Write-downs, investigations and tax hikes hammer HSBC profits

Shares slide on news of shock fourth-quarter loss for the universal bank

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The Independent Online

Scandal-ridden HSBC reported a small rise in full-year profits of just 1 per cent yesterday after posting an unexpected loss in the fourth quarter.

That was mainly down to a $634m (£448m) rise in bad debt write-downs centred on souring loans to oil and gas businesses. But the bank said it was also hit by a $357m increase in the UK bank levy.

Last week, Britain’s biggest bank finally confirmed that it would keep its head office in London, thanks partly to the Chancellor’s cut in how much levy it will have to pay.

But yesterday the focus was on the revelation that the bank is being investigated by US regulators into its hiring of so-called “princelings” – young relatives of China’s political leaders or senior executives at state-owned enterprises  in the Far East. 

The Securities and Exchange Commission is examining “hiring practices of candidates referred by or related to government officials or employees of state-owned enterprises in Asia-Pacific.” JPMorgan was caught doing something similar three years ago, for which it expects a huge fine later this year.

HSBC gave no details of the numbers involved or potential penalties, but the scandal comes on top of an official investigation into forex rigging and alleged money laundering for crisis-hit world football governing body Fifa.

 

The bank reported profits of $18.8bn for 2015, up by 1 per cent on 2014. But its adjusted profits were down by 7 per cent, at $20.4bn, on higher costs. The company’s chief executive, Stuart Gulliver, saw his pay cut by £300,000 but still took home£7.3m for the year. He warned that “the current economic environment is uncertain” and said HSBC would continue to focus on China for growth, despite remaining headquartered in London. 

However, he warned that plans to hire 4,000 people for retail banking and commercial lending in the Pearl River Delta could end up taking  five years instead of three. Despite that, and the other setbacks, Mr Gulliver said he still believed he could deliver $5bn of savings by 2017, partly by cutting 25,000 jobs across the world. 

“Targeted investment, prudent lending and our diversified, universal banking business model helped us achieve revenue growth in a difficult market environment, while also reducing risk-weighted assets,” he added.

But some planned disposals have hit a snag, the bank admitted. It said it would abandon an attempt to sell its Turkish bank and will instead seek to restructure it after receiving a number of offers that Mr Gulliver said weren’t “deemed to be in the best interest of shareholders”.

The shares dropped by as much 4 per cent on the news in early trading but ended the day just 1 per cent down. 

The bank raised its dividend by 1 cent to 51 cents a share, creating a total payout of $10bn for shareholders.

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