Europe’s largest bank HSBC reported soaring 2011 net profits on Monday as growth in Asia and other emerging markets offset eurozone debt losses and costs linked to its US exit.
Profit after tax jumped 28 per cent to $16.8 billion (12.5 billion euros) from $13.2 billion in 2010, the London-headquartered lender said in a statement.
The earnings update concludes the annual results season for Britain’s four main retail/investment banks — Asia-focused HSBC, Barclays and the bailed-out pair Royal Bank of Scotland and Lloyds Banking Group.
The British media has meanwhile focused on the amount of bonuses handed out to staff amid a public backlash over high pay for bankers and HSBC came in for some criticism Monday as a result.
“2011 was a year of major progress for HSBC,” chief executive Stuart Gulliver said in a statement.
“We gained traction in our strategy designed to simplify the structure and improve the management and control of the group, thereby improving returns and positioning HSBC for growth.
“We recorded a strong performance in faster-growing markets and had a record year in commercial banking. I am pleased with our progress but there is a lot more to do and we remain focused on delivering our targets.”
Founded in Hong Kong and Shanghai in 1865, HSBC last year announced massive cost-cutting measures, including plans to save up to $3.5 billion by 2013 and to axe 30,000 jobs globally.
On Monday, it announced that Gulliver would receive an annual pay package worth up to £7.2 million (8.51 million euros, $11.4 million) for his performance in 2011, sparking fresh anger among union bosses.
“How can Stuart Gulliver have a clear conscience over his reward package of £7.2 million, while thousands of staff face uncertainty about their jobs?” said David Fleming, a senior official at Britain’s biggest union Unite.
Chairman Douglas Flint, who will receive £3.4 million for 2011, admitted that “a few people” were paid “extraordinarily well” at HSBC. However, he insisted that the group needed to attract and retain the best staff.
Gulliver noted that there was “puzzlement” over anti-business sentiment in Britain.
“If you really want to get (economic) growth to offset the (state) austerity measures, you need investment and you need banks to continue to lend, which is what we are trying our hardest to do,” he told reporters.
HSBC added that group pre-tax profits climbed 15 per cent to $21.9 billion last year, in line with analyst forecasts.
“In 2011 in our heartland of Asia, throughout the Middle East and in Latin America we made good progress in developing customer business in line with the risk appetite endorsed by the board,” the bank said.
“In Europe and the US we concentrated on supporting our core customer base, targeting trade services while constraining risk appetite within the financial sector. We also made significant further progress in working down our exit businesses in the US.”
Total bad debt charges stood at $12.1 billion in 2011, down nearly 14 per cent.
“Our results continue to be adversely affected by the losses in the US consumer finance business, which, on an underlying basis, were $2.4 billion … in 2011,” the bank added.
HSBC noted that its core tier one ratio, or buffer against future financial crises, fell to 10.1 per cent from 10.5 per cent but remained well above the 9.0 per cent level set by the EU’s banking regulator from June of this year.
The group’s total dividend payout for 2011 reached $7.3 billion, up 14 per cent.
Profit-taking sent the bank’s share price tumbling 3.72 per cent to finish at 553.50 pence on London’s FTSE 100 benchmark index, which closed 0.33 per cent lower at 5,915.55 points.
“HSBC is … well placed to benefit from continued globalisation and the shift of economic power to Asia, with a strong position in greater China as the leading Hong Kong bank,” said equities head Jonathan Jackson at Killik & Co.
“Within developed markets, it is restructuring the US business to remove high risk consumer lending, whilst in Europe it has a very strong UK business, which continues to benefit from difficulties at competitors.”