The fall was mainly due to a sharp rise in staff costs in faster-growing markets, and other restructuring costs within the business. With about 90% of HSBC’s money made outside the UK, the bank has focused on growing its business in emerging economies. Asia, Latin America, the Middle East and North Africa accounted for almost half of group revenue in 2011.
HSBC is the last of the big banks to report its earnings for 2011. And the results contrast with its rivals. Last week, both RBS and Lloyds reported a loss for 2011 of £2bn and £3.5bn respectively. And while Barclays reported profits of £5.9bn for last year, it was a fall of 3% on the year before, mainly as a result of a slowdown in its investment arm.
But HSBC hasn’t been sheltered from the wider economic problems. Profits at HSBC’s investment banking division fell almost a quarter (24%) to £15bn. Like other UK banks, it has suffered from the eurozone crisis, which has spooked financial markets and caused currencies to drop. There has also been much tighter regulation in the UK which requires banks to hold more capital to cushion themselves against another banking crisis, like the one in 2008 which led to RBS and Lloyds needing a bailout from the taxpayers. Meanwhile the distressed mortgage market in the US is still giving HSBC a headache.
HSBC also revealed pay details for its top staff. Chief executive Stuart Gulliver received a generous bonus of £5.9m. The eight highest paid executives shared £28m between them. But the bonus pool for investment bankers was cut from $1.6bn to $1.2bn. The taxpayer has no stake in HSBC, of course; but that doesn’t necessarily mean there will be less pressure on HSBC over its pay packages than there has been on RBS and Lloyds recently.