Operating profit in global private banking was $940 million, down from $1.07 billion in 2010. Profit before tax at the unit fell from $1.05 billion in 2010 to $944 million for the year.

"This is a resilient performance as we continue to operate in a challenging business environment with increasing regulatory pressures for the private banking industry," HSBC said in an emailed comment to this publication today.

Meanwhile, net new money inflows to the private banking operations globally were $13 billion, the same as for 2010, and up significantly from net outflows of $7 billion in 2009.

Wealth management and retail

Retail banking and wealth management profit before tax rose 11 per cent year-on-year to $4.3 billion, the Hong Kong/London-listed bank said in a statement.

“In wealth management we made modest progress towards our medium-term target of $4 billion incremental revenue, with revenue growth of some $300 million. Notably, we generated strong sales of insurance products in Hong Kong, Latin America and the rest of Asia-Pacific, while revenue from distribution of investment products to our clients and global asset management was broadly unchanged, reflecting difficult market conditions, particularly in the second half of the year,” HSBC said.

The past 12 months have seen a number of changes as the bank has sought to improve margins and overall profitability in wealth management. For example, late last year, HSBC announced it was selling its Japanese private banking business to Credit Suisse.

Overall results

For the banking group as a whole, reported profit before tax was $21.9 billion, up $2.8 billion on 2010, including $3.9 billion of favorable fair value movements on HSBC’s own debt attributable to credit spreads, compared with a fall of $63 million in 2010. Underlying profit before tax was $17.7 billion, down by $1.2 billion on 2010 due to higher costs which were partly offset by a significant improvement in loan impairment charges and other credit risk provisions. The group had a cost-efficiency ratio of 57.5 per cent, up from 55.2 per cent.

In the key Asia-Pacific region, the group said its reported pre-tax profit in Asia-Pacific, at $13.3 billion, rose by 15 per cent from a year earlier.

At the end of 2011, HSBC had a core tier 1 capital ratio of 10.1 per cent, down from 10.5 per cent in 2010.

In a statement from Doug Flint, HSBC group chairman, the bank gave a clear hint that the weight and pace of regulatory change needs to be kept in check. There has been speculation, for example, that HSBC might quit the UK, or seriously downgrade its involvement in London, if proposals by a government-backed body to split investment and retail banking go ahead.

“The industry will continue to bear a heavy burden of both time commitment and cost as it works with policy makers to finalize the regulatory reforms, including addressing the many inconsistencies within and extra-territorial dimensions of national rule-making. We are committed to all necessary constructive dialogue and support to speed the finalization of these remaining issues,” Flint said.

Disposals

HSBC has exited a number of businesses as part of a drive to boost margins, selling or closing 16 business units in 2011, with a further three in 2012, including two large transactions in the US, the disposal of retail banking and wealth management operations in Russia, Chile and Thailand and the exit of operations in Poland and Georgia.

“When completed, these disposals and closures should represent a reduction of around $50 billion of risk-weighted assets and the transfer to the acquirers of approximately 12,000 full-time equivalent employees. We are continuing this process in 2012 and have identified a number of further transactions,” it said.

Boardroom reshuffle

HSBC also announced boardroom changes. Sir Brian Williamson, who served on the board of HSBC Holdings since 2002 and was a central figure in establishing London’s LIFFE futures and options market, will not seek re-election. Gwyn Morgan, who has also has served since 2006, is also stepping down. Joining the board are Joachim Faber and John Lipsky. Faber has previously been on the board of German financial conglomerate of Allianz. Lipsky is a an economist, most recently serving as first deputy managing director at the IMF from which he retired in November 2011.

Litigation

The bank pointed out that it remains involved in a number of legal disputes, including issues relating to the massive Bernard Madoff Ponzi fraud. In a lengthy statement, HSBC said “various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US whose assets were invested with Madoff Securities”. HSBC companies have been named as defendants in a number of Madoff-related cases in different jurisdictions. A number of claims have been dismissed, the bank said, while pointing out that some legal proceedings are ongoing and that claims will be “vigorously” contested by the bank.