Regulator asks HSBC for Swiss unit details

HSBCs investment bank benefited from a surge in market volatility at the start of the year. Picture: Getty

The multi-national giant, announcing a 4 per cent rise in first-quarter pre-tax profits to $7.1 billion (£4.7bn) from $6.8bn a year ago, also denied that its review on whether to move its global HQ from Britain was a threat.

Like UBS, its Swiss rival, HSBC’s investment bank benefited from a surge in market volatility at the start of the year, which helped its underlying revenues rise 4 per cent.

Stuart Gulliver, group chief executive, said: “Our business recovered well in the first quarter following a difficult [fourth quarter of 2014].”

HSBC’s group profits fell 17 per cent last year.

Gulliver said the investment bank enjoyed its “usual strong start to the year”, with commercial banking also performing well, and retail banking and wealth management seeing increased revenue.

HSBC said Britain’s Financial Conduct Authority (FCA) had asked it for information about its Swiss private bank following the recent controversial revelations.

However, no investigation on the issue has been so far launched by the FCA, whose remit includes investor protection and fighting financial crime.

The regulator had said in February it was “working closely with the firm”.

The bank has previously admitted that past controls at its Swiss private bank were poor and apologised publicly, but it said yesterday that the scandal had not had a financial impact on its business.

“It hasn’t actually resulted in any significant decrease in business. We haven’t seen in any of the business segments a significant change in business,” Gulliver added.

Yesterday’s figures come after HSBC said recently that it was considering moving its headquarters out of the UK in response to “regulatory and structural reforms” in the sector here.

These include a surge in the UK government’s annual bank levy, which will cost HSBC about $1.5bn in 2015. Gulliver said the rise in the levy was “going to make it impossible for us to stick to our commitment to make the dividend progressive”, and the bank’s shareholders were concerned.

The bank said that in the first three months of this year underlying operating costs lifted 6 per cent from a year ago.

However, Gulliver said the review of the siting of the global HQ was purely about underlying economics. “This isn’t meant to be a threat. This is just very objectively looking at a few facts,” he said.

HSBC said earnings were boosted by higher revenues and lower charges for bad loans. However, misconduct charges continued, with a $137 million (£91m) provision taken for UK customer redress.

This included £60m to pay for compensating customers mis-sold payment protection insurance (PPI) and £31m for commercial banking customers.

The group also took a £92m regulatory provision for global private banking. Gary Greenwood, banking analyst at Shore Capital, said: “HSBC still has some seriously heavy lifting to do if it is to adapt to an environment in which large complex banks are frowned upon by regulators and penalised accordingly.”

On the stock market, HSBC’s shares slid 3.2 per cent or 20.4p to close at 625.9p.