HSBC's 2016 profit slumps 82 per cent

Banking giant HSBC has unveiled an 82 per cent slide in profits following a year of "unexpected economic and political events".

HSBC, which in 2016 paid a total of $18 billion to staff in wages and benefits, previous year changed its pay policy for executive directors, bowing to shareholder concerns triggered by a drop in the bank's share price and worries over its dividend.

While adjusted revenue at HSBC was little changed in 2016, reported revenue was 20% lower to $48 billion because of "unfavourable movements in significant items and currency translation".

The bank cut its global bonus pool by 12 per cent to US$3 billion in recognition of the worse than expected profits.

HSBC chairman Douglas Flint said that geopolitical changes in the past year had contributed to "volatile financial market conditions".

Analysts have projected the bank this year or next could raise its dividend or buy back more shares as excess capital accrues.

"Risks to this central scenario, however, remain high", Flint said, including the effect of rising populism on policy in upcoming European elections, the threat of global trade protection measures from Trump's administration and uncertainty over Britain's negotiations to leave the European Union.

HSBC said that it was being investigated by the Financial Conduct Authority over its financial crime controls. The bank blamed slowing growth in its core markets of Hong Kong and the United Kingdom, while its adjusted profit fell $1.2bn short of analyst estimates.

The bank confirmed a year ago it would keep its European headquarters in London, despite Britain's vote to leave the European Union.

Royal Banking Group is expected to report an eye-watering loss of £6.1bn as it sets aside a further $3.8bn for expected fines from USA authorities over the way it packaged up and sold mortgages nearly a decade ago.

The full-year dividend ticked up slightly to $0.51, and a share buy-back of $1bn was announced, following a $2.5bn share buy-back completed in December.

He added the bank had "broadly all the licenses and infrastructure needed to continue to support our clients once the United Kingdom leaves the EU".

HSBC CEO Stuart Gulliver said the restructured private bank is now viable as a slimmed-down operation providing advice to wealthy clients referred from the lender's other business lines.

  • Zachary Reyes