HSBC first-quarter pre-tax profit falls 19%


HSBC boosted its spending on fighting financial crime in the first three months of the year compared with 12 months ago as part of its effort to overcome a series of scandals, reports The Guardian.

Britain’s biggest bank revealed it had hired more staff and increased its spending on “regulatory programmes and compliance” by 12 per cent year on year to $800m (£621m) as it announced a 19 per cent fall in first-quarter profits to £3.8bn.

The bank has pledged to increase its efforts to prevent financial crime as part of a deferred prosecution agreement that was put in the place alongside the £1.2bn fine imposed in 2012 by the US authorities for poor controls that allowed Mexican drug traffickers make deposits. Under this DPA the US lawyer Michael Cherkasky, who has has been appointed as a monitor, has raised questions about the speed of change at HSBC.

The bank’s shares rose 3 per cent to 667p as investors focused on the increase in underlying profits to $4.6bn, a $1bn share buyback and attempts to cut costs from a business that has operations in 70 countries and more than 235,000 staff.

There was also a $210m provision to pay compensation for payment protection insurance (PPI), taking the total cost of the scandal for HSBC to $5.3bn.

The bank said its staff numbers had increased by 679 since the end of the year – despite its efforts to cut costs – because of the increase in spending on crime controls which “reflected the continued implementation of our global standards programme to enhance financial crime risk controls and capabilities, and meet external commitments”.

Stuart Gulliver, the HSBC chief executive , said: “This is a good set of results. The increase in adjusted profit was driven by strong performances in three of our four global businesses.”

Gulliver is in the final year of a three-year programme announced in 2015 to achieve global cost savings of $5bn, cut 25,000 jobs and “pivot” the business towards Asia. The bank said was on track to achieve the targets and has benefited from the rise in US interest rates to 1 per cent.

Gulliver is expected to replaced as chief executive after the new chairman, Mark Tucker, takes over on 1 October, when Douglas Flint retires.

HSBC repeated that it expected to transfer up to 1,000 staff to its Paris office as a result of Brexit.

The bank reported a 62% slump in 2016 profits and Laith Khalaf, a senior analyst at Hargreaves Lansdown, said on Thursday: “The dial has twitched in the right direction at HSBC, though the bank needs to sustain this performance for more than one quarter to convince shareholders it’s on the up and up.”