HSBC announce 10% profit growth despite drop in revenues

(Jason Alden)

Banking giant HSBC announced today that first-half year profits grew 10 per cent on the previous year to 14.1 billion US dollars (£9.2 billion) on lower bad debts and shrinking costs.

The banking group's announcement came after a year of cost cutting measures.

Profits in its UK retail banking arm increased by 58 per cent to 804 million US dollars (£524 million).

The bank said it lent £7.1 billion of new mortgages to 68,000 homebuyers during the first six months of the year.

Profits in its UK business banking arm swelled about 190 per cent to 894 million US dollars (£582 million).

However, shares in the bank fell more than two per cent as the earnings haul disappointed City hopes for pre-tax profits of around 14.5 billion US dollars (£9.5 billion).

Revenues fell by seven per cent to 34.4 billion US dollars (£22.4 billion) amid shrinking income in North America and Latin America.

HSBC Chief executive Stuart Gulliver shrugged off "muted" global growth and said the bank is well-placed to benefit from long-term trends in the global economy.

He said: "Despite slower growth in the short term, the long-term economic trends remain intact.

"The global economy will continue to rebalance towards the faster-growing markets and trade and capital flows will continue to expand."

HSBC has been heavily reducing costs under Mr Gulliver's watch since his appointment in 2011, including selling or closing 54 businesses and cutting more than 40,000 jobs. The bank expects total staff numbers to eventually fall to 254,000.

The banking group generates an estimated 90 per cent of its money from outside of the UK and has benefited from being exposure to emerging markets in Asia.

The lender, the last of the major UK high street banks to report on first-half trading, swung back into the black in the UK with first-half profits of £2.2 billion.

But HSBC set aside another 367 million US dollars (£239 million) to compensate customers mis-sold payment protection insurance, taking HSBC's total bill for the mis-selling scandal to £1.8 billion.

The bank reported pre-tax losses of 3.4 billion US dollars (£2.3 billion) in the UK a year earlier, weighed down by the cost of mis-selling claims and a money-laundering scandal in the US.

The bank said first-half underlying operating costs were down 8 per cent to 18.3 billion US dollars (£11.9 billion) year-on-year.

Provisions for bad debts also fell 29 per cent to 3.1 billion US dollars (£2 billion).

Additional reporting by PA