HSBC drags down FTSE as profits plunge
- Author: Essie Rivera Feb 22, 2017,
Feb 22, 2017, 0:07
According to a market update released today (21 February), the banking giant saw its pre-tax profits plunge to $7.1bn (£5.7bn) past year, down from the $18.9bn (£15.2bn) reported in 2015.
Across Europe, the French Cac 40 and German Dax rose 0.49% and 1.18%.
HSBC Holdings Plc boosted Stuart Gulliver's total potential pay to 9.7 million pounds ($12 million) as the chief executive officer was rewarded for cutting costs, while the bank's bonus pool dropped. It announced in 2015 it was cutting 50,000 jobs and quitting noncore markets.
Europe's biggest bank said full year profits before tax came in at $7.1 billion, down 62% from 2015 and well shy of the $14.4 billion forecast by analysts.
Last year, HSBC improved its internet and mobile banking platforms in several key markets, including the United Kingdom and Hong Kong.
He highlighted "the threat of populism impacting policy choices in upcoming European elections, possible protectionist measures from the new USA administration impacting global trade".
However, impairment charges were the main catalyst for the lower-than-expected earnings, in particular the write-down of the private banking division in Europe.
The bank is the process of overhauling its board and seeking a new chairman to replace Douglas Flint who said an announcement would be made "in due course". This was based on feedback received from a monitor installed by U.S. Department of Justice, as well "matters arising from risk and compliance incidents, and a number of unsatisfactory internal audits" related to anti-money laundering and sanctions-related issues, the company said.
HSBC is in the middle of carrying out a sweeping reorganization to focus on faster-growing Asia, where it earns the bulk of its profits. British Prime Minister Theresa May has indicated willingness to give up access to the European single market to regain control over immigration. "HSBC has plenty of long-dated regulatory capital now in issue, but much of its Tier 2 loses regulatory capital treatment from 1 January, 2022 due to either being issued from an operating company or being governed by non-EU law with no contractual recognition of European Union bail-in power".
As if that was not enough the bank has also received requests for information from various regulatory and law enforcement authorities around the world concerning persons and entities believed to be linked to Mossack Fonseca & Co., which the bank says could be significant.