HSBC in a Spot of Bother
English: A Lloyds TSB bank branch in Enfield, London. (Photo credit: Wikipedia)
HSBC’s profits are down 6% to $20.6bn, due to money laundering fines and PPI compensation costs. The bank is facing some challenges recently, as well as a 6% profit fall; the bonus pool has fallen 15% and shareholder returns slip to 8.4% from 10.9%. HSBC are the second highest mis-seller of PPI claims in Britain, behind the Lloyds group (Halifax, Black Horse Finance, Royal Bank of Scotland and Lloyds TSB).
HSBC has added £199 million to its provision, making the total £1.5 billion set aside for compensation payments to its customers. So far, £757m has been claimed by consumers and HSBC have employed 700 staff in the UK alone to deal with the problem. The bank is in the process of contacting its customers who it believes may be able to reclaim PPI.
HSBC posted a 6% decline in annual profits after the bank put aside the £1.5bn for PPI compensation, and had to hand over a further $2bn to American authorities after allegations emerged of money laundering. HSBC was also hit by a $5.2bn accounting charge against the rising value of its own debt in the financial markets. Also, shareholder return on equity took a blow for HSBC. This is a crucial measure of bank performance levels and it fell from 10.9 % to 8.4% in 2011.
The bank appointed a new CEO, Stuart Gulliver, in 2011, and since taking over has relentlessly tried to trim the bank’s balance sheet and cut its costs, mainly with the aim to increase shareholder returns. With these extra economic problems, profits for Europe’s largest bank were bound to fall. PPI payments for compensation has added significant amounts to HSBC’s costs, as well as external allegations regarding money laundering, and on top of that failing shareholder returns. Further annual profit reports may reveal hopeful underlying business performance, but the fines the bank has faced recently has taken a hit on their profits.
This article was provided by Steve Turnbull who is a financial blogger and commentator for the PPI Claims Company website – http://www.missoldppiclaimsco.co.uk, where he has been covering the UK banking scandals such as mis-sold PPI and mis-sold interest rate swaps
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Category: Consumer Complaints
