Little Britain is put in her place by HSBC

THE results posted by Britain’s biggest bank yesterday not only confirmed how staggeringly wealthy some of its senior executives are, but also served as a sobering reminder of the UK’S place in the pecking order.

Just days after state-backed Royal Bank of Scotland and Lloyds both announced huge losses, HSBC reported profits of almost £14bn for 2011.

This marks an increase of 15pc on the previous year for the High Street giant, though a £2.46bn increase in the value of the bank’s debt meant underlying profits were actually down by around three quarters of a billion pounds.

HSBC revealed it made nine-tenths of its profits and more than four-fifths of its revenues outside the UK, and its figures clearly reflect a two speed world economy, with developing countries outpacing their Western counterparts.

It singled out strong performance in faster growing markets with revenues shooting up i n Asia and Latin America, as well as in the Middle East and North America. The huge importance HSBC attaches to emerging markets is reflected clearly i n the £ 695m i t used to increase salaries there – particularly in India and China.

Increasing demand f or skilled workers i n these countries, and the ‘ limited pool of talent’, is forcing it to hike wages just to stay competitive.

With another FTSE 100 stalwart Prudential mooting plans to move its headquarters overseas, HSBC made it clear yesterday that a move is not out of the question – though it will not happen imminently.

Tellingly, it was meant to hold a review this year over, but has put this off for 18 months due to ‘ regulatory uncertainty’.

A major bone of contention is the bank levy – which cost HSBC £570m last year – and a range of tougher regula- tions imposed in the aftermath of the banking crisis.

HSBC is infuriated that Lloyds and RBS have to pay less because they are slashing billions of pounds from their swollen balance sheets – meaning it and others have to stump up more if the government is to achieve its revenue target.

The bank is also annoyed that it has to pay the tax on the whole of its balance sheet across its global operations, not just those in Britain.

It has indicated that the tipping point will be when the costs of regulation outweigh its profit for the UK.

Group chairman Douglas Flint signalled his exasperation yesterday, arguing ‘there is no more we can do to make the case’ to the government on the bank levy.

All this, perhaps, does not bode particularly well for staff in the UK who will be entitled to feel wary about their future.

HSBC announced plans last summer to make 30,000 redundancies across the group and has 19,000 of these to go.

But it is certainly not all doom and gloom in the UK business, with profits rising 17.2pc to £1.5bn.

The UK division met its Project Merlin lending targets set by the government. It lent £11.9bn to small businesses – just sneaking past the £11.7bn requirement.

The bank also increased mortgage lending by 12pc to £13.2bn and expects to increase that to £15bn this year, with £3bn earmarked for first time buyers.

The commercial bank division had a record year with profit up 31pc to just under £5bn.

But there were clouds on the horizon. In common with most of its rivals, the investment banking division suffered amid the growing problems in the eurozone. Profits there fell 24pc to £15bn as a result of the eurozone crisis.

The sub-prime mortgage crisis in the US is still giving HSBC a major headache.

Losses in its troubled US consumer finance division – spear-headed by sub- prime lender Household –increased from £1.39bn in 2010 to £1.52bn.

Although £4.4bn was written off in bad loans last year this is the smallest amount since 2006.

Inevitably much of the focus was on pay.

The bank revealed that 192 staff are taking home more than £1m each, with 64 of those in the UK.

Chief executive Stuart Gulliver receives £5.9m in bonuses and long term shares awards on top of his £1.25m basic salary.

This is despite his bonus being scaled down by £1.3m due to the bank’s involvement in two major mis-selling scandals. Neither happened on Gulliver’s watch but he said he wanted to set an example.

HSBC defended its pay structure, saying it aims to retain half of its profits, pay 35pc back to shareholders as dividends and award 15pc in bonuses. Last year it paid £4.6bn in dividends, and awarded £760m to its investment bankers.

This compares very favourably with Barclays which came under fire recently for paying £1.5bn in bonuses to its investment bankers, while dishing out just £730m to shareholders last year.

While the bonuses at HSBC will infuriate the public, they pass muster with one powerful group of shareholders which has been hugely critical of bankers’ pay.

Robert Talbut, chairman of the Association of British Insurers’ Investment Committee, said: ‘ABI members have asked all UK listed banks for a shift in the balance away from reward to employees and towards maintaining capital strength, and delivering returns to shareholders.

‘We welcome the company’s disclosures on the allocation of attributable profit which strengthens its investment case.’