The more than expected slide of 17% in the annual pretax profit and cut in earnings’ target reported by HSBC is seemingly the fall out of allegations against its Swiss businesses helping customers to avoid tax payment. It has also brought shame on the bank, bank authorities admitted.
On Monday, earnings of HSBC, the biggest lender of Europe, are reflective of its past misdeeds and misconducts, and the ineffectiveness of its efforts to minimize the impact of scandals. It has admitted tarnishing of its image due to allegations against its Swiss operations. Stuart Gulliver, Chief Executive, told reporters that many of them believed the past practices of the private bank are “a source of shame”, and damage of the reputation of HSBC. He added that it was reasonable to use the word shame in this connection. He was himself in the thick of the scandal on Sunday when The Guardian newspaper accused him of sheltering millions of pounds in Swiss private bank of HSBC through a Panamanian company.
HSBC has confirmed Gulliver having a Swiss bank account; however, no mention was there whether he violated any rules. Nevertheless, the fact was out at an inopportune or highly sensitive time. Douglas Flint, Chairman of HSBC, is scheduled to appear before legal authorities on Wednesday to reply to questions about allegations of bank’s complicity in the evasion of taxes. Gulliver has been one of the best paid executives of Europe with a pay package of 7.6 million pounds in 2014, less by 0.4 million pounds from that in 2013 with a cut in his bonus to bring to the fore the bank’s incompetence to do away misconduct in bank transactions.
HSBC has reported a pretax profit of $18.7 billion in 2014 against the previous year’s figure of 22.6 billion. The pretax profit in 2014 was forecast to be around $21 billion due to its suffering from higher costs and allegations of a series of misdeeds including foreign exchange market manipulation. The bank shares fell by around 6% which is the biggest intra-day slide after November 2011. Gulliver, the CEO since 2011, was instrumental in selling or closing 77 businesses, and cutting 50000 jobs to augment earnings after the higher capital requirement due to the Financial Crisis. The higher capital requirement made all the more difficult for large banks to earn profits.