Profits at HSBC, Europe's largest bank by market value, fell by 5.6 per cent after a record settlement for anti-money-laundering sanctions in the US and a charge to revalue its own debt.
Pre-tax earnings for 2012 fell to $20.65 billion from $21.87 billion a year earlier, trailing estimates. Revenue fell by 5.4 per cent to $68.33 billion from $72.28 billion, London-based HSBC said today in a statement.
The company said it has cut $3.6 billion of costs, beating its $3.5 billion target. Chief executive officer Stuart Gulliver, 53, has closed or sold 47 businesses since he took the top job in 2011, sacrificing revenue and targeting 30,000 job cuts.
HSBC operates in more than 80 markets, some of which Gulliver is retreating from to boost return on equity, a measure of profitability, to at least 12 per cent. The company paid $1.92 billion to settle US money-laundering probes in December.
“There's some stuff we didn't actually foresee, some stuff we didn't see the degree of and some stuff we should have seen,” Gulliver said on a conference call, referring to the bank's costs and compliance issues since 2011. “We had not invested appropriately on compliance or our legal function.”
HSBC shares fell 2.6 per cent to 709.5 pence at 9:06 a.m. in London trading, exceeding the 1.2 per cent drop by the Stoxx 600's index of European banking stocks. Before today, they had risen 28 per cent over the past 12 months. D
The company said it would increase dividend payments to $8.3 billion, or 45 cents per share, a 10 per cent increase from last year. HSBC also said it paid $2.9 billion in bonuses to employees for 2012. The company took a $5.2 billion charge for "adverse fair value" movements on its own debt. So-called credit-valuation adjustments
require banks to book losses when the value of their debt rises, and gains when it declines, on the theory that a loss, or profit, would be realised were the bank to repurchase that debt.
The company said today that it's "unable to reliably measure" costs related to probes of the London interbank offered rate. Royal Bank of Scotland, Britain's largest taxpayer-owned lender, was forced to pay regulators a $612 million fine last month for rigging benchmark interest rates such as Libor.
The bank said return on equity fell to 8.4 per cent from 10.9 per cent a year earlier due to the debt revaluation. Costs as a proportion of revenue climbed to 62.8 per cent from 57.5 per cent, moving away from the bank's 48 to 52 per cent aim.