HSBC Holdings PLC HSBA

DJ HSBC CEO: Sees Euro-Zone Deposit Insurance; Pay Yes-Vote Near 90%

 
  (Adds remuneration vote and other detail in final nine paragraphs.) 
 
  By Max Colchester 
  Of DOW JONES NEWSWIRES 
 

LONDON (Dow Jones)--The euro zone will likely hold together, but continuing volatility could result in a deposit-guarantee scheme being created for the members of the monetary union, HSBC Holdings PLC (HBC) Chief Executive Stuart Gulliver said Friday.

"Our working assumption is that the euro zone will hold together," Gulliver told the annual meeting. "But there will be heightened periods of volatility."

Gulliver said he could see a European equivalent of the U.S. Troubled Asset Relief Program being implemented and a euro-wide deposit-guarantee scheme to stop deposits fleeing less stable economies. The TARP effort consisted of the U.S. government buying assets and equity from financial institutions during the subprime mortgage crisis.

The CEO added that HSBC wouldn't use the ongoing turmoil on the Continent as an opportunity to buy a European bank. "We don't see this as an opportunity to buy a bank," he said.

Meanwhile, the majority of HSBC investors voted to back the global bank's executive remuneration report. Nearly 90% of shareholders backed the director pay, as the bank became the latest financial institution to dodge growing shareholder discontent over pay. Last year's AGM saw 18.7% of voting shareholders reject the report.

The Asia-focused bank has come under pressure from the shareholder advisory group Pensions & Investment Research Consultants, or PIRC, which recommended that investors vote down the director's remuneration package at the group's AGM.

In part, PIRC criticized the fact that HSBC incentivizes executives to increase the bank's dividend. In 2011, Gulliver's total pay as he became chief executive increased 75% to $10.58 million compared with the year before, following a hike in bonus payout and salary. He was awarded a bonus of $3.4 million for 2011.

"Public trust can only be earned," HSBC Chairman Douglas Flint said. "we have also acknowledged lapses that have been pointed out by regulators...we can't deny we made mistake but we will learn from them."

Flint added that shareholder returns "were not where we want them to be...but we are still one of the best performing bank of our peer group."

Members of HSBC's board said that they consulted at length with shareholders over pay.

Some investors have taken some comfort in the fact that HSBC has weathered the financial crisis and subsequent euro-zone troubles better than some of its U.K rivals The bank's share price fell 26% from 668.10 pence at the beginning of January 2011 to 491.05 pence at the end of December. Barclays PLC (BCS) share price declined by 35% in the same period.

HSBC is one year into a three-year plan to try and boost its profitability. The bank has sold 28 businesses around the world this year and has so far cut around 15,000 jobs. Last week Gulliver said that the bank would generate extra revenue by cross selling products from its four main businesses.

The bank is now betting that it can harness trade between faster growing continents to boost its bottom line.

The bank is still on track to hit the low end of its 2013 target of a 12-15% return on equity, he said Friday.

- By Max Colchester, Dow Jones Newswires; +44 (0) 207 842 9295, max.colchester@wsj.com

(END) Dow Jones Newswires

May 25, 2012 09:06 ET (13:06 GMT)

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