HSBC's 17% profit fall piles more pressure on Stuart Gulliver after tax leaks
HSBC has reported a sharp fall in profits, disappointing investors already reeling from recent revelations about the bank’s private Swiss operations and its chief executive’s pay.
Shares in Europe’s biggest bank fell 31p, or 5%, to 374.2p — their lowest for more than two years.
Stuart Gulliver, chief executive, admitted the profits had “disappointed” blaming a tough, final quarter which had “masked some of the progress” made over the first three quarters.
Gulliver also repeated his apology over the Swiss private bank saying: “We have no appetite to do business with people who are evading taxes.”
He robustly defended his own financial affairs, which saw his pay before he became a director of HSBC Holdings paid through a Panama company into a Swiss private account.
Gulliver said that he had always paid tax “at the UK marginal rate” adding: “I would expect to die abroad — that’s the definition of domicility.”
Douglas Flint, chairman of the bank who has come under increasing pressure recently, said: “His tax affairs have been open to us as a board. There is absolutely no story here.”
Gulliver’s total pay package was cut from £8 million to £7.6 million and he said that the board had removed £500,000 of potential bonuses from him for this year and £1.25 million from the previous year because of the bank’s role in Forex rigging which cost it $1.19 billion (£772.2 million) in fines and settlements.
That, along with a slightly increased $1.28 billion for UK PPI and interest-rate hedging compensation to customers, the UK bank levy up from $900 million to $1.1 billion and other fines and settlements helped knock headline profits by 17%.
Reported profits before tax fell from $22.6 billion to $18.7 billion.
But HSBC spooked investors further by lowering its targets going forward. In particular it cut its return on equity from the 12% to 15% it set in 2011, when Gulliver took charge, to a new “more than 10%”.
Gulliver said this reflected higher demands for capital from regulators, a zero interest-rate environment and the rising UK bank levy.
He also admitted there were still areas of the world where the bank was not doing well enough. He highlighted Brazil and Mexico in Latin America, the United States and Turkey.
