HSBC’s 2014 results have shown the bank set aside an additional £910m for customer redress last year, as it posts a pre-tax profit of £12.2bn.
Pre-tax profits were down by 17 per cent, to £12.2bn in 2014 from £14.7bn in 2013, which group chairman Douglas Flint said reflected the negative effect of significant items including fines, settlements and UK customer redress.
As at 1 January 2014, HSBC had set aside £1.6bn for customer remediation, with an additional £910m set aside during the year.
This includes an additional £624m for payment protection insurance mis-selling, £187m for interest rate swap mis-selling and £246m for the repayment of interest where the bank failed to comply with the UK Consumer Credit Act.
For legal proceedings and regulatory matters, HSBC set aside £1.2bn at the start of 2014, a figure which doubled during the year, including £358m for US and UK investigations into Forex trading which are ongoing.
Amid the turmoil, chief executive Stuart Gulliver received a total remuneration package of £7.6m last year, including a base salary of £1.3m and the same amount as a bonus, although this was a reduction from the £8m pay and £1.8m bonus he received in 2013.
Mr Gulliver stated that 2014 was “a challenging year” in which profits disappointed, although he noted that many aspects were common to the industry as a whole.
Following the recent revelations about tax evasion via HSBC’s Swiss arm, Mr Gulliver explained that the number of customer accounts in the Swiss private bank is now nearly 70 per cent lower than at its peak.
“We continued to remodel the private bank in 2014, which included the sale of a customer portfolio in Switzerland to LGT Bank; one consequence of this remodelling was a reduction in revenue.”
Mr Flint also sought to apologise for these conduct and compliance failures, promising to reinforce controls and provide demonstrable evidence of their effectiveness.
Mr Gulliver also pointed out that settlements were agreed in respect of inquiries by the UK Financial Conduct Authority and the US Commodity Futures Trading Commission into the foreign exchange market in 2014.
“HSBC was badly let down by a few individuals whose actions do not reflect the vast majority of employees who uphold the values and standards expected of the bank. This matter is now rightly in the hands of the Serious Fraud Office.”
The Trades Union Congress’ general secretary Frances O’Grady commented that it was hard to see why HSBC is paying bonuses at a time when their role in tax evasion and avoidance has become so controversial.
“Those at the top of the banks continue to believe they have some special entitlement to be paid huge amounts every year whatever they do, even when the value of average wages has fallen every year since the crash.”
peter.walker@ft.com
