HSBC has cast a shadow over the start of the banks’ reporting season as Europe’s biggest lender unveiled a 62 per cent slump in 2016 profits, and warned of the risks of political protectionism.
Alluding to president Donald Trump’s election in the US and the UK’s Brexit vote, HSBC’s Scots-born chairman Douglas Flint said last year would be long remembered for its “significant and largely unexpected economic and political events”.
He said: “These foreshadowed changes to the established geopolitical and economic relationships that have defined interactions within developed economies and between them and the rest of the world.”
Flint also warned over the “threat of populism” for the year ahead. He cautioned over risks from “upcoming European elections, possible protectionist measures from the new US administration impacting global trade, uncertainties facing the UK and the EU as they enter Brexit negotiations, and the impact of a stronger dollar on emerging economies with high debt levels”.
He repeated that 1,000 HSBC jobs may have to move from London to Paris over the next two years depending on the outcome of Brexit negotiations.
Trump’s publicly stated “America First” policy has worried financial markets that it is a harbinger of protectionism. Group chief executive Stuart Gulliver said: The protectionist stance is clearly a negative for us. Clearly we are free-traders. The risk is a trade war with China.”
HSBC, which employs about 1,700 at its call centre operations north of the Border, reported a yearly pre-tax profit of $7.1 billion (£5.7bn), sharply down from $18.9bn in the previous 12 months.
HSBC attributed the fall to a string of one-off charges, including the sale of its operations in Brazil. The group’s shares shed 6.5 per cent to 665.7p after a strong run over recent months, with investors disappointed that a new share buyback announced yesterday was lower than expected at $1bn when they had expected it to be worth between $2.5bn and $3bn.
“It’s a bank that is still in transition after the crisis,” Chris Wheeler, banking analyst at Atlantic Equities, commented.
Yesterday’s results came ahead of 2016 figures from Lloyds Banking Group today, Barclays tomorrow and Royal Bank of Scotland on Friday. RBS is expected to make a loss of about £6bn, its ninth successive year of losses since its taxpayer bailout.
HSBC revealed that 245 staff earned more than £1 million in 2016. Gulliver saw his annual bonus rise to £1.7m from £1.1m in 2015.
But the lender cut its overall bonus pool for staff by 12 per cent to $3bn for 2016. It also said that it was on track with its hunt to find a successor to HSBC veteran Flint by the end of 2017.
The new chairman will lead the hunt for a new chief executive to replace Gulliver.