Britain’s largest bank HSBC Holdings Plc reported a $7.1 billion pretax profit for the year ending December 2009, a 24 percent drop due to the value of its debt deteriorating—buffered by dramatically lower operating costs.
The figures released were short from analyst estimates with profit falling for the company’s businesses in Europe, the Middle East, and Asia.
“These results are disappointing,” said David Crawford in an interview with Bloomberg, a money manager at Octopus Investment Ltd. who had the best-performing long-short fund in the U.K. last year. “It is the most highly valued bank in Europe, so it needs to deliver on that high valuation. People expect great things from it.”
In essence, $6.5 billion was stripped from its profits, which include goodwill impairment and also the volatile value of its own debt. However, HSBC’s underlying profit still rose 56 percent to $13.3 billion. Also, HSBC raised $17.8 billion in April 2009 to shore up capital in a U.K. rights offering, second in size only to Lloyds Banking Group Plc’s 13.5 billion-pound ($20 billion) share sale in December. HSBC, unlike rivals Royal Bank of Scotland Group Plc and Lloyds, did not take direct state assistance to bolster capital during the global financial crisis.
However, the spotlight has been on Michael Geoghegan, HSBC’s Chief Executive officer who is planning to give his bonus—worth $6 million—to charity, while numerous rival executives expect to retain their bonuses.
In fact, Stuart Gulliver, HSBC’s head of investment banking—one of five executives who were paid around $58 million in salary and bonuses—was revealed in the latest annual report to be the highest paid identifiable banker in London with a $15 million bonus package. Gulliver has a 30-year career at HSBC and has committed part of his pay to charity and felt “uncomfortable” about the publicity.
HSBC chairman Stephen Green nevertheless confirmed that the bank will revamp its pay policies and will be increasing base salaries to offset the lower amount of bonuses paid.
According to BBC, the HSBC chairman said, “We have witnessed unacceptable distortions—from rewards linked to unsustainable or illusory day one revenues, which encouraged risk-taking; to multi-year guaranteed bonuses with no performance criteria.”
“Remuneration must be firmly tied to sustainable performance and must not reward failure,” he added.
The London-based lender was founded in 1865 as the Hongkong and Shanghai Banking Corp. The Asia-focused group said that it was “well positioned” for the economic recovery. According to Bloomberg, the bank plans to trade its shares in Shanghai and moved Chief Executive Officer Geoghegan to Hong Kong from London last month to sharpen its focus on Asia. HSBC halted consumer finance loans in the United States after racking up provisions of at least $70 billion in the past four years following its acquisition of U.S. subprime lender Household International Inc.
CEOs at Barclays, Royal Bank of Scotland, and Lloyds Banking Group all refused bonuses for 2009.
The figures released were short from analyst estimates with profit falling for the company’s businesses in Europe, the Middle East, and Asia.
“These results are disappointing,” said David Crawford in an interview with Bloomberg, a money manager at Octopus Investment Ltd. who had the best-performing long-short fund in the U.K. last year. “It is the most highly valued bank in Europe, so it needs to deliver on that high valuation. People expect great things from it.”
In essence, $6.5 billion was stripped from its profits, which include goodwill impairment and also the volatile value of its own debt. However, HSBC’s underlying profit still rose 56 percent to $13.3 billion. Also, HSBC raised $17.8 billion in April 2009 to shore up capital in a U.K. rights offering, second in size only to Lloyds Banking Group Plc’s 13.5 billion-pound ($20 billion) share sale in December. HSBC, unlike rivals Royal Bank of Scotland Group Plc and Lloyds, did not take direct state assistance to bolster capital during the global financial crisis.
However, the spotlight has been on Michael Geoghegan, HSBC’s Chief Executive officer who is planning to give his bonus—worth $6 million—to charity, while numerous rival executives expect to retain their bonuses.
In fact, Stuart Gulliver, HSBC’s head of investment banking—one of five executives who were paid around $58 million in salary and bonuses—was revealed in the latest annual report to be the highest paid identifiable banker in London with a $15 million bonus package. Gulliver has a 30-year career at HSBC and has committed part of his pay to charity and felt “uncomfortable” about the publicity.
HSBC chairman Stephen Green nevertheless confirmed that the bank will revamp its pay policies and will be increasing base salaries to offset the lower amount of bonuses paid.
According to BBC, the HSBC chairman said, “We have witnessed unacceptable distortions—from rewards linked to unsustainable or illusory day one revenues, which encouraged risk-taking; to multi-year guaranteed bonuses with no performance criteria.”
“Remuneration must be firmly tied to sustainable performance and must not reward failure,” he added.
The London-based lender was founded in 1865 as the Hongkong and Shanghai Banking Corp. The Asia-focused group said that it was “well positioned” for the economic recovery. According to Bloomberg, the bank plans to trade its shares in Shanghai and moved Chief Executive Officer Geoghegan to Hong Kong from London last month to sharpen its focus on Asia. HSBC halted consumer finance loans in the United States after racking up provisions of at least $70 billion in the past four years following its acquisition of U.S. subprime lender Household International Inc.
CEOs at Barclays, Royal Bank of Scotland, and Lloyds Banking Group all refused bonuses for 2009.
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