HSBC's £1m an hour profit

BANKING giant HSBC sparked renewed calls for a windfall tax on the sector after it unveiled pre-tax profits of £9.18bn, the biggest profit ever recorded by a UK-based bank and 35% ahead of last year. The bank said group profits were $19.43bn, up from $14.4m last year.

Expressed in sterling, the figure equates to more than £1m profit for every hour of the day.

HSBC, which generates only 20% of its earnings in the UK, pointed to overseas growth, particularly the US and also the 'remarkable' economic surge in China, as the underlying cause of its prosperity.

The results come just a week after Royal Bank of Scotland unveiled profits of £8.1bn. Rivals HBOS and Lloyds TSB announce annual profit figures later this week.

The banks are expected to have accumulated profits of around £30bn in 2004 but, unlike the utility companies, which were targeted by Labour in the run-up to the 1997 General Election with a one-off windfall tax on their profits, there is little sign of a similar profit tax this time.

Speaking after the publication of HSBC's figures, chairman Sir John Bond said the results reflected the economic recovery in the US and 'remarkable economic progress made in China'.

The US business produced a $6.18bn surplus, up from $4.26bn. Much of this came from the larger consumer finance business following the acquisition of several major financial and residential mortgages and credit card businesses last year.

Europe, meanwhile, performed strongly. The region accounted for 31% of group profits with profits of $6.17bn. The other big growth story was South America, where HSBC more than doubled its profits albeit from a low base. A $444m surplus compared with $126m a year ago.

Bond played down fears over rising interest rates in the US and UK, insisting that the outlook remained positive. Britain, he added, remained 'resilient'.

HSBC expanded in the UK after buying the customer base of M&S Money and a partnership agreement with the John Lewis Group for the management of its store card businesses.

Bond said: 'The UK continued to enjoy high levels of employment and, while property prices softened, the market remained resilient. Indeed, buoyant domestic housing markets were a significant factor in most economies where they contributed to continued economic activity by bolstering consumer confidence and releasing equity to fund spending growth.'

{3} 'Some of the concerns which made for an uncertain economic outlook in 2004 have been allayed. The US economy has also improved its competitiveness through a weaker dollar without fuelling inflation or significantly disturbing the foreign capital inflows necessary to fund continuing current account deficits,' he said.

Shareholders get a 10% increased dividend. The $0.27 a share payout takes the total for the year to $0.66. HSBC shares were down 3p at 890p on the results.

Unions are likely to use today's bumper profits announcement as grounds for a strike over pay in the UK. Thousands of HSBC workers could walk out, according to Amicus, which said it is planning to ballot 20,000 staff for industrial action unless the dispute was resolved.

The union said it was preparing to stage a walk-out to coincide with the company's annual meeting in May. Talks at the conciliation service Acas failed to break the deadlock with management. Unions said that around 10% of workers will receive no pay rise this year and a further 40% would be given a below inflation rise with the rest receiving 3.5%.

Amicus also claimed that a new bonus system would hit the pay of workers, particularly long-service employees who could lose up to £2,000 this year compared to 2004. National officer Rob O'Neill said: 'How can a bank which is making so much money squeeze the pay of exactly the same staff who have contributed to the success of the business and expect them to take it lying down. These massive profits will mean yet another bonanza for shareholders and the boardroom but no such luck for staff.'

HSBC, meanwhile, rushed to deny claims that its profits were excessive. Michael Geoghegan, who became chief executive of HSBC's UK arm last year, denied the company was exploiting customers.

In the UK, he said the annual profits figure equated to £77 per customer with 7.5p in every £1 of global profits coming from the UK bank's personal customers. He added the percentage of costs in the UK - at 31.8% - was higher than the ratio of profits, while the company paid £698m to the Inland Revenue after making £789m in profits from its personal customers. The company also estimated that almost one-third of UK residents had an interest in the fortunes of HSBC - either through shares or pension funds. The bank paid £2.6bn in dividends to UK-registered shareholders in 2004.

Geoghegan added: 'This is one of the biggest companies in Europe and it's a great support for the UK to have HSBC based here. I also believe this is one of the most open markets.'