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HSBC profits fall 14 per cent

HSBC has made a provision of £269m to cover the cost of compensation for mis-sold payment protection insurance, as it posts a £3bn pre-tax profit for the first three months of the year.

The bank’s profits are down 14 per cent from £3.5bn for the same period last year.

HSBC’s PPI provision compares to the £3.2bn set aside by Lloyds Banking Group to deal with PPI redress, and Barclays’ £1bn provision.

Royal Bank of Scotland has not yet calculated its PPI liability, but says it could prove to be material.

HSBC says: “There are many factors which affect the estimated liability, including the nature and volume of customer complaints, the extent to which HSBC may be required to take action, and the facts and circumstances of each individual customer’s case.

“Accordingly there is currently a high degree of uncertainty around the ultimate costs of dealing with the matter.”

Loan impairment charges at HSBC have fallen 35 per cent from £2.3m in Q1 2010 to £1.5m in Q1 2011.

On May 3 HSBC announced its first dividend payment of 2011 of 0.06p per ordinary share, up 12.5 per cent on its first dividend payment of 2010.

The bank’s core tier 1 capital ratio went from 10.5 per cent in December to 10.7 per cent as at March 31.

HSBC says it continues to work with the Independent Commission on Banking to assess the impact of the ICB’s interim report, published in April.

It has not recognised a bank levy charge for Q1, but estimates the cost of the UK bank levy for HSBC will be approximately £367m for the full year 2011.

The loan-to-deposit ratio remained at 78.2 per cent. Gross residential mortgage lending in Europe grew 5 per cent from £68bn as at December 31 to £72bn as at March 31.

HSBC group chief executive Stuart Gulliver says: “Underlying profits held up well against a strong Q1 2010, we were profitable in all regions and customer groups, profits increased in each of our faster-growing regions and credit quality improved.

“I am pleased to say that April’s performance was satisfactory and in line with expectations. I believe HSBC is well placed to capitalise on global business opportunities.”

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