HSBC Annual Profits Fall 17% To £12.14bn

HSBC, the global bank currently at the centre of a tax scandal, has blamed a 17% fall in annual profits on the cost of past mistakes.

The London-listed group said reported profit before tax fell to $18.68bn (£12.14bn) in 2014.

It said it was, in part, due to the "negative effect" of "significant items including fines, settlements, UK customer redress and associated provisions".

The explanation reflected the continued cost on the industry of a number of scandals, including the mis-selling of payment protection insurance (PPI).

HSBC's share price fell more than 5% in the wake of the results as profits fell short of expectations.

Dividend and return-on-equity targets were also unexpectedly cut.

The earnings report was announced just hours after HSBC's chief executive Stuart Gulliver, who has vowed to reform the bank in the wake of allegations of complicity in tax evasion at its Swiss arm, was dragged into a tax row himself.

Mr Gulliver, who denies any suggestion of wrong-doing in connection with his own Swiss-based account, said he was "disappointed" in the group's performance last year.

"2014 was a challenging year in which we continued to work hard to improve business performance while managing the impact of a higher operating cost base," he said.

"Profits disappointed, although a tough fourth quarter masked some of the progress made over the preceding three quarters.

"Many of the challenging aspects of the fourth-quarter results were common to the industry as a whole."

Banks have not only been negotiating the effects of record-low interest rates but also uncertainty over the global economy.

In relation to the Swiss tax scandal, HSBC chairman Douglas Flint said the bank needed to reinforce controls and demonstrate their effectiveness.

He added: "We deeply regret and apologise for the conduct and compliance failures highlighted, which were in contravention of our own policies as well as expectations of us."

The bank was also the subject of a £216m fine from the Financial Conduct Authority relating to HSBC's failure to prevent the rigging of foreign exchange operations.

Mr Gulliver's total pay package for 2014 was £7.6m, though his bonus of £1.3m was weaker and reflected the foreign exchange failures which ultimately cost him £500,000 of his reward.

Labour said the size of the payout would leave people "astounded" and called for wider reforms of the banking industry.

It was due to ask an urgent question in the Commons on HSBC and bonuses.

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