 "HSBC posts loss in Dec quarter; hiring under SEC lens")
HSBC said on Monday that it lost money in the fourth quarter and warned that it was being investigated for hiring candidates with ties to government officials in the Asia-Pacific region.
The lender, which is based in Britain but generates more than half its earnings in Asia, also forecast that slowing economic growth in China would contribute to a "bumpier financial environment."
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For the three months that ended December 31, the bank, Britain's largest by assets, posted a loss of $1.33 billion, compared with a profit of $511 million in the fourth quarter of 2014. Before taxes, HSBC posted a loss of $858 million in the final quarter of last year.
In addition to reporting its earnings, HSBC said that it and "multiple financial institutions" were facing an investigation by the Securities and Exchange Commission. The regulator, HSBC said, was looking into the hiring of candidates who were referred by, or related to, government officials or employees of state-owned enterprises in Asia.
"HSBC has received various requests for information and is cooperating with the SEC's investigation," the lender said.
In 2013, the commission opened an investigation into whether JPMorgan Chase had hired the children of powerful Chinese officials to help the bank get lucrative business. That inquiry has since expanded to include the hiring practices of other banks in Asia.
For all of last year, HSBC reported a pre-tax profit of $18.9 billion, compared with an annual profit of $18.7 billion in 2014.
But the lender's quarterly results were weighed down by restructuring costs and provisions for legal and regulatory matters, including a $370 million charge for potential settlements and $337 million to compensate customers who were mis-sold products in Britain. The quarter also included loan impairment charges and provisions for credit risk of $1.64 billion and a reduction in the fair market value of its debt.
In Asia, the bank's pre-tax profit of $2.82 billion in the fourth quarter was lower than some analysts had expected. In a research note, the Citigroup analysts Ronit Ghose and Andrew Coombs said they had expected a pre-tax profit of $3.5 billion from HSBC's Asian business in the fourth quarter, but the bank had lower revenue than Citigroup had forecast and "slightly higher" provisions on loan losses.
Douglas Flint, the HSBC chairman, said in the news release that "China's slower economic growth will undoubtedly contribute to a bumpier financial environment, but it is still expected to be the largest contributor to global growth as its economy transitions to higher added value manufacturing and services and becomes more consumer driven." Shares of HSBC declined as much as 5 per cent in early trading in London on Monday and were down about 2 percent in Hong Kong.
The loss in the fourth quarter came as HSBC was reshaping its operations, including plans announced in June to shed tens of thousands of jobs, sell several underperforming businesses and shrink its global investment banking business.
The bank said on Monday that it had decided to retain and restructure its business in Turkey, which would have accounted for some of the job cuts. HSBC said that it had received several offers since putting the business up for sale in June, but that none "were deemed to be in the best interests of shareholders." Last week, HSBC, which was founded in 1865 as the Hongkong and Shanghai Banking Corporation in Hong Kong, said it would keep its headquarters in Britain after a lengthy review. In announcing its decision, HSBC said that Asia remained "at the heart of the group's strategy."
The lender announced a formal review in April, citing increasing regulatory requirements and a tax that had hit banks based in Britain particularly hard. The political environment, however, shifted after the Conservative Party gained full power in May 2014, following five years of a coalition government. Since then, the British government has softened its tone on the banking industry, hoping to keep London an attractive home for such businesses.
HSBC also said on Monday that it had cut the salary of its chief executive, Stuart Gulliver, reflecting the bank's "weaker financial performance."
Gulliver's total compensation declined about 4 per cent in 2015 to 7.34 million pounds, or about $10.6 million, the bank said. That is down from £7.62 million in 2014.
Revenue at HSBC declined 22 per cent to $10.1 billion in the fourth quarter, from $13 billion in the period a year earlier.
Net interest income, the measure of what a bank earns on its lending after deducting what it pays out on deposits and other liabilities, declined 5 per cent to $8.06 billion in the period, from $8.55 billion in the fourth quarter of 2014.
Operating expenses were down 3 per cent to $11.5 billion in the fourth quarter, from $11.9 billion in the period a year earlier.
Pre-tax profit in HSBC's investment bank, known as global banking and markets, rose to $1.02 billion in the fourth quarter, from a loss of $85 million in the period a year earlier.
Pre-tax profit in its commercial banking business was down 28 per cent to $1.22 billion in the fourth quarter, from $1.7 billion in the period a year earlier.
In its retail and wealth management business, pre-tax profit fell 66 per cent to $445 million in the period, from $1.3 billion in the fourth quarter of 2014.
©2016 The New York Times News Service
