HSBC has reported a 32% surge in profits for the three months to September, intensifying pressure on Chancellor John Healey to impose a windfall tax on banks in the upcoming Budget. Europe's largest bank, which also operates as a major UK high street lender, made £7.2bn globally over the quarter — equivalent to more than £900 a second — bringing its total profits for the year to nearly £22bn.
The bank also announced a further £750m share buyback programme, returning cash to investors. The bumper results come on the eve of the Budget, in which Mr Healey is expected to announce a tax increase on banks' UK profits.
Banking sector pushes back on tax hike
The banking industry has mounted a last-ditch effort to persuade the Chancellor to abandon the move, warning that the sector is already heavily taxed compared with rival financial centres worldwide. However, insiders privately accept that a tax rise is likely, given the profit bonanza banks have enjoyed from higher-for-longer interest rates amid rising inflation that is hitting ordinary households.
Mr Healey is reportedly considering increasing the surcharge on banks' profits above £100m from 3% to 8% — reversing a tax cut introduced by former Conservative chancellor Jeremy Hunt.
Critics call for stronger action
Abhijay Sood, economist at the New Economics Foundation, said: "It's not surprising that HSBC have made such significant profits in the last quarter, but it will be difficult news to swallow for households struggling with rising mortgage costs." He noted that, like other big banks, HSBC's profitability has depended on keeping savings rates low and a "stealth subsidy" from taxpayers via the Bank of England due to quantitative easing.
Sood added: "While the rumours of a bank tax change in the Budget are welcome, it is unlikely to go far enough. While banks are making over a billion pounds a week of profit, NEF analysis suggests that the restoration of the bank surcharge to 8% would raise just £1.8bn a year from them. The chancellor should go further by clawing back the stealth subsidy, and use this to fund inflation-busting investment and keep the essentials of life affordable for ordinary people."
Sara Hall, co-executive director of Positive Money, said: "HSBC's profits have surged because of higher interest rates, not because of any improvements to the products or services they offer customers." She argued that banks are spending billions on bonuses not seen since the financial crash and massive shareholder payouts rather than investing in UK businesses or communities, and urged the Chancellor to "claw back some of these lost billions with a windfall tax on bank profits this week."
Union and HSBC responses
The TUC added its voice, claiming the pay bonanza — which saw chief executives of Britain's big four banks pocket an average £8.9m each last year — was another reason for a windfall tax. TUC General Secretary Paul Nowak said: "Some in the finance lobby have tried every which way to stop tax rises in the Budget. But these results make it blatantly obvious banks can afford to contribute more." He noted that Barclays also announced bumper profits last week and that the big four banks have made more than £200bn in profit over the last five years.
HSBC's group chief financial officer, Pam Kaur, declined to comment on the prospect of a windfall tax but indicated that any such move would not deter its investment decisions. She confirmed the bank's commitment to keeping its UK headquarters, despite past pressure to shift focus to Hong Kong and its Asian operations. "We have said we are very comfortable we are domiciled in the UK, so that question is not on the table," she said, adding: "Irrespective of what happens with taxes, we are there to support our customers and that is what we will do."
