HSBC profits double to almost £12bn

HSBC revealed that its highest paid banker took home more than £8.4m last year as it reported that profits more than doubled to $19bn (£11.8bn) in 2010.
The UK's largest bank said 280 of its most senior employees had shared in bonuses of $374m. Some 186 of these were in the UK and their share of the bonuses was $172m. This means key bankers in the UK get paid an average of $920,000 verses $1.3m group-wide, although this is partly because the UK numbers include lower-paid staff involved in monitoring the bank's risks.
Stuart Gulliver, who took over as chief executive at the start of the year, is to take his £5.2m bonus in shares. His total pay was £6.1m, down on the £10m he received a year ago when he was the highest paid employee of the bank.
While the chief executive's office is Hong Kong, Gulliver joked that he lives on Cathay Pacific and British Airways, spending a third of his time in the UK, a third in Hong Kong and a third in the air.
For 2010, the highest paid banker – who is not named – received between £8.4m and £8.5m; one took £6.8m and three received between £6.3m and £6.4m.
HSBC provides more information about pay than other financial institutions because it is listed in Hong Kong, which demands disclosure of the five highest paid staff. In banking, the biggest earners are often outside the boardroom.
Under Project Merlin, the deal between major banks and the UK government, the disclosure is different and only requires the pay of the five highest paid executives outside the boardroom – rather than all bankers and traders – to be disclosed. Under this measure the highest paid executive received £4.2m.
The information about the bonus pool for senior staff is being provided to comply with a new Financial Services Authority rule which requires so-called "code staff" – those deemed to be high paid and taking big risks – to have their pay published in aggregate.
Gulliver replaced Michael Geoghegan as chief executive after a very public boardroom reshuffle. For 2010 Geoghegan received £5.8m after his £2m salary and benefits were topped by a £3.8m bonus. He is also to receive £1m for 2011 and a pension contribution of £401,250 under the terms of his contract. While he stepped down at the end of December, he will receive £200,000 in consultancy fees to 1 April which he will donate to charity.
The bank cut its long-term return on equity target to 12-15% from a previous 15-19% target, blaming the costs caused by regulations which demand banks hold more capital and extra liquid instruments that can be sold quickly in a crisis. The shares fell 4% to 682p as the market digested numbers which, Gulliver admitted, showed income was flat, costs were up and that profits have been bolstered by the $12.4bn fall in impairments to $14bn – the lowest level since 2006.
"We've targeted 12 to 15% through the cycle for return on equity, principally taking into consideration what we view as a somewhat unstable and uneven economic recovery over the coming years as well as much higher capital requirements," said new finance director Iain Mackay.
Commenting on the profits, which were below the $20bn estimated by analysts, Gulliver said: "Underlying financial performance continued to improve in 2010 and shareholders continued to benefit from HSBC's universal banking model. All regions and customer groups were profitable, as personal financial services and North America returned to profit. Commercial banking made an increased contribution to underlying earnings and global banking and markets also remained strongly profitable, albeit behind 2009's record performance, reflecting a well-balanced and diversified business."
HSBC's new chairman Douglas Flint – who was the finance director until he replaced Stephen Green in December – said the group will "not forget" the financial crisis and support from governments around the world, adding the group entered 2011 "with humility". Green's departure to join the government as trade minister caused the bank to reorganise its top team last year.
But Flint hit out against George Osborne's permanent levy on bank balance sheets, saying that if the chancellor removed the levy – which will cost HSBC around $600m – the bank would increase its payouts to shareholders. The final dividend was announced at 12 cents, up from 10 cents at the same point last year.
Flint was also concerned about the new rules that force banks to hold more liquid instruments such as government bonds. "It will be a near impossibility for the industry to expand business lending at the same time as increasing the amount of deposits deployed in government bonds while, for many banks but not HSBC, reducing dependency on central bank liquidity support arrangements," Flint said. It is to be hoped that the observation period, which starts this year and precedes the formal introduction of the new requirements, will inform a recalibration of these minimum liquidity standards.
For 2009 the bank reported a 24% fall in pretax profit to $7bn (£4.63bn), which included a total bill for salaries and bonuses of $18.5bn, down 11%.
Jill Treanor @'The Guardian'