HSBC chief says UK exit review will be complete by end of year – and Tory policy is to blame

Stuart Gulliver reiterated HSBC’s plans for review of UK base during first quarter earnings

Stuart Gulliver reiterated HSBC’s plans for review of UK base (Getty)

HSBC chief Stuart Gulliver has promised a decision on a UK exit by the end of 2015 in a first quarter earnings call, stating that shareholders would vote to decide.

The exit review is bad news for David Cameron and the Conservatives in the final few days before the election. It follows regulatory and statutory changes to the ways banks can do business in the UK, most of which were brought in by the government after the financial crisis in 2008.

HSBC bounced back with pretax profits up 4 per cent to $7.1 billion on Tuesday. The improvements follow a tricky financial year. In 2014, falling profits and underperforming shares were blamed on the bank’s Swiss arm, which was revealed to have helped clients dodge tax.

This year the biggest bank in Europe is wielding its influence in the UK with a formal review into whether to change its headquarters, first announced by Gulliver ahead of the election at the bank’s annual meeting on April 24.

“[The review] will take a few months,” Gulliver said on Tuesday. “If we decide that the UK is not the best place for HSBC, we will need to go to the board with a recommendation to move and also hold an emergency general meeting to get shareholder approval. The decision is likely to take a few months and until we finish the review it will be impossible to say how much we could save.”

Hong Kong is expected to be top of the list if HSBC did relocate. Gulliver has re-established HSBC’s strong presence in Asia. Some 63 per cent of profits have come from the region in the last two years.

HSBC has been vocal about the banking levy, an annual tax on the value of all the debts in UK banks. HSBC said it is disproportionately affected because it has the largest balance sheet of the UK-based banks. This year, HSBC will pay around $1.5 billion under the levy – or around 7 per cent of pretax profits – according to Reuters.

All three political parties have reiterated their commitment to maintaining the levy, which is expected to raise an additional £3b next year. In his 2015 budget, George Osborne, Chancellor of the Exchequer, said he was raising the levy from 0.156 per cent to 0.21 per cent, raising an additional £900 million a year.

Both Labour and the Liberal Democrats have said they would raise the tax further.

Conservative plans to hold a referendum about Britain’s membership of the EU may have also sparked concerns. HSBC has reportedly said that the threat of a UK exit from the EU would cause major economic uncertainty.

Speaking after the review was first announced, shadow Chancellor Ed Balls said: “HSBC is just the latest in a long line of companies warning of the dangers of a re-elected Tory government taking Britain out of the European Union.”

Martin Gilbert, chief executive of Aberdeen Asset Management, which is a top ten shareholder in HSBC, said he would back the board’s eventual decision.

“We support its management team,” he told the Independent. “However, no-one should underestimate just how difficult it would be moving away from London. It would take years rather than months.”