Business

HSBC says while profits are good, regulation is a worry

A worker is silhouetted against an illuminated sign in a branch of HSBC in the City of London
Image caption HSBC worries about UK and EU regulation

The UK's biggest bank HSBC says its pre-tax profits are well ahead of 2009, with bad debt continuing to fall.

The bank did not give precise figures in its interim statement, but said the global economy was "in better shape than many expected a year ago".

Chief executive Michael Geoghegan however warned of new UK and European regulation for the banking sector.

To avoid unintended consequences it was "very important to maintain a level playing field globally," he said.

"It is... of some concern that the EU and UK appear to be going further than others in contemplating measures which would have a wider global impact," Mr Geoghegan said.

He warned of "regulatory arbitrage", a term used to describe financial services companies moving their operations to countries with the most favourable banking regimes.

"In the UK, a levy on the global balance sheets of UK-headquartered banks effectively places a tax on their emerging market growth," he said.

Chancellor George Osborne had announced the levy in his emergency budget in June, and predicting in his spending review in October that it would raise £2.5bn a year.

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Mr Geoghegan warned policymakers to "consider the long-term consequences of changes of the competitive landscape as they finalise legislation".

There has been speculation before that HSBC was contemplating moving its headquarters out of the UK, although the bank denied it at the time.

'Lacklustre'

HSBC said in its statement that loan impairments in the third quarter fell to their lowest quarterly level since early 2007, with the biggest improvement in its US business.

However, one analyst, who asked not to be named, described the tone of the bank's statement as "lacklustre".

"Overall group revenues down, Europe profitability not good, North America shrinking the balance sheet and still in losses," said the analyst.

In August, HSBC had reported pre-tax profits of $11.1bn (£7bn) for the first six months of 2010 - more than double its profits for the same time last year.

Mr Geoghegan is set to leave the company following a big and very contentious boardroom shake-up in September. He will be replaced by Stuart Gulliver - currently the head of the group's investment bank.

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