HSBC's Bond downbeat on world economy

Sir John Bond, the chairman of HSBC, yesterday forecast a gloomy global economy for the year, saying the credit quality of some of its loans was deteriorating as global business continues to slide.

Speaking at its annual meeting in London yesterday, Sir John said he continued to see "the world economy characterised by weak growth, excess capacity and subdued revenues for corporates."

Sir John faced shareholder complaints over the pay of the group's US executive William Aldinger, who is entitled to $37.5m (£25m) over three years for staying with the company after it bought US group Household Internation. Nearly a fifth of shareholders voted against or abstained from Mr Aldinger's board appointment.

Sir John said the bank's performance in the first four months of 2003 had been sound as low interest rates had fuelled growth in mortgages and consumer debt. But he warned that lending to businesses had remained subdued as companies reduce borrowings.

The bank yesterday said it had seen a "modest deterioration" in its credit quality, with some increases in provisions for loans to companies in Hong Kong and Europe.

The business is likely to be hit by the deadly Severe Acute Respiratory Syndrome in its Asian operations, but Sir John yesterday said it was too early to assess the impact of its economic costs.

Stephen Green, head of HSBC's investment-banking business, yesterday replaced Sir Keith Whitson as chief executive of the company.

The appointment puts Mr Green in line to replace Sir John Bond, who has run the lender as executive chairman since 1998. This would run contrary to the proposals put forward by Derek Higgs in his review of corporate governance, but Sir John yesterday said he was prepared to defy the recommendations on the basis that the decision could be explained to shareholders. "The expertise gained makes it perfectly reasonable, in our view that a chief executive may go on to become chairman," Sir John said. "We would prefer to comply, but if necessary, we will explain."

Sir John also said the limit of two three-year terms for non-executive directors proposed by Higgs is too short a time for a company "as large and complex as HSBC". He said in his organisation, a "director's contribution is likely to become even more valuable over time."