HSBC profits up but bank gives no guarantee on safety of jobs

HSBC chief executive Stuart Gulliver said the industry was moving into “calmer waters” in the wake of the credit crunch and the PPI mis-selling scandal as charges for bad loans and compensation fell.

However, Mr Gulliver, who was paid £7.4m last year, said he could not give any assurances over potential future job losses.

Underlying profits in the first quarter of 2013 were up to 7.6 billion US dollars (£4.9bn), from 5.7 billion US dollars (£3.7bn) – representing a 34 per cent year-on-year rise.

The bank reported a pre-tax profit of $8.4 billion (£5.4bn), up from $4.3bn a year ago and above the average forecast of $8.1bn from analysts polled by the company.

A $1.1bn gain from disposals aided earnings as did a halving of bad debt provisions to $1.2bn, helped by the winding down of some US loan books.

Costs in the first quarter were down 10 per cent from a year ago. Costs are now just over 53 per cent of income, close to the bank’s target to get them below 52 per cent by the year-end.

Across Europe, smaller rivals are also cutting back. French banks Societe Generale and Credit Agricole yesterday committed to keep cutting costs to help offset a weak domestic economy.

HSBC has compensated for weakness in Europe with strong growth in Asia and the bank said it expected the mainland Chinese economy to accelerate after a slower than expected start to the year.

Worldwide, the bank has lost 38,000 of its 300,000 employees as a result of restructuring and sell-offs, since Mr Gulliver took over at the start of 2011.

The cuts are 10,000 more than the number predicted at the time. It has closed or sold more than 50 businesses.

Mr Gulliver said HSBC was responding to “economic and regulatory” circumstances.

The bank, which is due to give a key strategy update next week, expects total staff numbers to fall eventually to 254,000.

A fortnight ago, HSBC announced a shake-up affecting more than 3,000 UK jobs.

Around 2,000 further posts, which are being created by HSBC, are expected to be largely filled by displaced employees.

The bank said its improved profits for the first quarter of the year reflected higher revenues and lower loan impairment charges, with a notable improvement in its US consumer and mortgage lending business.

Its UK customer redress programme, which includes compensation for PPI as well as card and identity protection insurance policies, was $164m (£106m) in the first quarter, compared to $286m (£184m) in the last three months of 2012.

The figure shows that the pot of money set aside to reimburse customers is still swelling but at a reduced rate.

With loan impairment charges – losses from bad debts – also falling, it suggests HSBC is beginning to overcome the difficulties of the credit crunch and the mis-selling claims that have dogged the industry over the last few years.

A poor outlook in the eurozone and subdued growth in the UK continued to pose concerns, Mr Gulliver said.

Globally, revenue rises were “muted” though there were increases in areas such as residential mortgages and commercial banking in Hong Kong and the UK, and efficiency savings.

Mr Gulliver said: “We have had a good start to the year, with growth in reported and underlying profit before tax.”

Analysts at Credit Suisse said the results were “better than expected”.

In March, HSBC revealed that 204 of its staff earned more than £1m over the last financial year, with 78 of these based in the UK.

HSBC owns Leeds-based internet and phone bank First Direct,

The bank was founded in October 1989 by Midland Bank and joined HSBC in 1992.

It first broke even in 1994 and launched PC banking in 1997. First Direct was the first bank in the UK to offer text message banking in 1999, and launched internet banking later that year.

In March, First Direct revealed that it had 1.22m customers, after taking on a net 20,000 customers during 2012.

Altogether, the HSBC banking group employs around 270,000 people, including 48,000 people in the UK business.

It has more than 3,000 staff across its Yorkshire branch and office network.

In Leeds it has a call centre in Arlington plus First Direct’s office in Stourton.

It also has four offices in Sheffield: Griffin House, The Balance and Hoyle Street which support the head office, plus a training centre at Milton House.

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