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The anti-money laundering settlement of HSBC Holdings plc (LSE:HSBA) back in December 2012 barely made a dent on Europe’s largest banking institution as it revealed its profit for last year, despite having missed market expectations.
Deducting tax, HSBC group posted US$15.3 billion profit, nearly eight times more than US$1.92 billion the bank had to absorb as settlement for breaches in anti-money laundering laws and bank secrecy laws of the United States.
Excluding that, the London-based firm’s underlying profit – a computation that excludes impact of own creebit, foreign currency translations and operating results of acquired or disposed businesses – jumped 18% to US$16.4 billion, indicating that the bank grew last year, despite it being one of the toughest years for the banking industry.
Wake Up Call
According to the group’s Chairman, Douglas Flint, the banking sector faced “unprecedented challenges” that served as a “wake up call” and that HSBC has to play its part in “restoring its reputation and thereby regaining society’s trust.”
Stuart Gulliver, the group Chief Executive, said HSBC made “significant progress”, by increasing its revenue, performed well in faster-growing markets making the bank “easier to manage and control”.
In its annual report released today, it showed the bank’s profit came not from the UK or the Europe but elsewhere around the globe.
Not a single cent of HSBC’s pretax profit of US$20.6 billion came from Europe; instead, the bank’s European operations resulted in a US$3.4 billion pre-tax loss, down from a profit US$4.67 billion in 2011, which was equivalent to 21.3% of the total pre-tax profit the bank had during that year.
Increased Market Value
The news, however, did not sit well on the market as HSBC shares pulled the FTSE 100 index down, registering the largest losses on the London Stock Exchange since trading opened earlier.
At 13:40 GMT, nearly 24 million shares were traded, with the share price down 2.1% to 713 pence, despite the bank allotting some US$8.3 billion for dividend this year, up 10% compared to that in 2011, and with plans to increase the same by 11% in the first three quarters during the current fiscal period.
Investors reacted adversely to the 20% loss in earnings per share as the bank was hit by a US$9.1 billion charge of own credit adjustment.
Nonetheless, the bank has managed to increase its market capitalisation in 2012 by US$58 billion to US$198 billion, it said.
