Asia-focused bank HSBC Holdings PLC yesterday said its net profits sank 16.5 percent to US$14.03 billion last year due to US-imposed fines, scandals over mis-sold financial products, rising taxes and a hefty accounting charge.
Profits after tax fell to the equivalent of 10.78 billion euros last year, compared with US$16.8 billion in 2011, London-based HSBC said in a statement, while pre-tax profits slid 6 percent to US$20.65 billion.
HSBC’s performance was hit by a US$1.9 billion fine to settle US allegations of money laundering that were said to have helped Mexican drug cartels, terrorists and Iran.
The bank admitted in December last year to having “inadequate” controls in place and accepted responsibility for the group’s past mistakes, as part of an agreement with several US authorities, including the US Department of Justice.
HSBC’s annual results were also dented by a US$5.2 billion charge against the value of its own debt. It also set aside another US$1.4 billion to cover compensation in Britain for mis-selling financial products.
However, the lender’s capital position improved after a string of asset sales, including its stake in Chinese insurance giant Ping An (平安保險). As a result, the bank pledged to pay out more in shareholder dividends this year.
Also, bad debts — or consumer loans that have turned sour — fell to US$8.31 billion from US$12.13 billion.
Underlying profits — excluding exceptional items — climbed by 18 percent to US$16.4 billion, amid strong growth in Hong Kong and Asia, and a sharp economic turnaround in the EU.
“HSBC made significant progress in 2012. First and foremost, we grew our business. We increased revenues, performed well in most faster-growing markets and enjoyed a record year in commercial banking,” chief executive Stuart Gulliver said.
“We’ve made the business easier to manage and control by disposing of non-core businesses and surpassed our sustainable savings target,” Gulliver added. “We also agreed a settlement with the US and UK authorities in respect of our past anti-money laundering and sanctions failings.”
HSBC also revealed that its cost-cutting program had exceeded the group’s target.
Two years ago, the bank announced a large restructuring program that included plans to save up to US$3.5 billion by this year and to axe 30,000 jobs globally.
Yesterday, it said it had generated US$2 billion in extra savings, giving it an annualized total of US$3.6 billion in savings.
HSBC’s share price sank 3.01 percent to ￡706.20 yesterday mornings in London, while the FTSE-100 was 0.47 percent lower.
“HSBC shares are under pressure after the bank reported earnings which fell short of expectations with pre-tax profit down 6.0 percent, but the bank has pledged to increase its divided on strong growth in Asian markets,” ETX Capital trader Joe Rundle said.