DOUGLAS FLINT, the Scot who chairs global banking giant HSBC, has criticised European banking pay plans as "highly damaging" and warned the institution might simply raise basic salaries to remain competitive.
His comments came as HSBC reported a 10% rise in first half pre-tax profit to $14.1 billion (£9.2bn), a result that disappointed investors who sent its shares down 4.3%.
Revenue at the London-headquartered bank fell 7% to $34.4bn as growth in China and Asia slowed, while regulatory reforms added to its costs.
Mr Flint said: "You can see from these results that 80% of our profits in the first half came from outside of Europe. We have got to be competitive."
He said a cap on bonuses was "very uncomfortable" for HSBC because its rivals do not have these restrictions in the markets where it makes most of is money.
Under European Union proposals there will be a cap on the ratio of variable pay to fixed pay for certain senior bankers from the start of next year.
In his comments in HSBC's results document Mr Flint said the EU proposal "could have a highly damaging impact on our competitive position in many of our key markets, including those outside Europe".
However, he later added: "We are very confident that we will be able to come up with a competitive remuneration proposal."
Raising basic salaries, he said, "is certainly one of the possibilities".
He added: "We will look at a whole range of things to see what we can do."
The bank has only recently overhauled its pay policies and currently requires executives to hold shares awarded in bonuses until retirement in an effort to tie their fortunes to those of the company.
Mr Flint said he expected shareholders to be sympathetic to HSBC's position.
However, he played down the chances of HSBC moving its headquarters from the UK, where it has been based since buying Midland bank in the 1990s.
HSBC's profits benefited from falling bad debts, particularly in the United States.
However, it was hit with a slowdown elsewhere, with profits falling in Asia, excluding Hong Kong, and in Latin America, where it took large provisions for bad debts.
Chief executive Stuart Gulliver added: "There has been a slowdown in faster-growing markets in recent quarters. Even emerging markets go through business cycles.
"But the reality is those markets continue to grow relatively quickly and HSBC remains well positioned across the faster-growing economies."
He was particularly dismissive of concerns about growth in China, which slowed to 7.5% in the second quarter.
He noted that this was still much more substantial than in many developed countries.
He said: "There maybe some wishful thinking in the West that China's economy is slowing down in an uncontrolled way. We don't see it."
HSBC said its employee numbers had fallen by 1100 to 259,400 in the quarter.
Disposals of various businesses will take that number down to around 255,000 by the end of 2013.
The bank said in May employee numbers could fall to between 240,000 and 250,000 by 2016.
Mr Gulliver is two and a half years into a restructuring that has seen him sell or close 52 businesses. He said the pace of change is likely to slow, but it is looking to increase its run-off of its US loan book. HSBC said it would pay a second interim dividend of $0.10 per share, taking the total for the first half to $0.20, up 11% on a year ago.
Shailesh Raikundlia, analyst at Espirto Santo said that while the bank's results "are no doubt disappointing, this should not detract from the cost cutting and capital return story at HSBC".
HSBC's shares closed at 721.7p, down 33p on the day. However, the dip comes after a strong period for the stock which is up 11.7% in the year to date.
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