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HSBC underlying profits rise in 2012 despite fine HSBC underlying profits rise in 2012 despite fine
(35 minutes later)
HSBC has reported rising underlying profits in 2012, despite the cost of a regulatory fine for money laundering. HSBC has reported rising profitability and revenue in 2012, despite the cost of fines for money-laundering.
Overall profits before tax fell 6% to $20.6bn (£13bn), 10 times the $1.9bn fine the bank paid last year. Its underlying profits - which ignore one-time accounting effects, as well as the impact of changes in the bank's creditworthiness - rose 18%.
Ignoring the counter-intuitive accounting effect of the bank's improving creditworthiness, HSBC's underlying profits rose 18%. href="http://www.hsbc.com/news-and-insight/2013/annual-results-2012-message-from-stuart-gulliver?WT.ac=HGHQ_Hb1.1_On" >Its overall profit before tax was $20.6bn (£13bn), 10 times the $1.9bn fine the bank paid last year.
Business rose strongly in Hong Kong and the rest of Asia, and the bank said it saw a sharp turnaround in Europe.Business rose strongly in Hong Kong and the rest of Asia, and the bank said it saw a sharp turnaround in Europe.
Some 90% of the bank's earnings now come from outside the UK.
"HSBC made significant progress in 2012 despite a challenging operating environment characterised by low economic growth and a changing regulatory landscape," said chief executive Stuart Gulliver.
While acknowledging the bank's past anti-money-laundering and sanctions failings, he said the bank's performance had been strong enough to allow it to increase its dividend by 10%.
HSBC was fined by US and UK regulators for breaking various laws against doing business with criminals and regimes, most notably drugs cartels in Mexico.
Mr Gulliver's own personal dividend also rose - his total remuneration for 2012 was some $7m, compared with $6.7m the year before.
HSBC also set aside more money to cover the expected cost of past sins in the UK - a further $1.7bn to cover the cost of mis-selling payment protection insurance (PPI) to mortgage borrowers, bringing the total provisioning for PPI claims to $2.4bn, as well as $598m for mis-selling interest rate swaps to small businesses.
The bank's results also reflected the continuing gradual recovery of the global economy from the 2008 crisis.
Loan impairments - a measure of how much money has been set aside for loans that cannot be repaid - fell by a third in 2012 to $8.3bn worldwide.
The bank's results were heavily affected by a negative "fair value adjustment" to its own debt of $5.2bn in 2012, compared with a positive adjustment of $3.9bn the year before.
The adjustment is an accounting requirement, largely ignored by financial analysts, that takes account of the price at which HSBC could buy back its own debts from the markets.
It has the perverse effect of flattering a bank's profits at a time when markets are more worried about its ability to repay its debts, and vice versa.
Excluding this adjustment and various other one-off accounting effects, HSBC's bottom-line profits-before-tax fell 6% in the year.
Markets were not overly impressed by the results, with analysts having expected an extra $2bn in profits. Shares in HSBC fell 3% in early trading in London.