HSBC announces £7bn profit amid calls for extra lending
BANKING giant HSBC has said it more than doubled half-year profits to £7 billion as the furore grows over the industry’s support for business.
The pressure on banks to show they are freeing up credit is unlikely to ease as HSBC’s performance meant UK players including Lloyds TSB, Barclays and RBS are on course to report a combined half-year profits haul in excess of £10bn this week.
HSBC, which generates a large slice of its profits from emerging markets, increased profits by 121% year-on-year in the first six months of 2010, or 34% to £6.3bn on an underlying basis.
The UK side of the business saw underlying profits rise 23% to £593m. The global results were helped by a sharp fall in bad debts, which dropped to their lowest level since the financial crisis, according to HSBC.
The leap in profits came despite a drop in trading revenues at its investment banking division, which was hit by “exceptional” stock market volatility in the second quarter of the year. The results followed a warning from Chancellor George Osborne that banks had an “economic obligation” to lend to businesses.
Business Secretary Vince Cable has called for dividends and bonuses to be targeted in a “carrot and stick” approach to boost lending to cash- strapped small firms.
HSBC risked stoking anger further by revealing a 39% hike in staff pay and bonuses at its Global Banking and Markets (GBM) division, to £1.6bn since the end of 2009.
It set aside total pay and benefits of $9.8bn (£6.2bn) across the group – up 7% on a year earlier. Michael Geoghegan, HSBC group chief executive, said the bank was braced for “intense public and political scrutiny”.
He added that the banking sector and regulators had a “responsibility” to take the next steps to free up the flow of credit and support the wider economy.
Lending was up 4% across all regions since the end of last year, and HSBC said demand for credit among businesses had increased, despite recent suggestions from the sector that there is a lack of appetite for borrowing.