HSBC reveals £14bn profits

HSBC YESTERDAY revealed how it racked up profits of nearly £14 billion during a year in which its chief executive was handed a pay package worth more than £8 million.

The pay-out for Stuart Gulliver, and the bank’s revelation that 239 staff received more than £1m last year, looks likely to stoke continuing anger over bankers’ bonuses.

The bank’s annual results announcement also outlined measures which will see it sidestep new EU rules on bank bonuses, by offering senior staff fixed pay allowances.

Mr Gulliver’s base salary will remain at £1.25m but he will receive a fixed pay allowance of £1.7m, to be awarded in shares on a quarterly basis.

It will not be tied directly to performance, and so will not count as a bonus under new European rules preventing bankers from being paid bonuses worth more than two times their salary.

The controversial new rules from Brussels came into effect in January, meaning that 2013 was the last year in which big bonuses could be paid.

Chancellor George Osborne has filed a formal complaint against Brussels over the plans, amid fears their introduction will drive up fixed salaries and increase the risk to financial stability.

Other banks, including Royal Bank of Scotland, are expected to announce how they plan to tackle the new rules in annual reports later in the spring.

Shares in HSBC slumped by more than 4% after it posted profits of $22.56bn.

The f igure was below City expectations, but marked a 9% increase on a year ago.

The banking group, which has more than 250,000 staff, said it was now “leaner and simpler” as a result of a three-year turnaround plan, which was launched by Mr Gulliver after he took the helm in 2011.

Initiatives included the sale of 63 non-core businesses and a 41,000 reduction in its full-time headcount from 295,000 at the start of 2011.

However, he admitted that HSBC had not met all of its targets in 2013, with its cost efficiency ratio of 59.6% and return on equity of 9.2% both outside its target ranges, in part due to continuing customer compensation costs in the UK.

But a growing housing market helped HSBC’s retail banking and wealth management division more than double profits to £995m in the UK.

The bank approved £14.4bn of new mortgage lending to more than 135,000 customers during 2013, including £3.8bn to some 30,000 first-time buyers. The loanto-value ratio on new lending was 59.5%.

Stuart Gulliver.