HSBC is considering increasing the salaries of its bankers around the world in response to the cap on bonuses being implemented by the European Union.
Chairman Douglas Flint warned about the impact of the limit on bonuses – at one times salary, or two with the approval of shareholders – as the UK's largest bank disappointed investors with rise in profit to $14.1bn (£9.2bn) in the first half of 2013, up 10% on the same period in 2012.
A slowdown in the previously fast-growing emerging markets where HSBC and lower than expected revenues led to a slide of more than 4% in its shares.
Speaking from Hong Kong, Flint said one of the options being considered to tackle the bonus cap was a potential pay rise for staff and said he was confident that shareholders would support policies intended to keep the bank competitive.
"We are looking at a whole range of things," said Flint, who played down any suggestion that this might force HSBC to move its headquarters from the UK, where it has been based since buying Midland bank in the 1990s.
"You can see from these results that 80% of the profits comes from outside Europe. We have to be competitive. The cap on variable pay as a proportion of fixed pay is very uncomfortable when we make our market where these restrictions are not faced by our competitors," said Flint.
He said the cap was not supported by the government or the new banking regulator, the Prudential Regulation Authority, and "could have a highly damaging impact on our competitive position in many of our key markets, including those outside Europe".
Flint added: "We will therefore be consulting on how best to achieve this aim [of paying competitively] while seeking to preserve the essence of the remuneration framework supported by shareholders two years ago."
The bank has previously had the support of shareholders for pay policies that require top executives to hold any shares they are awarded until retirement, longer than rival banks. He said the report by the parliamentary commission on banking standards published in June was hard-hitting and uncomfortable to read, but he warned that some of some of its recommendations will have unintended consequences.
A year ago, the bank's half year results were dominated by the "shameful" systems breakdowns that failed to stop the bank laundering money for terrorists and drug barons. This year the bank said Michael Cherkasky, appointed as the formal monitor of the bank for the next five years, had begun his role on 22 July. Cherkasky is a former prosecutor in New York county.
The bank also warned that it could face significant fines or penalties as part of the on-going investigation into rigging of Libor that has already led to fines at Barclays, Royal Bank of Scotland and the Swiss bank UBS.
Stuart Gulliver has pulled out of 54 businesses since he became chief executive of HSBC in 2011, and cut the number of staff by more than 40,000 to 259,000. He eventually expects the bank to employ around 240,000 staff.
Gulliver said growth in mainland China was slowing, and forecasted expansion of 7.4% in 2013 and 2014. The economy grew at a rate of 7.5% in the second quarter of 2013. "There is wishful thinking in the west that China is slowing down in an uncontrollable way. We don't see it," said Gulliver.
The pace of profit growth slowed in North America and Latin America – where Brazil and Mexico weighed on the total – to 4.7% and 3.3% respectively but was 36% higher in Asia Pacific, 30% in Hong Kong and 20% in Europe. In the UK, HSBC took another provision for mis-selling of payment protection insurance – the largest ever mis-selling scandal in the UK – of $367m (£239m).
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