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HSBC underlying profits rise in 2012 despite fine HSBC pays $4.2bn for fines and mis-selling in 2012
(about 2 hours later)
HSBC has reported rising profitability and revenue in 2012, despite the cost of fines for money-laundering. HSBC paid out $4.2bn (£2.8bn) last year to cover the cost of past wrongdoing.
Its underlying profits - which ignore one-time accounting effects, as well as the impact of changes in the bank's creditworthiness - rose 18%. As well as $1.9bn in fines for money laundering, the bank also set aside another $2.3bn for mis-selling financial products in the UK.
>Its overall profit before tax was $20.6bn (£13bn), 10 times the $1.9bn fine the bank paid last year. The figures came as HSBC reported rising underlying profitability and revenue in 2012, and >an overall profit before tax of $20.6bn.
Business rose strongly in Hong Kong and the rest of Asia, and the bank said it saw a sharp turnaround in Europe. Chief executive Stuart Gulliver's total remuneration for 2012 was some $7m, compared with $6.7m the year before.
Some 90% of the bank's earnings now come from outside the UK. And after taking account of the deferral of pay this year and in more highly-remunerated years previously, Mr Gulliver actually received $14.1m in 2012, up from $10.6m in 2011.
"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. The company's 16 top executives received an average of $4.9m each.
Globally, 204 employees were paid more than £1m last year, of which 78 were in the UK where the group has its headquarters.
"HSBC made significant progress in 2012 despite a challenging operating environment characterised by low economic growth and a changing regulatory landscape," said Mr 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%.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. HSBC was fined by US and UK regulators for breaking various laws against doing business in Syria and Iran and with Mexican drug cartels.
Mr Gulliver's own personal dividend also rose - his total remuneration for 2012 was some $7m, compared with $6.7m the year before. HSBC set aside more money to cover the expected cost of past misdemeanours in the UK. It identified 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.
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. Global recovery
The bank's results also reflected the continuing gradual recovery of the global economy from the 2008 crisis. Its underlying profits - which ignore one-time accounting effects as well as the impact of changes in the bank's creditworthiness - rose 18%.
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, and about 40% comes from the Asia-Pacific region.
Meanwhile, HSBC confirmed that its staff numbers had fallen by 10% to 260,591, as it seeks to cut costs and sell off some businesses.
The bank's results 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.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 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. The adjustment is an accounting requirement 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.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.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. Markets were not overly impressed by the results, with analysts having expected an extra $2bn in profits. Shares in HSBC fell about 3% in morning trading in London.