Everybody hates Mondays but today could mark one of the worst ever for HSBC boss Stuart Gulliver.
Today, HSBC unveiled a 17% plunge in profits before tax to £12.14 billion for 2014, from £14.66 billion in 2013.
It cited “significant items” hitting the bank’s balance sheet, including “fines, settlements, UK customer redress and associated provisions.”
This included its fine for FX rigging in November 2014.
As of 9 a.m. GMT (4 a.m. ET), HSBC’s share price is down 4.92%.
“2014 was a challenging year in which we continued to work hard to improve business performance while managing the impact of a higher operating cost base,” said Stuart Gulliver, HSBC’s group CEO in the results statement. “Profits disappointed, although a tough fourth quarter masked some of the progress made over the preceding three quarters.”
HSBC is currently embroiled in a tax evasion and money laundering scandal, following whistleblower Herve Falciani’s huge leak of thousands of Swiss bank accounts.
Falciani handed over 100,000 HSBC client accounts to French authorities in 2008. In total, the accounts are worth £78 billion in assets. Since then, France, Spain and the UK have recovered over £500 million in tax from the data.
On February 18, police raided HSBC’s Switzerland office in Geneva while the Swiss prosecution office confirmed it was investigating the subsidiary and “persons unknown for suspected aggravated money laundering.“
However, over the weekend, media reports surfaced over Gulliver’s own account activity, which showed he had “
sheltered £5 million of his own money at a Panamanian company with Swiss HSBC account.“
HSBC confirmed the report on 23 February and highlighted the fact that Gulliver lives in Hong Kong and pays taxes in that jurisdiction. It added that he has also paid taxes in the UK.
In HSBC’s results statement, provided a lengthy statement over its Swiss unit:
“The recent disclosures around unacceptable historical practises and behaviour within the Swiss private bank remind us of how much there still is to do and how far society’s expectations have changed in terms of banks’ responsibilities. They are also a reminder of the need for constant vigilance over the effectiveness of our controls and the imperative to embed a robust and ethical compliance culture.
“We deeply regret and apologise for the conduct and compliance failures highlighted which were in contravention of our own policies as well as expectations of us.
“In response to, and in parallel with, the tax investigations prompted by the data theft more than eight years ago, we have been completely overhauling our private banking business, putting the entire customer base through enhanced due diligence and tax transparency filters.
“Our Swiss Private Bank customer base and the countries we serve are now both about one‑third of the size they were in 2007. In addition, HSBC is already working to implement the OECD’s Common Reporting Standard and other measures to foster greater transparency.
“We cannot change the past. But, looking to the future, we can and must reinforce controls and provide demonstrable evidence of their effectiveness. This forms part of our commitment to Global Standards, to ensure that we will never knowingly do business with counterparties seeking to evade taxes or use the financial system to commit financial crime.”
To make matters worse, HSBC warned in its statement that the result of various money laundering and tax investigations will lead could lead to hefty additional fines.
“Based on the facts currently known, there is a high degree of uncertainty as to the terms on which they will be resolved and the timing of such resolutions, including the amounts of fines, penalties and/or forfeitures imposed on HSBC, which could be significant,” it added.
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