HSBC PLC, Europe’s biggest bank by market value, said Monday that its first-half profit rose 22 percent as it reaped the benefits of restructuring measures and reduced loan losses in the United States. Its shares fell, however, on concern about growth in China, a key market.
The bank, which gets more than 60 percent of its income from Asia, said Monday that its net income rose to $10.3 billion in the first half of the year from $8.4 billion in the same period of 2012.
In the United States, loan impairment charges were down to $1.3 billion, or 29 percent, compared with the first half of 2012. The decrease reflected improvements in the housing market and lower delinquency levels.
The bank sold a $3.7 billion non-real estate loan portfolio. It also announced 11 disposals or closures of non-strategic businesses since the start of the year — efforts that the bank said would “continue to reshape HSBC.”
At the same time, the bank said it cut costs by $800 million during the period — taking annual savings to $4.1 billion since the start of 2011.
Chief executive Stuart Gulliver said the bank’s priority is to implement a global standard of conduct and compliance. The focus on ethics comes after the group agreed to pay almost $2 billion last year to settle a money-laundering case involving illicit drug money from Mexico. It also handled assets belonging to Iran and to Libya. The bank has struggled to clear its name and restore its reputation.
“Our values are to be dependable, open to different ideas and cultures, and connected to customers, communities, regulators and each other; they form a key part of the annual performance review for everyone who works at HSBC,” Gulliver wrote in his statement. “By implementing global standards we are reinforcing the expectation that our employees will do the right thing, act with courageous integrity and maintain the most effective financial crime controls everywhere that we operate.”
One of the more recent consequences of this strategy has been the decision to close the accounts of dozens of foreign missions in London — a move that sent diplomats across the capital scrambling.
Foreign missions traditionally deal in large amounts of cash, something that may have raised uncomfortable questions at a bank that has been buffeted by money-laundering scandals. The bank declined to comment on “individual customer relationships.”
The bank said that over the past six months, it added 1,600 people to its regulatory and financial crime compliance units, and all of its employees are receiving mandatory training on compliance issues.
The bank said Monday that former U.S. prosecutor Michael Cherkasky, who was hired in the wake of the American fines, has started work evaluating the group’s internal controls as they relate to anti-money-laundering laws and international sanctions.
But shares slumped 4 percent lower in London, as analysts said revenue, which fell 7 percent to $34.4 billion, was weaker than expected amid concerns about an economic slowdown in China.
“Perhaps the most telling comment is management’s view that China has moved from a stimulus agenda to one focused on reform,” said Gary Greenwood of Shore Capital Stockbrokers. “This suggests to us that the outlook for growth in China and the surrounding region may be more muted than management had previously anticipated.”