Banking major HSBC posted worse-than-expected profits yesterday, braced investors for a “bumpier ride” and admitted it was being investigated by US authorities about its hiring of “princelings” – young relations of Chinese politicians.
Europe’s largest bank saw annual pre-tax profits edge up 1 per cent to $18.9 billion (£13.2bn), but fell short of consensus analyst expectations of $21.8bn.
HSBC unveiled a fourth quarter loss of $858 million (£604 million), pointing at “seismic shifts” in the global economy, including the slump in oil prices, the Chinese slowdown and low interest rates in developed economies.
Scots-born chairman Douglas Flint said the challenges caused by the slowdown in China were likely to persist, stating it “will undoubtedly contribute to a bumpier financial environment”.
HSBC, which recently announced after a lengthy review that it would be keeping its global HQ in the UK, highlighted progress on reducing the group’s RWAs (risk-weighted assets), new business in Brazil and gaining momentum in Asia, but acknowledged the global lender was operating in “a difficult market environment”. Bad debts in the key US market surged by $365m in Q4.
The bank, which employs 3,700 in Scotland, including two call centres in Edinburgh and Hamilton, revealed it now faced another potentially damaging US investigation, this time over hiring relations linked to government officials in China.
It confirmed it is among several financial firms being probed by the Securities and Exchange Commission (SEC) over the issue, but did not comment on the likely timing or impact of the investigation.
The SEC opened an inquiry into US banking giant JP Morgan in 2013 over the hiring of “princelings” in Asia. This is a term that Asian people also use for the children or younger relatives of the top executives of state-owned enterprises in China.
The revelation and overall disappointing financial performance initially sent HSBC’s shares down 4 per cent, as the bank has also suffered significant regulatory fines in the past, including for its Mexican subsidiary laundering drug money.
However, the stock later recovered somewhat to close down just under 1 per cent at 445.6p.
HSBC’s annual report also issued yesterday showed that total remuneration for its group chief executive Stuart Gulliver has been reduced from £7.6m to £7.3m.