HSBC profits take 6pc dip, but chief executive pockets HK$22m bonus

US$4 billion of penalties and fines contribute to 6pc dip, but boss will pocket a 33pc pay rise and dividend for shareholders will go up 11pc

PUBLISHED : Tuesday, 05 March, 2013, 12:00am
UPDATED : Tuesday, 05 March, 2013, 5:54am

HSBC's profit before taxes fell 6 per cent last year, partly as a result of fines and penalties totalling US$4.2 billion, it was revealed yesterday.

But its top boss and the shareholders won't feel the pinch.

Chief executive Stuart Gulliver will take home a 33 per cent larger pay packet.

And shareholders of the global banking group will get 11 per cent higher dividends for the three upcoming quarters.

Chairman Douglas Flint said the board intends to increase the dividends for each of the first three quarters of this year by 1 US cent per share to 10 US cents.

HSBC declared a fourth quarter interim dividend of 18 US cents for last year, up 28.5 per cent from 2011.

The dividend payout ratio for the year grew to 55 per cent from 44.5 per cent the year before.

Gulliver said HSBC would deliver a progressive dividend payout in the range of 40-60 per cent.

The bank's profits last year were crimped after paying a total of US$4.2 billion for misconduct.

This included US$1.9 billion of fines and penalties paid to settle accusations by US authorities of money-laundering.

HSBC set aside a further US$2.3 billion for mis-selling financial products in Britain, Gulliver said.

British regulators have ordered banks to compensate customers for personal protection insurance mis-sold to individuals and business loans mis-sold to corporate customers.

Gulliver received a bonus of £1.95 million (HK$22.7 million) for last year. His total compensation came to US$14.1 million, including deferred bonuses from prior years that were released.

His total compensation in 2011 was US$10.6 million.

"It is weird for HSBC to grant such a hefty bonus to its chief after a tough year," said Daniel So, a strategist at Sun Hung Kai Financial.

It is weird for HSBC to grant such a hefty bonus to its chief after a tough year ... this is contrary to the global banking industry's trend

"This is contrary to the global banking industry's trend, which is laying off top-paid investment bankers and freezing bonuses everywhere."

Flint said the management was restructuring the group and building for the future, so it would be inappropriate to "punish" bosses with a pay cut.

Asked about the caps on bonuses and restrictions on executives' payrolls proposed in Europe, Gulliver said the bank's management had not consulted the shareholders yet and could not comment.

HSBC reported profit before tax of US$20.6 billion, down 6 per cent from a year earlier, including US$5.2 billion of adverse fair value movements on its own debt.

Underlying profit before tax was US$16.4 billion, up 18 per cent. The result was in line with market expectations, but in the lower range of forecasts.