HSBC’s global private banking operations reported stable pre-tax results in the third quarter despite a 13% slump in operating income and reduced fee revenue.
HSBC Private Bank reported pre-tax profit of $252m in the third quarter compared to $248m year-on-year.
However net operating income dropped 13% drop on a yearly basis from $831m to $721m in the third quarter.
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HSBC said the results stayed in line with previous year as strict costs control has been implemented. A reduction in operating expenses following the closing of several private banks and wealth management divisions in Ireland, Japan, Thailand, Korea, Pakistan and Mauritius also contributed to the cost reductions.
Refocusing on new target
The global private banking unit also reported fee revenue had declined leading to a drop in net new money for the fourth quarter in a row and declining client’s numbers.
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By GlobalDataHowever it did not report the net new money or client number figures.
The losses were in part attributed to HSBC’s ‘slimdown’ strategy to refocus its target client base on high net worth international and domestic relationships in core markets. The group is believed to be discussing the sell of its Latin American businesses in Columbia, Peru, Uruguay and Paraguay.
Laundering money scandal
HSBC Group’s third quarters results were also hit by ongoing US regulatory investigations against the bank.
The group set aside an additional provision of $800m on top of the $700m already assigned to cover the possible fines arising from US anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control investigations.
HSBC is under the investigation of the Bank Secrecy Act and Office of Foreign Assets Control for facilitated the financing of criminal activities in America caused by poor internal controls between 2004 and 2010.
"We are actively engaged in discussions with US authorities to try to reach a resolution, but there is not yet an agreement. The US authorities have substantial discretion in deciding exactly how to resolve this matter. Indeed, the final amount of the financial penalties could be higher, possibly significantly higher, than the amount accrued," says group CEO Stuart Gulliver.
