HSBC profit drops after money laundering fine

The HSBC banking group on Monday reported a 17 per cent drop in net profit in 2012, when it had to pay a hefty US fine to settle money-laundering claims. But earnings remained robust at $13.5 billion as Asian businesses performed well.

HSBC paid nearly $2 billion last year to settle a money-laundering case brought by US officials that dealt with illicit drug money from Mexico. It paid another $1.4 billion fine in the UK for improperly selling financial products to customers and also wrote down the value of its own debt by $5.2 billion.

Investors were disappointed by the figures, sending the company's shares down nearly 3 per cent to 7.06 pounds in early trading in London.

The bank noted that not counting one-time charges, its "underlying profit" before tax rose 18 per cent to $16.4 billion, as it had to write off fewer bad loans. That suggests it is being hurt less by the economic downturn that has hit its European and US units in recent years.

Chief Executive Stuart Gulliver said the bank has made important progress in focusing on its more profitable businesses and reducing costs. HSBC has cut staff by about 10 per cent.

"In terms of the broader strategy that we set out in 2011, we've delivered most of what we promised," he said in a statement. "We have made HSBC easier to manage and control by disposing of non-core businesses."

The bank, which showed substantial growth in its commercial and retail departments, increased its dividend payout by 10 per cent for the full year compared with 2011.

Joe Rundle, head of trading at ETX Capital, said the decline in the company's share price on Monday is likely to be brief now that the bank has dealt with the difficult issues of job cuts and regulatory fines.

"With these penalties now settled and out of the way, a major overhang on the stock price has been removed," he said.

The global banking group earns roughly 90 per cent of its revenue outside of Britain and has done well in growing Asian markets.