HSBC has reported a surge in quarterly profit, prompting fresh calls for Chancellor John Healey to increase taxes on banks in the upcoming Budget. The banking group posted a pre-tax profit of 9.6 billion US dollars (£7.2 billion) for the three months to September, a 32% increase compared with the same period last year.
The rise was partly driven by higher net interest income, which is the difference between what banks earn from loans and what they pay out in deposits, as UK interest rates remained higher for longer. Earnings were also boosted by lower expected credit losses and a smaller provision for legal costs than in the same period last year.
HSBC Exec Says Bank Not Under Pressure to Relocate
Pam Kaur, the banking group’s chief financial officer, said there was “no pressure” on the bank despite facing the prospect of higher costs. Asked whether higher taxes could increase pressure to shift its headquarters away from the UK, she said the bank was “very comfortable”, adding: “We are domiciled in the UK and we remain in the UK so that question is just not on the table.”
“Irrespective of what happens on taxes, we are there to support our customers and that is what we will do,” she said. She added that there was “no pressure because we are doing well, we are meeting all our targets”.
Calls for Higher Bank Taxes Intensify
The results announcement came a day before the Chancellor is due to deliver his Budget, where reports have suggested he could increase the surcharge on bank profits from 3% to 8%, reversing a tax cut implemented by the former Conservative government. Ms Kaur said she would not speculate on the Budget given it was a day away.
Industry groups have warned that higher taxes on the financial services sector could divert investment, jobs and businesses away from the UK. However, HSBC’s financial results sparked fresh calls to the Chancellor to target banks to raise more money for the Treasury.
Paul Nowak, general secretary of the Trades Union Congress (TUC), said the profits make it “blatantly obvious banks can afford to contribute more”, also referring to Barclays reporting a 12% jump in its quarterly profit last week. “Households and businesses are going to need more support – and it’s time for the Chancellor to make the banks pay a fairer share,” he said.
The TUC said reversing the Tory tax cut and setting the surcharge at 8% would raise £9 billion over four years, while setting the surcharge at 16% could deliver £24 billion over the same period. Sara Hall, co-executive director of campaign group Positive Money, accused banks of “blowing billions of pounds” on bonuses and payouts to shareholders, adding: “The Chancellor should claw back some of these lost billions with a windfall tax on bank profits this week, to show the public that this Government will put the public interest ahead of corporate ones.”
HSBC Announces Share Buyback and Cost Savings
HSBC also announced it would be handing up to one billion dollars (£750 million) to shareholders as part of a new share buyback scheme. The bank said it had made cost savings worth 1.9 billion dollars (£1.4 billion) under chief executive Georges Elhedery’s cost-cutting drive, and expects this to reach two billion dollars (£1.5 billion) by the end of the year, exceeding the 1.5 billion dollar (£1.1 billion) target originally set.
Ms Kaur said the cost savings have come from “a range of places” including the “deduplication of roles”, which particularly impacted more senior positions. She also said the bank was encouraging its staff to build their AI skills and be “future ready”.
“And that’s so important for us because, in our judgment, what’s most important for an AI strategy to work is to keep the human accountability, judgment and decision-making very much at the core of what we do,” she said. “So AI is there to help humans, not necessarily to replace humans.”
“We know that AI will change how work is done across industries and of course it will impact some roles, it will transform other roles, while creating entirely new roles,” she added. Reports have said the bank was preparing to cut jobs in its UK wealth management business as part of efforts to ramp up the use of AI to serve wealthy customers more efficiently, according to the Financial Times. Ms Kaur said she would not comment on the speculation about job losses but that the bank “absolutely focuses on the workforce we have, both in terms of skilling it and building on it”.
