THE EURO could survive an exit by Greece, HSBC predicted yesterday, as it announced that first-quarter underlying pre-tax profit had risen 25 per cent year-on-year to $6.78 billion (€5.2 billion).
Stuart Gulliver, the bank’s chief executive, said Greece’s future within the European single currency would be a matter for Greece’s own politicians following the electoral success of parties opposed to economic austerity measures at the weekend.
“If, hypothetically, Greece was to leave the euro zone, I don’t think that results in the rest of the euro zone breaking up,” Mr Gulliver said, adding HSBC’s exposure to Greece was small.
He played down socialist François Hollande’s victory in the French presidential election. HSBC has a significant presence in France.
Mr Gulliver brushed off concerns the toppling of right-of-centre president Nicolas Sarkozy would lead to France disrupting attempts to resolve the euro zone crisis and reversing spending cuts.
“We remain quite sanguine . . . I don’t see it today as a significant worry,” he said.
He added the UK was right to continue with its focus on austerity measures, arguing that financial markets had rewarded it for its attempt to curb spending.
HSBC said the rise in underlying pre-tax profit reflected increased revenues in its investment banking and commercial banking arms, adding that faster-growing regions had also aided its retail banking and wealth management business.
Statutory pre-tax profit, which included a $2.64 billion accounting loss related to fluctuations in the value of its issued debt, was $4.32 billion for the first three months of the year, down from $4.91 billion in the first quarter of 2011.
Impairment charges – money set aside against soured loans – were broadly flat year on year at $2.37 billion.
HSBC absorbed a $468 million charge for compensating customers who had been mis-sold payment protection insurance (PPI), a form of loan cover that had been a big earner for UK banks.
It had already made $717 million of PPI provisions in 2011.
Mr Gulliver added to recent criticism by Lloyds Banking Group of claims against management companies that aggressively pursue PPI compensation on behalf of individuals.
He said it would be helpful if these intermediaries faced some kind of charge if they were found to have put forward a specious claim, citing the costly “administrative hassle” caused.
HSBC said 25-30 per cent of claims it received related to people who had never held its PPI cover.
The bank said its performance in April had been satisfactory, adding: “Markets remain volatile with high levels of debt and regulatory and political uncertainty in developed economies, contrasting with an encouraging outlook in faster-growing markets.” – (Copyright The Financial Times Limited 2012)
