HSBC Holdings missed expectations with a $7 billion annual profit after bad debts rose and risked a public backlash by paying three investment bankers over £9 million ($13.7 million) each. Europe's biggest bank said on Monday that Stuart Gulliver, head of investment banking, would receive £9.8 million ($14.9 million) for 2009, mostly in shares over the next three years. Another two unnamed bankers will get over 9 million pounds after record earnings from their unit. HSBC's 2009 profit of $7.1 billion was down from $9.3 billion in 2008 and falling short of an expected pretax profit of $11.4 billion, according to the average forecast from analysts polled by Thomson Reuters I/B/E/S. Profit for global banking and markets (GBM) more than trebled to a record $10.5 billion as it benefited from buoyant capital markets. By 1126 GMT HSBC's London-listed shares were down 5 percent at 683.6 pence. Revenues were depressed more than expected by the impact of low interest rates, while GBM's revenues were not as strong as expected and insurance clains were high, analysts said. “There are a number of negative issues which in aggregate will dampen enthusiasm for the stock today,” said Andrew Lim, analyst at Matrix, citing large insurance claims, weakness in trading profits and high loan losses in the Middle East. Reported profits were also dented by a $6.5 billion technical accounting loss on the value of its own debt, more than the $5 billion expected by analysts. Underlying profit before that loss was $13.3 billion, up 56 percent. Losses on loans that have soured rose 9 percent to $26.5 billion, broadly in line with expectations as an improvement in the United States was offset by losses elsewhere. Massive losses in the United States in the last three years stem from its purchase of US consumer finance firm Household in 2003 – a deal the bank now says it regrets – but impairments there are declining as the loan portfolio is wound down and the impact of rising unemployment has been less than expected. Asked if US bad debts had peaked, Finance Director Douglas Flint said: “That would be a reasonable expectation.” The bank said it expects overall impairment charges to decline in 2010; analysts expect total bad debts will drop to about $20 billion.
