Withdrawals at Swiss unit hit HSBC

HSBC Holdings Plc, Europe's largest lender, said full-year earnings at its private bank fell 81 per cent as customers withdrew funds from its Swiss cross-border business.

Pretax profit from private banking was down to $193 million from over $1 billion a year earlier, as the company benefited from one-time asset sales, London-based HSBC said. A write down in the value of HSBC's Monaco business also caused a depression in earnings.

Client assets were down at $382 billion as of 31 December from $398 billion a year earlier, following net outflows of $26 billion, which included withdrawals from Switzerland, and the disposal of operations in Panama and a business in Luxembourg.

"We continued to address legacy issues and reposition our business model and client base in global private banking," CEO Stuart Gulliver said in a statement.

Gulliver's initiatives for the transformation of a private bank reduced underlying pretax profit by $700 million, according to the statement.

He added in 2012 the Swiss offshore private-banking model built on secrecy began disappearing.

Gulliver appointed Peter Boyles, who joined the firm in 1975, to oversee the unit's transition after HSBC was hit by "reputation and financial damage" from the theft of client data in 2009.

Meanwhile Gulliver is to get allowances worth £32,000 a week, in addition to his salary of £1.2 million, in a bid to avoid a bonus cap imposed on Brussels.

The bank was slammed yesterday for giving out a £8-million pay package, including bonuses, to Gulliver in 2013 and giving £1million awards to 239 staff – up from 204 in 2012 and 192 in 2011.

The lender also became the first bank to reveal detailed plans for avoiding a bonus cap imposed by Brussels.

The bank plans to provide Gulliver with a £1.7-million 'fixed pay allowance', to be paid in shares every three months in addition to his salary, according to The Guardian.

This would mean he was paid £4.2 million a year, as against the £2.5 million he now earned.

The shares, which would not be allowed to be sold for five years, would also be handed as allowances to 111 of the top bankers at HSBC.

Extra payments in cash too are expected to be handed to another 554 staff.

Under the EU rules introduced in January, banks are banned from bonus payments of over one year's annual salary – or up to two years if shareholders approved.