Financial Results

Pre-Tax Profit Drops At Private Banking Arm Of HSBC

Tom Burroughes Editor London 1 March 2010

Pre-Tax Profit Drops At Private Banking Arm Of HSBC

The private banking division of HSBC, the UK-listed bank, said today that its pre-tax profit for 2009 was $1.1 billion, a year-on-year fall of 21 per cent.

Client assets, as at 1 January this year, stood at $352 billion, a fall of 16 per cent from a year before, and HSBC logged net outflows from the private bank of $7 billion, it said in a statement.

The cost/efficiency ratio was 60.5 per cent at the end of last year, up from 58.3 per cent.

Last year, HSBC said that its group chief executive, Michael Geoghegan, would be headquartered in Hong Kong, to reflect the bank’s increasing focus on Asia as a source for future growth. He made the shift at the start of February. (HSBC’s corporate HQ remains in London, however).

For the private bank, data on its profits show that Europe still accounted for the biggest regional slice, with 77 per cent of profit contributions coming from the region. In second place was by Hong Kong, at 18 per cent, rest of Asia-Pacific, at 8 per cent, Middle East and Latin America both contributing 1 per cent each, while in North America, there was a decline, of -7 per cent.

On a “reported basis”, HSBC said pre-tax profit for the whole group fell by 24 per cent, year-on-year, to $7.1 billion for 2009. The underlying profit figure excludes impairment charges and changes in fair value of own debt. Earnings per share fell by 17 per cent to $0.34 per share.

HSBC said it strengthened its capital base last year – the bank has not, unlike a number of its UK peers, had to call on the UK taxpayer for aid. It had a Tier 1 capital ratio of 10.8 per cent at the end of 2009, ahead of its target range, the bank said. Last year, HSBC raised $10.2 billion in fresh capital through underlying profit generation, it said.

The banking group said it was profitable in all regions excluding North America, but performance constrained by lower demand and deposit spread compression.

Stephen Green, HSBC group chairman, reiterated that the bank’s decision to defer all executive director bonuses for 2009 over three years goes beyond the guidelines set out by policymakers in the Group of 20 major industrialised nations. The move comes as banks have been under pressure to curb high bonuses that have been blamed for fuelling risky financial practices.

“Proper pay for proper performance includes ensuring market-based pay for employees over time. The board expects fixed pay in banking to increase as a proportion of total compensation, especially for important risk and supervisory functions,” he said.

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