HSBC lurches into the red on bad loans

HSBC slumped to an unexpected loss at the end of last year after becoming the latest victim of falling oil prices.

The High Street giant lurched £606m into the red in the fourth quarter as it was hit by rising impairment costs, a drop in lending and an accounting charge.

HSBC has also been hampered by the slowdown in China’s economy.

As oil and commodities companies have hogged the headlines with huge losses and job cuts, HSBC showed that banks are also feeling the pain from the rout in commodity prices.

It set aside an extra £142m to cover losses to oil and gas companies at the end of last year, taking its total provision to £424m.

The bank has been trying to cut its exposure to the embattled sector but confirmed it still has around £20.5bn in outstanding loans. Financial director Iain Mackay attempted to allay concerns and said it was a ‘pretty good quality book of business’ that ‘we will keep under close scrutiny’.

He also dismissed parallels with sub- prime home loans which helped trigger the financial crisis and huge losses for banks.

But the surprise loss in the fourth quarter dragged down HSBC’s profit to £13.2bn last year – just 1pc up on 2014 and around £2bn less than forecast. The bank’s shares were down almost 4pc in early trading but recovered to close 4.25p lower at 445.6p.

It also revealed that US authorities have raised ‘significant concerns’ that it has not done enough to combat financial crime since its £1.2bn fine for money laundering in 2012.

It is also being investigated by US regulators for hiring ‘princelings’ – the term used in Asia to refer to the children or younger relatives of China’s political leaders.

But HSBC still dished out £2.4bn in bonuses to staff, only slightly down on the £2.58bn that it paid out in 2014.