HSBC made a fresh threat yesterday to pull out of London, saying Chancellor George Osborne's banking levy and an EU-wide crackdown on bonuses meant it was no longer on "a level playing field" with its international rivals.
The threat was made in conference calls with journalists and City analysts, despite Britain's decision to slash corporation tax and Mr Osborne's repeated insistence that his "permanent levy" would bringing in no more than £2.5bn annually when fully up and running.
Michael Geoghegan, HSBC's chief executive, said the levy – imposed on the global balance sheets of UK headquartered banks – meant that a direct cost was being imposed for being based in London. He likened it to a "tax on emerging markets growth" where HSBC makes most of its money.
The bank also complained about Mr Osborne's creation of the independent commission on banking and European policy makers "going further than others" in the crackdown on pay. "Policymakers need to understand the consequences on the wider economy and growth," said Mr Geoghegan. "Along with many other international banks, HSBC already complies with the Financial Stability Board's global principles on remuneration. If the EU takes those principles further and applies additional requirements to European firms operating in emerging markets, it would place those firms at a disadvantage to their regional competitors and to those based in North America."
Stuart Gulliver, the multimillionaire investment banker who is preparing to succeed him as chief executive, said the bank faced: "Three very significant issues that we, our board and our investors need to be mindful of."
Douglas Flint, the finance director who becomes chairman next month, refused to make any promises on HSBC's location: the bank is set to revisit the issue next year. He said the current bout of sabre rattling by the company was driven by its investors. "This is what shareholders are saying to us. We are responding to an increasing number of inquiries about what is the cost in terms of dollars and business model (of a London base)."
While HSBC has not taken any direct state aid, it has benefited from the billions of pounds of taxpayers' cash that has been pumped into the banking system to keep it from collapse, and the cheap money supplied by the Bank of England.
But yesterday's hard words from its executives represent a ratcheting up of tension between the bank and the Government. Critics of the banking industry have said the levy is little more than a damp squib. Banks like HSBC have also benefited from the sharp cut in corporation tax pursued by the Government.
The bank worried some investors with its third quarter update saying there were signs of a "slowdown in the rate of recovery" in emerging markets and that there would be " bumps in the road". However, Mr Geoghegan added: "The global economy is in better shape than many expected a year ago, and I am pleased to report that HSBC's performance in October was in line with third quarter trends. But, while fears of a double-dip in the West may be overplayed, the passage from downturn to upturn is clearly taking longer than previous cycles."
The update did not include specific numbers but HSBC indicated that its "run rate" of profitability" in the third quarter was slower than in the first half. However, it still said third quarter profits were well ahead of what the bank achieved last year. Results in Europe – driven by the UK – have also been strong and "targeted marketing" has increased the company's share of the mortgage market share. The shares fell 12.1p to 683p.