UPDATE 3-HSBC profits dip, pays top banker 10 mln pounds

* Pretax profit of $7.1 billion misses $11.4 bln forecast

* Underlying profit up 56 percent to $13.3 billion

* $15 mln payday for investment banker after record year

* CEO Geoghegan says to donate $6 mln bonus to charity

* Shares down 5 percent

(Adds details on pay, results, analyst comments, updates shares)

By Steve Slater and Clara Ferreira-Marques

LONDON, March 1 (BestGrowthStock) – HSBC Holdings (HSBA.L: ) missed
expectations with a $7 billion annual profit after bad debts
rose and risked a public backlash by paying three investment
bankers over 9 million pounds ($13.7 million) each.

Europe’s biggest bank said on Monday that Stuart Gulliver,
head of investment banking, would receive 9.8 million pounds
($14.9 million) for 2009, mostly in shares over the next three
years. Another two unnamed bankers will get over 9 million
pounds after record earnings from their unit.

HSBC’s 2009 profit of $7.1 billion was down from $9.3
billion in 2008 and falling short of an expected pretax profit
of $11.4 billion, according to the average forecast from
analysts polled by Thomson Reuters I/B/E/S.

Profit for global banking and markets (GBM) more than
trebled to a record $10.5 billion as it benefited from buoyant
capital markets.

By 1126 GMT HSBC’s London-listed shares were down 5 percent
at 683.6 pence.

Revenues were depressed more than expected by the impact of
low interest rates, while GBM’s revenues were not as strong as
expected and insurance clains were high, analysts said.

“There are a number of negative issues which in aggregate
will dampen enthusiasm for the stock today,” said Andrew Lim,
analyst at Matrix, citing large insurance claims, weakness in
trading profits and high loan losses in the Middle East.

Reported profits were also dented by a $6.5 billion
technical accounting loss on the value of its own debt, more
than the $5 billion expected by analysts. Underlying profit
before that loss was $13.3 billion, up 56 percent.

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BAD DEBTS UP, BUT IMPROVING

Losses on loans that have soured rose 9 percent to $26.5
billion, broadly in line with expectations as an improvement in
the United States was offset by losses elsewhere.

Massive losses in the United States in the last three years
stem from its purchase of U.S. consumer finance firm Household
in 2003 — a deal the bank now says it regrets — but
impairments there are declining as the loan portfolio is wound
down and the impact of rising unemployment has been less than
expected.

Asked if U.S. bad debts had peaked, Finance Director Douglas
Flint said: “That would be a reasonable expectation.”

The bank said it expects overall impairment charges to
decline in 2010; analysts expect total bad debts will drop to
about $20 billion.

The bank said its performance in January was strong and
ahead of its expectations.

HSBC said there was “understandable public anger” in some
countries about excessive pay for bankers so soon after the
financial crisis.

But bonuses were a “legitimate and proper element of reward”
and remuneration “must be market-based”, it said. Compensation
at GBM as a ratio of revenue was about 25 percent for 2009,
lower than almost all investment bank rivals.

The bank said it would pay bonuses to Gulliver and other
executives but defer them over three years. CEO Michael
Geoghegan said he would give his bonus of up to 4 million pounds
to charities.

Geoghegan, a 27-year HSBC veteran including almost four
years as CEO, has steered the bank through the crisis and last
month moved his base to Hong Kong to be closer to where the bank
is focusing investment and expects faster growth.

“In 2010 we expect a two-speed economy, with Asia leading
the way,” Geoghegan said at a press conference in Hong Kong.

“We expect Asia to play a bigger role in the growth story
and believe developed markets will remain stuck in first gear
and at risk of stalling.”

British insurer Prudential (PRU.L: ) backed up the trend that
economic power is shifting east, on Monday agreeing to buy AIG’s
(AIG.N: ) Asian life insurance arm for $35.5 billion.
[ID:nLDE6200CL]

HSBC said it remains in talks to be one of the first
overseas companies to list its shares in Shanghai, and will look
to raise between $3 billion and $7 billion as part of the
listing, sources have said.

“It’s something we’re very interested in doing but the
timing is in the hands of the Chinese authorities,” Flint said.

Stocks

(Additional reporting by Clare Jim in Hong Kong; Editing by
Hans Peters and David Cowell)

UPDATE 3-HSBC profits dip, pays top banker 10 mln pounds