HSBC warns of choppy markets as profits fall shortMonday 24 February 2014 15.33
HSBC missed market expectations with a 9% increase in annual profit and warned of greater volatility in emerging markets this year, sending shares in Europe's biggest bank to a 15-month low.
HSBC, which is based in London but made two thirds of last year's profit in Asia, has axed over 40,000 jobs and sold or closed 60 businesses over the past three years to cut costs.
But it has not yet reached its cost efficiency and profitability targets.
HSBC said it increased its bonus pool for staff by 6% to $3.9 billion last year, and lifted its CEO Stuart Gulliver's pay, including salary and bonuses, to £8m from £7.5m.
The increase comes despite pressure on banks to rein in big bonuses that many blame for fuelling the risk-taking that led to the 2008/2009 financial crisis.
HSBC said it would start paying 665 top staff a new quarterly allowance - either in cash or deferred shares - effectively increasing the amount of their fixed pay to meet a new EU law capping bonuses at 200% of salary.
Mr Gulliver said major shareholders supported the plan, but that the EU rules had made pay structures more complex and he hoped the UK government will be successful with a legal challenge to the move.
Under the new structure, senior bankers will be guaranteed more pay, but the maximum they can get will be reduced. Gulliver will be guaranteed £4.2m, up from £2.5m before, and can earn up to £11.4m, down from £13.8m.
Gulliver is under pressure to show how HSBC can replace income lost from the sale of US businesses and a stake in a Chinese insurer, and worries that Asia's economic growth is slowing.
He remained optimistic about longer-term prospects for emerging markets, which have been hit hard by a US decision to wind down stimulus measures, but warned of "greater volatility in 2014 and choppy markets".
He predicted China's economy would grow by 7.4% this year, Britain's should expand by 2.6%, the US by 2.5% and western Europe 1.2%.
HSBC reported 2013 pre-tax profit of $22.6 billion, up from $20.6 billion in 2012 but below the average forecast of $24.3 billion in a Thomson Reuters poll.
Shutting businesses hit the bank's revenues, which fell 5%. Stripping out the impact of disposals, underlying revenue was $63.3 billion, up from $61.6 billion.
HSBC said it continued to build up capital, while it remained unclear how much it would need to hold under global and UK rules. It will pay a final 2013 dividend of 19 cents per share, up on 2012 but less than expected by analysts.
"There is some degree of prudence and caution until we get greater clarity on the capital management framework for thebanking sector in Europe and the UK," said Finance Director IainMcKay.
HSBC's investment bank reported a flat fourth quarter, with pre-tax profit of $1.9 billion, as a drop in revenue from its rates business was offset by a strong quarter in equities.
Gulliver said he had now cut $4.9 billion in costs on an annualised basis, and the bank was aiming for $2-3 billion more a year by the end of 2016.
It set aside another $395m in the fourth quarter to compensate UK customers mis-sold loan insurance or companies mis-sold interest rate hedging products, and it also paid $321m more than a year earlier under a UK bank levy.