HSBC's provisions for PPI compensation rises to £745m
HSBC has been forced to put aside nearly £750m (€930m) to compensate customers mis-sold payment protection insurance as Britain’s largest bank said it had been hit by a rise in claims during the first three months of the year.
The lender said it made a £290m provision in the first quarter against PPI claims, taking the total amount set aside to pay out compensation to £745m.
HSBC’s provision follows similar moves by Barclays, Lloyds Banking Group and Royal Bank of Scotland, which have all seen a spike in compensation claims since the beginning of the year.
Stuart Gulliver, chief executive of HSBC, added to the criticism of PPI claims management companies and said they were putting in thousands of bogus claims creating an “administrative hassle” that was delaying payouts to genuine victims.
Mr Gulliver said the authorities needed to take action against claims companies, saying they currently had a "zero cost option" to bring "spurious" claims against the banks.
Mr Gulliver’s comment came as the bank reported its first quarter results, which showed a fall in pre-tax profits to $4.3bn (£2.68bn) from $4.9bn in the same period in 2011.
The fall was largely the result of a move in the value of the bank’s own debt that required it to recognise a $2.6bn charge. Stripping out this accounting charge, underlying pre-tax profit was up 25pc year-on-year at $6.8bn.
HSBC is a year into a turnaround programme designed to increase profitability. The bank said last year it would cut 30,000 jobs, or about 10pc of its global workforce, by the end of 2013.
This morning, the bank said it had so far cut 14,000 full time jobs, saving it about $1.2bn a year in costs.
“We continued to make good progress implementing our strategy, with 11 transactions to dispose of or close businesses announced since the start of the 2012, and we continued to position the business for growth with increased revenues in Hong Kong, Latin America and rest of Asia-Pacific against the previous quarter,” said Mr Gulliver.
The HSBC chief also sounded a note of caution about UK’s upcoming banking reform legislation which is due to be published within the next two months, saying it would “either leave us with two profitable business, or it won’t”. In particular, HSBC has been worried about the amount of additional capital it could be forced to issue against it British operation.
Next week, the bank will hold a strategy day at which it will outline in more detail the progress of its restructuring plans and the future shape of its business.