Gulliver's travels on hold but plans to cut costs are very much under way

Pre-tax profits took a dive to $4.91 billion (3bn) in the three months to the end of March, from $5.71bn during the same period last year.

The bank's cost-income ratio rose to 60.9 per cent over the quarter, well above Gulliver's 52 per cent target. This included a $440 million (269m) provision for Payment Protection Insurance (PPI) mis-selling and other one-off items.

But even without the restructuring charges, the ratio was still stubbornly above target at 55.1 per cent.

The quarterly update set the tone for what the City expects will be a heavy-handed and radical strategy overhaul tomorrow after Gulliver admitted that it could take "two to three years" to sort out the bank's cost efficiency problems. "This is a large firm, it will take a couple of years," he said.

Analysts have raised the prospect of shaving $2bn off costs a year, which will undoubtedly involve a dramatic slimming down of its global operations - including disposals and branch closures - and even potential job cuts among the middle management. A sale of the US credit card business is also understood to be on the cards.

But a decision on moving HSBC's headquarters from London to Hong Kong has been delayed until later this year, when the Independent Commission on Banking will have published its final recommendations.

Gulliver said the firm would "genuinely" like to stay in the UK but warned that the government's bank levy will cost it $600m this year alone.

On an underlying basis, profits fell to $5.5bn from $6.1bn previously, even though the figures were boosted by impairment charges falling 37 per cent to a five-year low of $2.4bn.

Profits improved in wealth management and retail banking, but staff costs rose in the group's fast growing emerging markets in the Far East while global banking and markets profits were lower.

In Europe, lower trading activity and the PPI charge sent profits tumbling 65 per cent from $1.86bn to $652m, while US profits fell by 60 per cent. HSBC said it accepted the decision of the British Banking Association to drop its legal action on PPI because the bank was the "least affected and had little chance of winning on appeal".

HSBC's provision is much lower than the 3.2bn set side by Lloyds Banking Group last week and the 1bn earmarked by Barclays.Gulliver said that was because HSBC stopped writing PPI business in 2007 rather than any indication it will be tough on claimants.

Analysts said yesterday's figures were a little disappointing but reserved judgement ahead of the presentation on Wednesday.

Gareth Hunt, analyst at Investec, said: "We know where the issues are, they are primarily in Europe, and banks' expenses don't turn around on a dime."