HSBC yesterday refused to abandon its troubled US housing division but gave further signs that it was preparing to bow to pressure to sell off unprofitable assets.
Britain's largest bank was last night under new pressure from activist shareholder Knight Vinke to ditch under-performing assets in favour of a drive further into emerging markets.
And yesterday's results for 2007 served to reinforce the Knight V
inke view, with Asia and emerging markets helping the company report a rise in profits despite major writedowns in the USA.
Worldwide, London-headquartered HSBC – the l;ast of the big-five UK banks to report – revealed a pre-tax profit of $24.2 billion (£12.2bn), up 10 per cent on 2007.
The bank joined its major UK peers in increasing payments to shareholders, unveiling an 11 per cent dividend hike.
And these increases came despite bad debts hitting £8.7bn, mainly stemming from the "exceptionally weak performance" at its US division, which accounted for bad debts of $12.2bn.
The provisions saw US profits collapse; from $4.7bn in 2006, the US business made a profit of less than $100m last year.
HSBC's North American unit was hit by losses on risky "subprime" loans at its mortgage specialist, Household, bought for around $14.8bn in 2002.
Yesterday HSBC said it had begun restructuring and downsizing the business, cutting the number of branches by around 300 to 1,000, but warned a turnaround may not filter through until the end of 2009.
Last night asset management company Knight Vinke renewed its call for HSBC to shed the struggling US consumer finance arm.
The company said: "In our view if HSBC were to 'ring fence' HFC by selling the business, spinning it off or, more radically, walking away from it – which it could do since HSBC has not guaranteed its borrowings – the share price would be some 200p to 300p higher than today."
But HSBC chairman Stephen Green said yesterday it would be "unthinkable" that the bank would walk away from Household, despite the problems.
He said: "Would we walk away from Household? That would be unthinkable and irresponsible."
Elsewhere there were signs that the company would continue with asset sales, such as of around half of its French branch network, for which it has received a firm offer of £1.6bn. Finance director Douglas Flint would not comment on specific divisions, but said in principle the company is willing to investigate other sales.
"There would be a number of businesses at the periphery of what we do (that] if somebody thought they were worth more than we do then we would clearly consider that (a sale]."
The US business contrasted sharply with its business in Asia. Profits at the bank's former home, Hong Kong, climbed 42 per cent to more than $7bn, while, in mainland China, profits exceeded $1bn for the first time. Europe was also strong, with profits rising 23 per cent to $8.6m.
The market responded strongly to the results, with bad debts no worse than observers had feared. Shares added 3.1 per cent to 790p, as its peers fell on recession fears.
Hargreaves Lansdown analyst Richard Hunter said: "If ever proof were needed about the benefits of diversification, these numbers fall squarely into that category."
TOP EMPLOYEE EARNS THREE TIMES CHAIRMAN'S PAYLAST year's credit crunch had little effect on salaries at Britain's largest bank, with an unnamed employee earning a just under £10 million in 2007, according to HSBC's annual report.
At £9.9m, the figure, thought to be paid to a banker from the HSBC's investment banking arm, was a slightly below the highest paid earner in 2006, who earned £10.4m.
HSBC's highest-paid employee earned more than three times that of its chairman, Stephen Green, who earned salary, benefit and bonuses of £3m. Chief executive Michael Geoghegan was paid a total package of £3.5m. In 2006 they each earned £2.9m.
Under Hong Kong regulations, HSBC is required to disclose how much its top five earners were paid in the annual report, but it does not disclose the employees' names or departments.
Below the top earner, payments last year were down on 2006, with the second and third earning around £4.9m and £4.7m respectively, down from £8m and £6.5m in 2006.
