HSBC banks bigger profits despite fines in 2012

At last, a bank comes out of 2012 without a ludicrously weak balance sheet. HSBC has reported rising revenues and profits in 2012, even though it has shouldered fines for money laundering.

by Michael Northcott
Last Updated: 19 Aug 2013

Underlying pre-tax profits, which do not take heed of one-off accounting issues or fluctuations in the bank’s credit rating, rose a massive 18% to $20.6bn. That’s ten times more than the $1.9bn fine the bank had to pay last year. 

Its main areas of growth were in Hong Kong and other Asian countries – not surprising given the continuing economic explosion over there – but also a marked improvement in European markets. 

Chief executive Stuart Gulliver said: ‘HSBC made significant progress in 2012 despite a challenging operating environment characterised by low economic growth and a changing regulatory landscape.’

It is true that banks have spent the last 12 months navigating an assault course of changing regulation (lots of it coming from the EU), fines for Libor, mis-selling of various products and money laundering, not to mention an onslaught of public and shareholder opprobrium over executive pay.

HSBC in particular has found itself in trouble with US and UK authorities for breaching regulations on providing services for criminal operations such as drug cartels in Mexico. It was fined around $1.9bn for the mishap.

Other boons for the banks included loan impairments falling by a third in 2012, dropping to $8.3bn. Impairments are how much cash has to be earmarked for covering defaulted loans.

So, a rosy story for the ‘world’s local bank’, right? Well, shareholders don’t seem to think so. They were hoping for another $2bn on the profit figure that hasn’t materialised: the price of HSBC shares in London was down 2.6% at the time of writing. 

No doubt some of them will be miffed at the bank’s £2.4bn bonus pot for the year, with 204 staff earning more than £1m in bonus cash. 78 of those staff are UK-based. But if we go the same way as Switzerland, the days of such big bonuses may be numbered.

If shareholders are to be kept happy, Gulliver will be hoping he can stave off any further scuffles with regulators in 2013…

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