Profits fall but HSBC hails its performance in a tough year

But the bank said it made “significant progress” during 2012, with underlying pre-tax profits growing 18 per cent to $16.4bn (£10.9bn), allowing it to pledge an increase in dividend payouts.

The bank is on the final leg of a three-year restructuring drive under chief executive Stuart Gulliver.

HSBC revealed 204 of its staff earned more than £1m in the year, with 78 of these based in the UK.

Mr Gulliver, who took the helm in 2011, received around half of his bonus entitlement, with the £2m payment subject to clawback and not accessible until he retires or leaves HSBC.

His overall £7.4m figure, which compares with £8m a year earlier, includes his base salary of £1.25m, around £1.2m of benefits including pension entitlement, plus long-term share incentive awards worth £3m.

Mr Gulliver said: “HSBC made significant progress in 2012. First and foremost we grew our business. We increased revenues, performed well in most faster-growing markets and enjoyed a record year in commercial banking.”

It will increase its first three interim payouts on 2013 earnings by 11 per cent.

HSBC’s record settlement with US regulators in December followed accusations it allowed rogue states and drug cartels to launder billions of pounds through its US arm.

The bank was accused by the US senate of ignoring warnings and breaching safeguards that should have stopped the laundering of money from Mexico, Iran and Syria. The findings led to the resignation of head of compliance David Bagley.

As well as the US penalties, it recorded an additional provision of $1.4bn to cover compensation claims relating to the mis-selling of payment protection insurance and interest rate swaps in the UK.

“During 2012, the banking sector, including HSBC, faced continuing and in many ways unprecedented challenges,” said chairman Douglas Flint.

“Banking has been given a huge wake-up call and we are determined to play our part in restoring its reputation and thereby regaining society’s trust.” HSBC, which aims “to be where the growth is”, said it is reaping the benefit of recovering growth in China, plus its impact on other fast-growing regions.

The bank, which earns 85 per cent of its revenues from emerging markets, forecasts 8.6 per cent growth this year from mainland China.

“We expect the developing economies, led by mainland China, to continue to grow briskly at 5.4 per cent, while developed economies should see more gradual growth of one per cent,” said Mr Gulliver.

It sees gradual recovery in the United States and higher growth in Latin America.

But Mr Gulliver said Europe’s flagging economy and a possible worsening of its sovereign debt crisis pose the “biggest challenge to the world economy”.

HSBC, which owns Leeds-based internet and phone bank First Direct, said it swung to a $5.1bn (£3.4bn) loss in the UK, from $3.5bn profits a year earlier, as it was hurt by a revaluation of its debt and the mis-selling provisions.

HSBC recently said its share of new UK mortgage approvals increased to 13.6 per cent in 2012 from 11.6 per cent in 2011.

The banking group employs 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.

First Direct’s bigger mortgage share

INTERNET and phone bank First Direct claimed a bigger slice of the UK mortgage market in 2012.

The Leeds-based bank increased its share of new mortgage lending to 3.4 per cent from 2.9 per cent in 2011.

That helped its total loan book grow to £19bn from £18bn a year earlier.

First Direct, headed by chief executive Mark Mullen, approved £4.8bn of new mortgages during 2012, up from £4.1bn in 2011.

The brand does not report separate profit figures. The bank employs 2,400 in Yorkshire and has two call centres in Stourton, Leeds, and Hamilton, Scotland.

First Direct now has 1.22m customers after taking on a net 20,000 customers during 2012.

“We’ve successfully continued our programme of sustainable saves with costs slightly lower than we’d planned,” said a spokeswoman.

“We also were ahead of plan for new customers which is a positive sign for our growth strategy.”

Mr Mullen was not available for an interview.

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.

Mr Mullen placed social media at its heart during an initial spell as marketing director. He returned to run the bank in September 2011.

First Direct has been advertising heavily in recent months. Last year it ran a £1.4m campaign in London and the South East “to capture the imagination of commuters when they’re in a frame of mind to consider their finances”.