HSBC delays decision on quitting UK

HSBC has delayed a decision on whether to move its headquarters out of the UK, saying it had “no idea” how the Government intends to implement the recommendations of the Independent Commission on Banking (ICB).

By Harry Wilson, Banking Correspondent
10:12AM GMT 09 Nov 2011
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8878550/HSBC-delays-decision-on-quitting-UK.html

Stuart Gulliver, chief executive of HSBC, confirmed yesterday the bank would no longer be making a decision on its domicile in a board meeting at the end of this month.

The bank is now expected to conclude its review within the next 12 to 18 months, putting pressure back on the Government to offer more concessions on controversial aspects of the Commission’s report.

Mr Gulliver said moving headquarters was a “non-trivial issue” and that the cost of the ICB reforms and the UK bank levy could hit HSBC with an additional annual costs of as much as $2.5bn (£1.6bn).

Stephen Hester, chief executive of Royal Bank of Scotland, last month described the commission’s proposals, which will force banks to place a ring-fence around their UK retail businesses, as a “done deal”.

However, Mr Gulliver said there was still uncertainty about what exactly the Government intended to do and that he had “no idea” what form the final package may take. “We simply do not have enough information to make a decision at the moment,” he said.

The comments came as HSBC reported its third-quarter profits, which showed its earnings doubled to $7.2bn (£4.5bn) after the lender booked a $4bn gain against the value of its own debt, demonstrating the dramatic effect the controversial accounting rules have had on the latest round of bank results.

Stripping out the gain, underlying profits at HSBC were down $1.6bn compared to the same period in 2010 at $3bn, as the bank was hit by a fall in revenues in investment banking and new impairments in its North American business.

Underlying pre-tax profits for the nine months to the end of September were $14.4bn, down $300m compared to last time round, with an increase in commercial banking revenues failing to offset a fall in those from global banking and markets, the division housing HSBC’s investment banking arm.

Despite the fall in profits, the bank said it had made “material progress” in implementing a turnaround strategy that will strip out billions of dollars of costs within the next two years and lead to annual savings of as much as $3bn.

HSBC said it had cut 5,000 full-time staff so far this year out of a projected 30,000 job losses expected by 2013, or one in 10 jobs globally.

The redundancies could not hold down the bank’s cost income ratio which worsened from 54.4pc to 59.1pc.

Analysts’ concerns focused on the increase in bad loan impairments in the bank’s US business, which increased 72pc quarter-on-quarter to $2.3bn.

Credit Suisse warned the increase may delay the ability of the bank to redeploy capital from North America to its faster growing businesses

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