HSBC’s profits fell by 12% in the first half as the bank grappled with ‘unprecedented’ and ‘inconsistent’ regulatory demands across multiple jurisdictions.
Pre-tax profits of $12.56 million (£7.46 million) over the six months to the end of June were down from $14.07 million in the same period last year. Much of the fall was attributed to the effect of asset disposals in the first quarter of 2013 distorting the figures.
Chairman Douglas Flint branded the results ‘well-balanced’ and laid bare the regulatory pressures the bank is facing.
‘The demands now being placed on the human capital of the firm and on our operational and systems capabilities are unprecedented.
'The cumulative workload arising from a regulatory reform programme that is unfortunately increasingly fragmented, often extra-territorial, still evolving and still adding definition is hugely consumptive of resources that would otherwise be customer facing,’ he said.
‘Add to this recent obligations to perform highly granular multiple stress tests which are inconsistent in definition and scenarios between major jurisdictions and so require considerable duplication of effort; recently announced significant wholesale market practice and competition reviews in the UK.
He added: '[re-organising] the financial, operational and structural framework of the group to respond to evolving thinking on cross-border resolution protocols; and, finally, planning what will be a multi-year project to separate and establish the ring-fenced bank in the UK, and the dimension of the execution risk is obvious.’
Flint highlighted that heightened geopolitical tensions and concerns about slowing economic growth in many major markets mean this is ‘not the time to expand risk appetite to offset the effect of lower revenues arising from business disposals and legacy portfolio run-off’.
The private bank bucked the trend, however, positing profits of $364 million, more than treble the $108 recorded in the same period last year.