HSBC announces record profit

Bank customers were outraged today and shareholders delighted as HSBC today posted the biggest ever profit by a British bank - a surplus of £7.7 billion.

The bank revealed that it racked up profits before tax at the rate of £244 a second in 2003. That is up 37 per cent on its 2002 profits, which were themselves a record.

The figure is likely to trigger fresh accusations that the banks are profiteering by gouging their customers.

Eddie Weatherill of the Independent Bank Advisory Service immediately condemned the bank: "This follows a very familiar pattern. It indicates to us that there is widespread profiteering at the customers' expense. The banks are making hay while the sun shines."

Barclays, Royal Bank of Scotland and Halifax Bank of Scotland have all announced record profits in the past few days and the entire banking industry is on target for total profits before tax of

£26 billion - equivalent to around £430 for every man, woman and child in the UK.

Critics complain the banks make excess profits through the payments clearing cartel, through mis-selling and by misleading customers with opaque terms and conditions.

The official Cruickshank Review of four years ago found the main banks were guilty of making excess profits. The Consumers' Association said: "It is astonishing that the banks can hike their profits while offering such a bad deal across their product ranges."

But Douglas Flint, finance director of HSBC, denied the bank was making excess profits. "We reckon we make about £70 per UK customer," he said.

He pointed to the success of First Direct, HSBC's widely acclaimed online bank, as an example of giving customers what they wanted.

HSBC also delivered huge amounts of income through dividends to the nation's pension funds.

"People talk about the pensions crisis," said Mr Flint. "There'd be much more of a pensions crisis without the kind of value we are creating." The banks argue that they operate in a competitive market and customers are free to vote with their feet.

Less than one third of HSBC profits came from the UK, where the bank trades as First Direct, HFC and Beneficial Bank as well as HSBC. The overall profit came in ahead of City expectations and was achieved even after the bank wrote off £3.25billion of loans. HSBC's 200,000 shareholders stand to receive dividends of about £4 billion.

Chairman Sir John Bond said: " Overall, 2003 was a good year for HSBC." Much of the profits growth was due to two large acquisitions last year, which gave the bank millions more customers in the US and Mexico.