Record £7.7bn profit for HSBC

SIR JOHN Bonnd, chairman of banking giant HSBC, Sir John Bond today hailed his controversial £9bn acquisition of Household International a success as he posted record £7.7bn group profits.

The acquisition, the biggest ever by the London-headquartered bank, is going better than expected, as is the recent £640m purchase of Mexican lender GF Bital.

'In both cases our progress has exceeded our expectations,' said Sir John. 'We have achieved synergies and overall results ahead of our original business cases.'

Household - which specialises in lending to the poor of America and those with impaired credit histories - was a departure for HSBC, which until last year preferred relatively affluent customers.

Adding to the pressure, Household had just paid fines of almost $500m (£258m) to settle allegations of predatory pricing.

Sir John said 'significant progress' had been made in integrating the two technology teams and initiating plans to consolidate data centres. Contracts with suppliers had been renegotiated and efficiency savings achieved.

The profit figure, struck before tax and goodwill, represented a 37% increase on 2002. More than 70% of the profits increase was due to the two acquisitions. Household alone contributed £977m in its first year within HSBC.

It came after writing off an unprecedented £3.25bn of bad and doubtful loans, more than three times the charge in 2002, as Household's much riskier loan book was consolidated into the bank.

Finance director Douglas Flint played down the chances of more major acquisitions, saying the priority was to bed in recent purchases.

An interim dividend of 24 US cents makes a total of 60 cents, up 13%.

Share traders marked HSBC shares down 13 1/2p to 862p because the figures, while perfectly respectable, were not quite as spectacular as some pundits had hoped. Fox-Pitt Kelton said while costs were a bit worse than expected, the outlook statement was relatively confident for the normally-conservative bank.

All major divisions performed well in 2003, the bank said. Excluding Household, non-performing loans were reduced. Personal financial services was boosted by low inflation and lower unemployment in many key markets including Britain, the US, Canada, Korea and New Zealand. Unsecured personal lending grew by 20% while credit card balances grew by a similar amount.

The number of customers registered for personal online banking doubled to 13.5m, with more than 60% of them classed as regular users. HSBC said it sold 2.3m products over the net. This reduced pressure on traditional phone-based call centres, which experienced their smallest increase in calls for years.

Bonus billions an embarrassment

A HANDFUL of directors and senior executives at the top of HSBC are to share an awe-inspiring £16,860m in bonuses this year, according to the bank's newly-published annual report.

The bonuses would buy them 112,000 Rolls-Royces, 900 Gulfstream jets or the whole of British Telecom.

Alas, for executive chairman Sir John Bond and his colleagues, the number is wrong. Executive pay in Britain's biggest bank is fantastically good and getting better, but it isn't that good. HSBC admitted it made a mistake after being alerted to the rogue figure by the the Evening Standard. Today it was busily altering hundreds of printed copies of the annual report - and trying to pull the report from its website.

'It's an unfortunate error. It should be £16.86m,' a spokesman said. The bank is ultrasensitive to allegations of fat-cattery after paying one director, William Alldinger, £15m last year.

It said it was in time to prevent hundreds of thousands more annual reports being printed with the mistake.

In other figures - believed to be accurate - Sir John received £2.15m in pay and cash bonuses, up 14%, plus £2.1m from a long-term incentive plan, making a total of £4.15m.

Stephen Green, chief executive, made a total of £2.67m, while finance director Douglas Flint was paid £2.1m.

The pay of the 13 non-executive directors is to be boosted by 57% - or 41 times the inflation rate - to £55,000. They will receive an extra £15,000 for sitting on any board sub-committee.