The guardian has reported that USBC has admitted that it is
breaching US regulator’s order to cover up financial crimes as UK’s biggest
bank announced a slump in first-half profits in shaky market.
Below is the report by Guardian;
A $2.5bn (£1.8bn) share
buyback – following the sale of its Brazilian business – buoyed its shares
despite the 29% fall in first-half profits to $9.7bn.
The bank’s shares were up 3%
even as it indicated dividends would not rise as much as previously expected and
scrapped its timetable to achieve a 10% return on equity – a closely watched
measure of performance for shareholders – in 2017.
A series of legal
disclosures alongside its interim results confirmed it had received requests
for information from various regulators around the world in relation to Mossack
Fonseca, the Panama law firm linked to tax-haven companies, and was continuing
to be investigated for the tax avoidance activities of its Swiss arm.
Among the legal disclosures
is a reference to an order agreed in October 2010 with the US Office of the
Comptroller of the Currency that required the bank to “establish an effective
compliance risk management programme across HSBC’s US businesses”.
“HSBC Bank USA is not
currently in compliance with the OCC order. Steps are being taken to address
the requirements of the orders,” HSBC said, without providing details.
In February the bank
revealed that an official monitor, which the US authorities installed after a
$1.9bn fine over money laundering four years ago, had raised “significant
concerns” about the slow pace of change to its procedures to combat crime.
“Through his country-level reviews the monitor identified potential
anti-money-laundering and sanctions compliance issues that the [Department of
Justice] and HSBC are reviewing further.”
Stuart Gulliver, the chief
executive, focused on adjusted profit of $10.8bn, down 14%, which the bank
described as a “reasonable performance in the face of considerable
uncertainty”.
The results are being
published at a time when bank shares are being bruised amid fears the sector
will find it difficult to make profits at a time when interest rates are
falling and negative. The Bank of England could cut interest rates from 0.5% on
Thursday but Gulliver said that its governor, Mark Carney, was not in favour of
negative rates in the UK.
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While Royal Bank of Scotland
wrote to UK business customers to warn them it may charge for holding deposits,
Gulliver said HSBC “had not reached a stage” of writing to customers. The bank
was, however, passing on negative rates to some business customers in foreign
currencies.
A year ago Gulliver
announced plans to axe 25,000 roles around the world, cutting costs and
slimming down global ambitions. The bank is “pivoting” towards Asia but keeping
a focus on the UK, where it has pledged to keep its head office, and the US.
Gulliver pointed to the
uncertainty sparked by the UK’s vote on 23 June to leave the European Union,
which in the past he has said could require 1,000 UK roles to be moved to
France.
“We are actively monitoring
our portfolio to quickly identify any areas of stress. However, it is still too
early to tell which parts may be impacted and to what extent,” he said.
The chairman, Douglas Flint,
who is to leave in 2017, said the bank was helping customers and staff deal
with the Brexit vote, which had sparked “exceptional volatility” in markets.
“Now is a time for calm
consideration of all the issues at hand and careful assessment of how
prosperity, growth and a dynamic economy for both the UK and the rest of Europe
can be ensured following an orderly transition period. Critical elements
include securing the best possible outcome on continuing terms of trade and
market access, and ensuring the UK remains attractive for inward investment and
has access to all the skills necessary to be fully competitive,” Flint said.
He said the first half of
2016 had been characterised by “spikes of volatility” which resulted in lower
demand for loans. Concerns over China’s economic growth and then the UK’s EU
referendum had set the tone. “Nothing that has happened in this turbulent
period cast doubt on the strategic direction and priorities we set out just
over a year ago,” he said.
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Flint warned regulators
against forcing banks to hold more capital, which could impede the ability to
grant credit to companies and households. “Any substantial increase, further
increase in capital requirements … could have a major impact on the availability
and cost of credit, as well as on the return of capital our industry is able to
generate.
“Such constraints would also
lean against the the increased public policy emphasis on stimulating economic
growth at the time of elevated uncertainties.”
Gary Greenwood, an analyst
at Shore Capital, pointed out the 10% return on equity target now being
abandoned had only been set just over a year ago and was already downgraded
from 12-15%. “It is therefore clear to us that the fundamentals of the business
continue to deteriorate and the decision to return a small amount of capital to
shareholders by way of a share buyback should not detract from this,” said
Greenwood.
The bank’s interim dividend
was increased by 3%, from 0.30 cents a share to 0.31 cents a share.
Credit:The Guardian
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