- HSBC has awarded its chief executive £5.9m in bonuses and longer-term incentives for 2011
- Bonus comes as bank reveals a 6 per cent fall in underlying pre-tax profit for the year
- Stuart Gulliver took over as chief executive at the start of 2011
HSBC awarded its chief executive £5.9m in bonuses and longer-term incentives for 2011 as the bank revealed a 6 per cent fall in underlying pre-tax profit for the year.
Stripping out a $3.9bn gain on the value of the bank's own debt, pre-tax profit fell by $1.2bn to $17.7bn as a robust performance in faster-growing markets was offset by a sharp rise in costs.
Total expenses jumped about 10 per cent to $41.5bn as HSBC spent an extra $1.1bn hiring staff across key emerging regions, including Hong Kong, China and Brazil. Its cost-efficiency ratio -- a measure of how much it spends to generate revenue -- rose from 55.2 per cent in 2010 to 57.5 per cent last year, far above the bank's target of 48-52 per cent.
Stuart Gulliver, who took over as chief executive at the start of 2011, said the rise in costs had been partly offset by identifying $900m of savings by exiting weaker businesses and stripping out layers of middle management.
He admitted, however, that meeting the cost-ratio target by the end of next year would be a "challenge".
Mr Gulliver received an annual bonus of £2.15m for 2011, less than half the £5.2m he received the year before when he was head of the investment banking division. He was also awarded three times his £1.25m salary in longer-term incentives -- half his entitlement.
Mr Gulliver's overall pay for 2011 was £7.16m, down from £8.35m in 2010. A detailed "scorecard" of his performance showed he failed to meet the criteria around compliance and reputation, as well as cost efficiency and profitability.
HSBC was fined £10.5m for mis-selling investment bonds to elderly people last year in what Mr Gulliver described as "disgraceful affairs". The bank is clawing back part of the bonuses awarded to staff as a result of this incident and the mis-selling of payment protection insurance.
The bank's five highest-paid executives shared £27.7m in 2011, according to disclosures in its annual report, which was published alongside the results.
In total, 170 people earned more than $1m, of which 65 are based in the UK. HSBC paid out $1.21bn to its investment bankers for 2011, 26 per cent lower than the $1.64bn it awarded a year earlier. That was roughly in line with a 24 per cent drop in pre-tax profits at its investment banking division, to $7bn.
The issue of bankers bonuses continues to be a political hot potato as bank chiefs defy political and public pressure to curb pay-outs
Total variable pay across the bank was $4.22bn, only marginally down on the $4.3bn in 2010.
Strong revenue growth in Asia, the Middle East and Latin America was offset by losses in HSBC's troubled US consumer finance division, which increased from $2.2bn in 2010 to $2.4bn in 2011. HSBC is running down the US business, formerly known as Household, after it was hit hard by subprime mortgage losses following the financial crisis.
Analysts at Credit Suisse, the Swiss bank, said there was "reassuring" progress in this business. Provisions in the fourth quarter were $1.4bn, down from $2.3bn on the previous three months, they said.
HSBC also made headway in shrinking its overseas presence. It closed or sold 16 businesses in 2011 and a further three so far this year.
One bright spot was the commercial business, where profits rose one-third to a record $7.9bn. Mr Gulliver highlighted strong growth in trade finance.
Total pre-tax profit, including the swing in the value of the bank's own credit, rose 15 per cent to $21.9bn.
Shares in HSBC slipped 14.1p or 2.45 per cent to 560.8p in a weaker London market.