The private banking arm of London/Hong Kong-listed HSBC logged a pre-tax profit of $193 million in 2013, down 79 per cent on a year before as restructuring costs hit results.

The private banking arm of London/Hong Kong-listed HSBC logged a pre-tax profit of $193 million in 2013, slumping by 79 per cent a year before as restructuring costs hit the figures, although the financial services giant as a whole saw a pre-tax profit of $22.565 billion, up 9 per cent.

In Asia, the private bank’s pre-tax profit fell 15 per cent year-on-year to $284 million; in Latin America, the bank broke even, falling from a pre-tax profit of $17 million in 2012; in the Middle East and North Africa, the private bank logged a rise in pre-tax profit of 60 per cent to $16 million, while the European private bank reported a loss of $165 million, against a profit the year before of $504 million; in North America, pre-tax profit fell to $67 million from $71 million, the statement from the bank said.

While the parent bank has been hit – like some of its peers – with costs associated with issues such as anti-money laundering controls – its private bank has restructured, slimming down the number of booking centres and exiting some jurisdictions in a bid to sharpen long-term profitability. In the short-term, however, the process has hit profits.

“We continued to address legacy issues and reposition our business model and client base in global private banking, which in part resulted in a reduction in underlying profit before tax of $0.7 billion,” HSBC group chief executive Stuart Gulliver said.

Consequently, the cost-efficiency ratio of the private bank deteriorated to 91.4 per cent at end-December, 2013, compared with 69 per cent a year earlier.

Global private banking accounted for just 0.9 per cent of HSBC’s entire pre-tax profit last year; that share was 4.9 per cent in 2012.

Results have also been affected by provisions for some regulatory/legal matters and by the effect on 2012's results from non-recurring items, such as a sale of the Japan business to Credit Suisse, agreed in late 2011, a spokesperson pointed out to this publication. 

Restructuring

In a statement today, HSBC said its overall results, across nearly all segments, had improved; one factor has been a heavy period of restructuring and cost-reduction. Last year, the bank began to dispose of, or close, 20 “non-strategic” businesses, bringing the total of such moves to 63 since 2011.

The underlying pre-tax profit last year rose 41 per cent in 2013 at $21.586 billion, it said.

“Our performance in 2013 reflects the strategic measures we have taken over the past three years. Today the group is leaner and simpler than in 2011 with strong potential for growth. In 2013 we grew underlying profits by $6.3 billion, generated $10.1 billion in core tier 1 capital, achieved an additional $1.5bn of sustainable cost-savings and declared $9.2 billion in dividends in respect of the year. Our strong capital generation continues to support our progressive dividend policy and reinforces HSBC’s status as one of the best capitalised banks in the world,” Gulliver said.  

“To date, about $90 billion in risk-weighted assets have been released with, potentially, some $5 billion still to come,” Gulliver said.

Since the banking group began its restructuring, the number full-time equivalent employees has shrunk from 295,000 at the start of 2011 to 254,000 at the end of 2013.