UK

HSBC UK Operation Loses £670m, Bank's Overall Profit Hits £13.6bn

04/03/2013 09:22 GMT | Updated 04/03/2013 09:23 GMT

HSBC's results revealed a less rosy year than analysts were expecting, with the UK operations losing £670 million as a result of the ongoing cost of payment protection insurance mis-selling and being hit by the new bank levy.

The UK's figures are skewed by the fact HSBC is head quartered here, and therefore has additional costs on its balance sheet, but the additional PPI payments and increase in the bank levy were also to blame, according to the bank.

The overall group figure fell slightly short of its profit expectations, reporting £13.96 billion, down from the expected £15bn figure and down 6% on 2011's profits.

The bank was hit by a number of scandals throughout 2012, including having to pay £1.2bn in payment protection insurance mis-selling claims, a £3.5bn accountancy write down on its debt and a paying £1.3bn to settle US claims of money laundering involving drug lords and suspected terrorists in the Middle East.

Much of HSBC's success has come from generating profits in emerging market regions - the bank has undergone a campaign of streamlining its business over the past few months, closing down unprofitable arms and concentrating on areas it can make profits.

Chief executive Stuart Gulliver has closed or sold 46 businesses since he took the top job in 2011, making 30,000 job cuts and sacrificing revenue opportunities to bin as much as to eliminate as much as £2.3bn of expenses.

HSBC currently operates in more than 80 markets, but Gulliver has already said he wants to retreat from some of them in future to boost the bank's return on equity to at least 12%.

The results also confirmed Gulliver will receive a £1.95m annual bonus and a regular package (which includes base pay, bonus and long-term shares) of £6.2m. The bonus payment will be deferred and subject to possible clawback, while he will not be able to cash it in until he retires from or leaves HSBC.

Speaking to analysts on Monday, Gulliver said: "Clearly there is work still to do. However, we have achieved a great deal in 2012.

"Looking ahead, while the operating environment remains difficult our core business will continue to reap the benefit of recovering economic growth in mainland China in 2013 and its positive impact on other faster-growing regions. We are on the right track and remain fully committed to achieving our goal of being the world's leading international bank."

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said the results were something of a mixed bag for HSBC.

"However, despite being down 6% from the previous year and below general expectations, the pre-tax profit figure is substantial. The capital cushion is also strong and reflective of the bank's financial health," he said.

"The ongoing programme to streamline operations through a combination of targeted disposals and a general focus on costs is well complemented by another robust contribution from its Asian operations."