HSBC struggles in UK with fines and PPI costs

Tim Wallace
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HSBC made no profit in the UK last year, the bank revealed yesterday, with regulatory fines, PPI compensation payments and the low interest-rate environment all taking their toll on the giant lender.

Shares slipped 2.49 per cent on the full year results as pre-tax profits unexpectedly fell six per cent to $20.6bn (£13.6bn) in 2012.

The bank has faced $1.9bn in fines and penalties paid to UK and US authorities to settle legal claims over weak money laundering controls, and also hiked its PPI provisions by $1.4bn.

Return on equity slumped to 8.4 per cent from 10.9 per cent a year earlier.

By region the bank lost $3.414bn in Europe last year, down from a profit of $4.67bn in 2011.

Profits in Hong Kong jumped 30 per cent to $7.582bn and in Asia rose 39.8 per cent to $10.448bn.

Chief Stuart Gulliver insisted he intends to keep the UK as a core market, but warned investors they will need to be “extremely patient” and wait for mis-selling costs and the bank levy to pass. And chairman Douglas Flint added the bank has not yet decided how to respond to the planned bank bonus cap.

Despite those problems the bank remains well capitalised and confident, increasing its dividend to return $8.3bn to shareholders.


HSBC slashed its total bonus pool from $4.2bn (£2.8bn) in 2011 to $3.7bn last year, under pressure from its $1.9bn US money-laundering fine, a weak world economy and increasingly onerous financial regulation.

But out of that shrinking pool, Europe’s biggest bank still managed to pay 204 employees, including 78 UK staff, £1m or more, it said yesterday.

Chief executive Stuart Gulliver saw his total compensation shrink £614,000 compared to 2011, from £8m to £7.4m, made up of £1.25m in base salary, £1.22m in benefits, £13,000 in pension contributions, £1.95m as an annual bonus and £3m in long-term incentives.

But two other executive directors saw their pay edge upwards: Douglas Flint and Iain Mackay shared £5.6m in 2011, and £6.2m in 2012.

The third other executive director, Sandy Flockhart, left in April last year, and was hence only paid £570,000, compared to the £3.6m he pulled in the year before.