealed that 253 of its bankers were paid £1m or more last year including 89 in London.
Close to the top was new chief executive Stuart Gulliver, who got £6.2m including a £5.2m bonus he took in shares. That payout, down from £9m a year earlier, was for his work as head of HSBC's investment bank.
Chairman Douglas Flint's pay rose 28 per cent to £4.1m in 2010, most of which he spent as finance director.
Mr Flint said it was fair to ask whether banks "get it"and that HSBC did. But he said it had to pay to keep the best people.
Former chief executive Michael Geoghegan will receive £1.03m pay and £401,250 for his pension to settle his contract, plus £600,000 in consultancy fees that he will give to charity.Reuse content