HSBC probed by U.S. over hiring linked to Asian governments

People are seen walking past a branch of HSBC bank in London on Aug. 28, 2015. (AP / Frank Augstein)

HONG KONG -- London-based bank HSBC said Monday it is among a number of firms being investigated by U.S. authorities over the hiring of people connected to Asian governments, raising the risk of more expensive legal issues.

Europe's biggest bank announced a $1.3 billion loss for the final quarter, compared with a $511 million profit in the same period the previous year. For the year, net profit was $13.5 billion for 2015, down 1.2 per cent and below analysts' forecasts.

In the report, the bank warned it is being investigated by the U.S. Securities and Exchange Commission over the hiring of people referred by or related to government officials or employees at state-owned companies in Asia. The regulator is reportedly scrutinizing global investment banks to see if they violated bribery laws by hiring relatives of well-connected officials or company executives at Chinese companies, known as princelings, to give them an advantage in winning deals.

"HSBC has received various requests for information and is co-operating with the SEC's investigation," said the bank, adding it's one of "multiple financial institutions" being scrutinized.

"Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of this matter, including the timing or any possible impact on HSBC, which could be significant," the company said in a section on legal and regulatory matters in its annual results.

The bank also acknowledged it had received inquiries from the Department of Justice over its banking relationships with certain individuals and entities associated with FIFA, the world governing body for soccer. It underscored that it was not the only institution undergoing such scrutiny over whether it permitted "the processing of suspicious or otherwise improper transactions." It said it was co-operating with the investigation.

Though HSBC warned of a challenging financial outlook, Chairman Douglas Flint said the results were "broadly satisfactory." He said in a statement that last year was marked by "seismic shifts in global economic conditions," notably sharp falls in prices for oil and other commodities, partly stemming from slowing growth in China.

"China's slower economic growth will undoubtedly contribute to a bumpier financial environment, but it is still expected to be the largest contributor to global growth as its economy transitions to higher added value manufacturing and services and becomes more consumer driven," he said.

The group has been steadily trimming back its global operations as part of a sweeping reorganization announced last June to focus on Asia, where it expects the region's growing affluence to drive profits. Asia accounted for 83.5 per cent of HSBC's pre-tax profits last year.

It's slashing thousands of jobs and selling off businesses in countries like Brazil while expanding in China, particularly the wealthy Pearl River Delta manufacturing region in the country's south. CEO Stuart Gulliver said HSBC gave up on plans to sell its Turkey business because it didn't get a good enough offer. It will restructure it instead.

Despite its focus on Asia, last month HSBC decided to keep its headquarters in London rather than moving it to Hong Kong, ending a 10-month review prompted by new U.K. regulatory and tax changes. The bank said keeping its base in London gave it the "best of both worlds."

HSBC has a sizeable presence in Hong Kong, where it was founded to finance trade between China and Europe more than a century ago, when the city was a British colony.