HSBC chairman Douglas Flint strongly hinted on Monday that the bank may ramp up basic salaries for key staff as a way around a European cap on bonuses.
Flint said the caps being imposed by the European Union made the bank feel “very uncomfortable”, given 80 per cent of its profits were outside Europe in countries where many local competitors for staff would not face the same crackdown.
However, he was confident the business could construct a “competitive” remuneration proposal to put to its investors.
Asked if this would involve higher basic salaries, Flint said: “It’s one of the possibilities. When you look at the arithmetic, that’s one option.”
Flint, who recently apologised publicly to shareholders after the bank was fined £1.3 billion following an inquiry into Mexican drug money laundering, said he believed shareholders would back remuneration arrangements that “protected their investment”.
However, he added that an EU bonus cap would not necessarily lead HSBC to move its UK headquarters because domicile was a bigger issue than just pay.
It came as HSBC, which operates in 80 countries, reported pre-tax profits up 10 per cent to $14.1bn (£9.2bn) in the first six months of 2013 compared with $12.7bn last time. Underlying profits, excluding exceptional items, lifted
47 per cent to $13.1bn, on revenues down 12 per cent at $34.4bn.
The bank took a further £239 million hit for payment protection insurance (PPI) mis-selling in the UK, taking its total provisions for an industry-wide scandal to £1.8bn. Despite this, the group made first-half profits of $2.2bn (£1.4bn) in the UK compared with a $1.6bn (£1bn) loss a year earlier.
HSBC said it lent £7.1bn of new mortgages to 68,000 homebuyers in the first six months of 2013. Groupwide, the bank benefited from a $1.7bn fall in bad debts to $3.1bn.
Geographically, all divisions improved profitability apart from North America and Latin America. As eurozone tensions eased, Europe’s profit of $2.7bn replaced a $667m loss last time.
In HSBC’s historic heartland of Hong Kong, profits lifted 12 per cent to $4.2bn partly reflecting balance sheet growth and strong dollar bond issuance.
Profits in the rest of Asia-Pacific rose to $5.1bn from $4.4bn, despite growth in China “slowing unexpectedly” to
7.7 per cent in the first quarter of 2013.
Elsewhere, performance in Brazil and Mexico was disappointing, with Latin American profits more than halving to $466m from $1.1bn.
Stuart Wheeler, HSBC’s chief executive, said it showed that emerging markets “also have their business cycles”. However, he added: “But the reality is those markets continue to grow relatively quickly and HSBC remains well positioned across the faster-growing economies.”
Gulliver is two-and-a-half years into his restructuring plan and has cut more than 46,000 jobs – another 1,100 in the first half – as well as selling or closing
He said that most of the big changes have occurred and no further flurry of divestments was likely. HSBC’s interim dividend rises to $0.28 from $0.23.