HSBC chief defends record £5.2bn profits for half-year

HSBC, Britain's largest bank, hit a new earnings record among UK banks yesterday, notching up £5.2bn of pre-tax profits for the first six months of the year.

The bumper amount was up by more than half on the previous year, and was almost £1bn more than the City had expected. It means HSBC is on track to surpass the £7.5bn it made for the whole of last year, which was itself the highest full-year sum ever earned by a British bank.

The result will prompt fresh concern among politicians and consumer groups that banks are making excessive profits while consumers rack up an ever-increasing amount of debt. It also comes at a particularly sensitive time for HSBC, which is in the middle of cutting 7,500 jobs, of which 4,000 are being transferred to low-wage call and processing centres in Asia.

HSBC denied it was using its dominant position in the market to overcharge customers. It said only 22 per cent of its profits were made in the UK in the first half of the year, with profits from personal customer banking in this country standing at £400m. That amounts to £40 per customer for the six months to 30 June, or £1.54 per customer per week.

While HSBC as a group is among the most profitable companies in the world, it stressed it makes less from its British customers than some of its rivals. While 22 per cent of its profits came from the UK business in the first half, its business in this country accounted for more than 30 per cent of its costs.

That has prompted Michael Geoghegan, appointed as head of HSBC's UK business six months ago, to take a knife to it, including adding a 3,500 redundancy programme to the 4,000 jobs HSBC said last October it would outsource to the Far East. He said those who were losing their jobs would know by this evening. Most of the cuts are expected to be from HSBC's head office staff. The bank hopes to achieve most of the cuts through voluntary redundancies.

Yesterday's figures drew condemnation from unions representing HSBC's employees. Rob O'Neill, Unifi's National Secretary, said: "We don't know how HSBC directors can sleep at night. Instead of rewarding staff for their part in making HSBC as profitable as it is, the bank is slashing jobs in the UK and exporting more and more work to Asia in an attempt to cut costs. At the same time they are lining their own pockets with huge pay rises."

Elsewhere, HSBC said its acquisition of the giant US consumer finance company Household International had doubled its earnings coming from America to one-third of total profits.

HSBC was able dramatically to cut the amount of money it set aside for bad or doubtful loans. James Leal, an analyst at Teather & Greenwood, said: "HSBC was able to normalise bad debt charges, which led to an exceptional release and added $800m (£440m) or $900m to profits, which is probably unsustainable." HSBC's shares rose 26p to 833.5p.

HSBC also highlighted its expansion plans in China. The bank said it had reached "agreement in principle" to buy a 19.9 per cent stake in Bank of Communications, China's fifth-largest bank.