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HSBC reveals 'princelings' probe by US regulators as profits rise disappoints

Published 22/02/2016

HSBC said it had achieved revenue growth in a difficult market environment
HSBC said it had achieved revenue growth in a difficult market environment
Stuart Gulliver said HSBC had achieved revenue growth in a difficult market environment

HSBC has said it is being investigated by US regulators over whether it has hired people with ties to Asian governments as it announced worse-than-expected profits.

Europe's largest bank saw annual pre-tax profits rise 1% to 18.9 billion US dollars (£13.2 billion), but fell short of analyst expectations of 21.8 billion dollars (£15.2 billion).

The lender came in shy of full-year predictions after positing a fourth-quarter loss of 858 million dollars (£604 million), partly driven by legal costs and the decision to dispose of its business in Brazil.

Shares dropped more than 2.5%.

HSBC said in its full-year accounts that it was one of many financial institutions being probed by the US Securities and Exchange Commission (SEC) over whether it had hired people with links to Asian government officials, known as "princelings".

It said the investigation focused on the "hiring practices of candidates referred by or related to government officials or employees of state-owned enterprises in Asia-Pacific".

HSBC stated that it was too early to say how the investigation would be resolved, or when, but said the impact "could be significant".

The bank also confirmed that a monitor - put in place by the US government to assess its anti-money laundering and sanctions compliance - had questioned its progress.

It said the monitor found it had "made progress" in its compliance measures but still had "significant concerns" about the speed at which it was moving forward.

HSBC was fined £1.2 billion by the US authorities in 2012 in a settlement over money laundering.

The report came as HSBC said its full-year performance was hampered by "seismic shifts" in the global economy, triggered by a sharp drop in oil prices, slowing economic growth in China and low interest rates in developed economies.

Group chairman Douglas Flint said the challenges caused by the Chinese economic slowdown were likely to persist, stating it "will undoubtedly contribute to a bumpier financial environment".

The bank said its adjusted revenue had risen by 1% from 57.2 billion dollars (£40 billion) to 57.7 billion dollars (£40.4 billion).

It also revealed that chief executive Stuart Gulliver was handed a £7.3 million pay deal for 2015.

There have been a string of developments at the bank this year, including hints by Mr Gulliver that he may step down in two years' time.

After a lengthy review HSBC announced it will keep its headquarters in the UK, although the good news was tempered soon after by a warning that the bank would move about 1,000 jobs from London to Paris in the event of Britain leaving the EU.

Commenting on the latest results, Mr Gulliver said: "Targeted investment, prudent lending and our diversified, universal banking business model helped us achieve revenue growth in a difficult market environment, whilst also reducing risk-weighted assets."

HSBC rolled back its decision to enforce a pay freeze on staff at the beginning of February, stating it would fund pay rises for 2015 from its variable bonus pool for 2016 after "listening to feedback".

The bank announced plans last year to cut 50,000 jobs globally by the end of 2017 in a bid to save five billion US dollars (£3.3 billion).

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