HSBC [HSBA.L], Europe's biggest bank by market value and a leader in the provision of UK retail banking services, has announced net profits of GBP9.6 billion - a record figure for a UK-based bank.
One of the major reasons for its bumper profits has been an increase in UK consumer borrowing - 2004 saw the total outstanding unsecured consumer debt move within a whisker of the GBP189 billion mark, with personal loans and credit cards accounting for over 78% of the total.
In addition to its domestic success, HSBC's impressive end-of-year performance was boosted by several acquisitions, in particular the 2003 purchase of Household Finance in the US for $15 billion and last year's acquisition of Bank of Bermuda. Household is a provider of sub-prime finance for more than 50 million US customers and accounted for about a fifth of the bank's total profit in 2004.
With only around a fifth of HSBC's earnings coming from its UK operations, the bank is aggressively pursuing a global growth strategy. It is focusing especially on expansion in fast-developing countries such as China and India.
The record profits will doubtless delight the London-based firm's shareholders, though there are one or two clouds on the horizon. The bank has faced criticism in the UK over its plans to offshore back office functions, and the prospect of strike action is looming as employees vent their frustration at what they see as a meager pay offer. In the longer term, HSBC's position as one of the 'big four' of UK retail banking could come under threat from rival HBOS [HBOS.L]. Abroad, it is also facing falling lending margins and higher loan loss provisions at Household. Yet none of this is likely to concern the banking group's top brass too much if it continues to draw in results like these.