Charges probe will hit profits, says HSBC

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Charges probe will hit profits, says HSBC

 

By Peter Thal Larsen and Kate Burgess

Published: November 23 2007 20:36 | FT.com

 

The chairman of HSBC, Stephen Green, on Friday warned of a profits squeeze in the UK banking industry as a result of regulatory scrutiny of bank charges and the growing power of consumers.

 

Mr Green said a legal challenge to banks’ overdraft charges, due to be heard next year, could “change the economics of retail banking” in the UK, while growing use of the internet had made it easier for consumers to shop around.

“The net outcome of that is not that retail banking is going to become a low profitability business,” he told analysts Friday. “But it is going to be less profitable than it is and is going to be growth constrained.”

 

The warning from HSBC, which controls the UK’s fifth-largest retail banking network, highlights the continuing pressure on the industry following a sharp increase in bad debt charges last year. However, Mr Green was confident HSBC could buck the trend by concentrating on younger and wealthier customers and by offering them wealth management and insurance products.

 

On Friday HSBC ruled out large acquisitions in the US, western Europe or in investment banking as it set a target for raising the share of profits from emerging markets to 60 per cent from 51 per cent in the first half of the year.

 

The pledge underlines the change of direction at the bank since Mr Green’s predecessor, Sir John Bond, stepped down in May 2006.

Executives insisted they had no plans to withdraw from the US, where the bank has been hit by significant losses in the subprime mortgage meltdown.

 

But Mr Green hinted at possible disposals. “If there are areas of business where our capital is not earning a return and there is nothing we can do to restructure the business . . . then we will follow through on that.”

[itsamomentintime]

boo hoo. they make obscene amounts as it is, mostly at the expense of poorer customers.

 

forgive me if i dont shed a tear at this story.

[tomterm8]

I don't believe retail banking is likely to change all that much. For a long time, retail banking has been about marketing other products - mortgages, loans etc.

 

Plus, we have seen recently what can happen to banks who get their liquidity principally from non-retail sources.

[noomill060]

Green has just admitted that they use unlawful charges as a profit source and that modifying their business model in order to stay within the law will hit them hard.

 

Such a hard life, isnt it, Green?

[djgordyp]

Maybe we should take pity on them and return all that money we got of them. I don't think so somehow.