HSBC has confirmed that it is under investigation by US regulators over whether it tried to curry favour with Asian governments and companies by hiring so-called ‘princelings’ – people linked or related to officials and politicians.
Point of view
The impact could be significant
Europe’s biggest bank said it is one of several financial institutions in the probe by the US Securities and Exchange Commission.
It said it could not predict how or when the matter would be resolved but said the impact “could be significant”.
The revelation came as HSBC announced its profit before tax for last year was little changed from 2014 at $18.87 billion (17.13 billion euros) and well below analysts’ expectations.
Profit was dragged down by an unexpected $858 million (777 million euros) loss in the fourth quarter. That reflected bad loans linked to the oil and gas industry, legal costs and the disposal of its Brazilian business as well as restructuring costs.
Chief Executive Stuart Gulliver tried to sound upbeat saying: “There is a lot to do to achieve our targets but we have made a good start.”
Our diversified banking model, low earnings volatility & strong capital generation will stand us in good stead: Stuart Gulliver #HSBCResults— HSBC (@HSBC) February 22, 2016
HSBC also warned that the economic slowdown in China is making the environment more challenging.
Chairman Douglas Flint said: “China’s slower economic growth will undoubtedly contribute to a bumpier financial environment, but it is still expected to be the largest contributor to global growth as its economy transitions to higher added-value manufacturing and services and becomes more consumer driven.”
Last year, Asia represented 83.5 percent of global pre-tax profit for the bank, a larger portion than a year earlier and a sign its growth is tied to the region’s.
“A disorderly exit could force changes to HSBC’s operating model, affect our ability to access the European Central Bank and high-value euro payments, and affect our transaction volumes due to possible disruption to global trade flows,” it cautioned in its annual report.