HSBC reports profit growth for first half, makes $2bn provision for compensation and US matters

HSBC Holdings plc (LSE:HSBA), the bank’s parent company, said that it had generated pre-tax profit of USD12.7bn in the six months to the end of June, up from USD11.5bn a year earlier.

Profit was boosted by USD4.3bn of gains from business disposals, including the sale of HSBC’s Card and Retail Services business and 138 branches in the US. The results also included USD2.2bn of adverse movements in the fair value of the bank’s own debt attributable to credit spreads, compared with an adverse movement of USD143m in the first half of 2011.

Underlying profit declined 3% to USD10.6bn. HSBC revealed that it had set aside USD1.3bn for compensation regarding the mis-selling of PPI and interest rate hedging products in the UK and USD700m to cover “certain law enforcement and regulatory matters” in the United States.

“We apologise for our past mistakes in relation to anti-money laundering controls,” said group chief executive Stuart Gulliver, adding that it is a priority for the bank’s senior management to build on steps already taken to manage risk and ensure compliance more effectively. Group chairman Douglas Flint also said that he was “very sorry” for mistakes made by HSBC in the past.

Group revenues fell to USD29.6bn, from USD31.1bn in the first half of last year. On an underlying basis revenues were 4% higher than in the first half of 2011 thanks to strong growth in emerging markets, particularly in Hong Kong and the rest of the Asia-Pacific region and in Latin America.