HSBC's reforms at Swiss bank eat into profits

Wed Feb 11, 2015 1:45pm EST
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By Steve Slater

LONDON Feb 11 (Reuters) - HSBC's Swiss private bank has seen a steep drop in profits since 2008 and even fell to a loss in 2013, showing how problems in the business have hit the British bank's bottom line as well as its reputation.

Its Swiss private bank lost $291 million in 2013, the last set of published full-year results, and only scraped a $14 million profit in the first-half of 2014. HSBC is due to release 2014 full-year results on Feb. 23.

HSBC this week admitted failings in compliance and controls in its Swiss private bank after media reports alleged it helped wealthy customers conceal millions of dollars of assets in a period up to 2007.

The Swiss arm's profits have fallen steeply every year since 2008, when they peaked at $553 million and represented 6 percent of HSBC's total earnings.

The same year HSBC said it began a radical transformation of its Swiss private bank to prevent it being used to evade taxes or launder money. Swiss-based banks have been under fire for helping clients avoid taxes for several years, prompting a clampdown across the industry.

HSBC has said it has shed clients who did not meet new stricter standards and has spent more on compliance. It said there were a large number of client withdrawals in 2013, the year the Swiss private bank dropped into the red.

HSBC, which had 10,343 Swiss accounts at the end of 2014, compared to more than 30,000 in 2007, this week said past compliance and controls failed, but said its Swiss business had since been transformed.

The Swiss private bank was effectively built from its $10 billion purchase in 1999 of Republic National Bank of New York and Safra Republic Holdings, banks controlled by Lebanese financier Edmond Safra.   Continued...