Argentina bad debt bill holes HSBC

BRITAIN'S biggest bank, HSBC, has declared a 14% fall in full-year profits after bad debt provisions and one-off charges knocked $3.3bn (£2.3bn) from the bottom line.

Argentina accounted for $1.1bn of the write-downs and HSBC hinted it may pull out of the country if its government fails to introduce appropriate economic reforms

'Argentina dominates these results. It is very disappointing. We shall have to wait and see what the next steps are in the country before deciding what we do there,' said finance director Douglas Flint.

Operating profits before provisions and goodwill rose 3% to $11.3bn. Profits before tax fell from $10.3bn to $8.8bn. The dividend is up 10% at 48 cents a share.

Chairman Sir John Bond, traditionally the most cautious of British banking leaders, delivered a mixed message for 2002. He expressed concern about the sustainability of consumer confidence in the face of rising unemployment and continued overcapacity in companies around the world. But he suggested interest rate cuts around the world may have averted protracted recession. 'It is possible that we shall see signs of a modest economic recovery during the year,' he said.

Bad debt provisions almost doubled to $2bn, including a $600m charge against Argentinian loans and several write-downs of corporate loans. There was also a $520m charge relating to the foreign currency redenomination in Argentina and a charge of $575m relating to fraud at a now-dormant subsidiary of the bank's US business, Republic New York Corporation. The cost was signalled last year and was taken into account when HSBC bought RNYC.

A breakdown of the results showed weak performances from Latin America, the US and the Asia-Pacific region outside Hong Kong. Europe delivered a modest rise in profits to $4.2bn, of which $3bn came from Britain.

'We're working hard to keep things going in the UK. There are a tremendous number of bank inquiries here, which is fine, but we'd just like to get on with running the business,' said Flint, in a swipe at the Government's interest in the banking sector.

Hong Kong also proved far more resilient than expected, delivering a 5% rise in profits to $3.9bn.

Across the business sectors, profits from personal financial services rose about 15% to $3.5bn as the bank expanded its credit card operations and general lending. Profits from corporate, investment banking and markets were up 13% to $4bn although the group admitted to a weak performance in corporate finance and equity markets. Commercial banking profits fell from $2.8bn to $2.4bn, largely due to the non-recurrence of provision recoveries in Asia.

HSBC switched from defined benefit to defined contribution pension arrangements in 1996.

HSBC has frozen plans to expand its online investment and banking service joint venture with Merrill Lynch, and is looking for fresh cost-cutting at the unit.

Merrill Lynch HSBC, aimed at affluent investors, was launched in the first quarter of 2001 and operates in Canada, the UK and Australia. HSBC said the unit accounted for most of the $91m operating loss it sustained from joint venture business last year.

Big boost for the top men's pay