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HSBC records 62% fall in pre-tax profits

HSBC has recorded a 62 per cent drop in group pre-tax profits for 2008, blaming global financial imbalances and cheap credit for the slump.

In its annual financial statement released today the banking giant recorded a £10.4bn drop in profit for 2008, down from £16.9bn in 2007 to £6.5bn last year.

Total equity was also down by 26 per cent to £7bn from £9.5bn in 2007.

HSBC is blaming the global financial imbalances, cheap credit, securitisation based on overly complex product structures and excessive gearing for the poor results.

A statement released on the London Stock Exchange today said: “The result has been unprecedented stress in the financial system, and it has led to a major breakdown in trust. In many countries, huge support from taxpayers has been required in order to stabilise the system.

“The industry has done many things wrong. It is important to remember that many ordinary bankers have always sought to provide good service to their customers; but we must also recognise that there have been too many who have profoundly damaged the industry’s reputation.

“Inappropriate products were sold inappropriately by many. Compensation practices ran out of control and perverse incentives led to dangerous outcomes. There is genuine and widespread anger that the contributors to the crisis were in some cases amongst the biggest beneficiaries of the system.”

However, the statement goes on to say: “We at HSBC were not immune from the crisis. But we have built our business on very strong foundations and are able to report results which demonstrate our ability to withstand the storm.”

HSBC is now calling on global governments to work together with the financial services industry to tackle the root causes of the crisis.

The statement said: “We must urgently improve governance and regulation to create a more stable financial framework. The globalisation of financial markets contrasts sharply with the domestic agenda of the regulatory regimes that underpin it.”

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