HSBC has broken ranks with its rivals and released the lending commitments it made under the Project Merlin accord with the government to keep credit flowing to small businesses.
The bank, which employs 52,000 people in the UK, insisted it was on track to meet its share of the commitments to lend £44.1bn to businesses out of a total of £190bn promised by the banking industry in February. But in releasing the figures it also highlighted the confusion about the difference between "targets" agreed with the government and "capacity" above those targets.
Joe Garner, head of HSBC UK retail banking, now expects the other banks that signed up to the pact – Barclays, Royal Bank of Scotland and Lloyds Banking Group – to admit their portion of the total target agreed with the government.
In total HSBC has agreed to a "capacity" for lending of £44.1bn, and a "target" of £38.3bn. Halfway through the year, HSBC had lent £22.7bn of new facilities – which includes loans and overdrafts – to businesses overall, including £5.6bn out of a pledge of £11.7bn to small businesses.
"There is capacity for additional facilities of at least £1.2bn [to small businesses]," Garner said. On that measure, HSBC is behind on its commitments.
Garner published the data ahead of a scheduled update on the progress of Project Merlin from the Bank of England on 12 August.
From the outset Santander revealed how much it had promised to lend through Merlin because it refused to sign up to the bonus part of the pact with the government. Last week Santander said its stock of lending for small business was up 27% and gross lending – which adds up loans repaid and new ones granted – had reached £4bn, some £2.1bn of which was for small and medium sized enterprises.
The bank, which reported a better-than-expected 3 percent increase in pretax profits to $11.5 billion in the six months to June, has already cut 5,000 jobs this year. Another 25,000 will be slashed by 2013, spokesman Patrick Humphris said.
HSBC currently employs around 296,000 people worldwide.
Humphris declined to give details of where the job cuts would be but said the group is still hiring in emerging economies such as Brazil and Mexico.
The move echoes similar announcements by other global banks, such as Credit Suisse, UBS and Goldman Sachs, who in recent weeks said they needed to trim payrolls to adjust to tougher market conditions.
As part of its restructuring, HSBC will sell 195 retail banking branches in the United States to First Niagara Bank for around $1 billion. Most of the branches to be sold are in upstate New York, while six are in Connecticut. Four more are in northern Westchester County, and two in Putnam County.
The bank is still dealing with the legacy of bad loans in the U.S. from the 2003 acquisition of consumer lender Household International Inc. The acquisition made HSBC the biggest subprime lender in the United States at the time, which resulted in billions of losses to HSBC leading up to the financial crisis of 2008.
"I am pleased with the results, which mark a first step in the right direction on what will be a long journey," New chief executive Stuart Gulliver said in a statement.
News of the bank's overhaul and its profit — earnings per share rose to 51 cents in the first half from 38 cents a year earlier, allowing for a 12.5 percent dividend increase to 18 cents — boosted the company's share price.
By midday in London, shares in HSBC Holdings PLC were up 4.4 percent at 619.40 pence (10.17).
Seymour Pierce analyst Bruce Packard said the pretax profit figures were about 6 per cent higher than forecast.
"These results look better than expected, underlining the attractions of HSBC's conservative balance sheet and developing markets business," he said.
Gulliver said in a statement that he expects financial markets worldwide to remain volatile this year and in 2012. He predicted growth in the U.S. and Europe would remain sluggish, weighed down by high debt levels and government budget cuts, but that Asia-Pacific and Latin American would continue to grow.
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