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Matthew Vella
HSBC Bank Malta’s chief executive officer Shaun Wallis will not comment on whether a windfall tax on the bank’s profits is justified following a bumper year in 2004 which yielded pre-tax profits of Lm33 million, up 26.3 per cent on 2003.
HSBC’s spokesperson Conway Wigg told MaltaToday the bank did not wish to enter into the merits of whether a windfall tax, a one-off slash off yearly profits, is justified in the light of 2004’s successful performance for the bank.
But consumer groups worldwide believe banks are making too much money, questioning the record profits made by multinational corporations such as HSBC, the ‘world’s local bank’.
So local, its expansionist stride into 77 countries globally today makes it one of the world’s largest banks, breathing down the neck of Citigroup of the US.
On Tuesday, HSBC revealed a global 37 per cent rise in pre-tax profit to GBP 9.2 billion (Lm5.7 billion) for 2004 – largely on the back of the company’s performance outside the UK.
In fact, since moving out of Hong Kong in 1992 with its purchase of Midland Bank in the UK, HSBC has mainly spread out across the globe through acquisitions, financing the growing trade in emerging markets and serving the demand for more credit.
Around GBP 573 million were made in profits from Mexico, Turkey, Bermuda and Malta, areas in which the bank had little or no presence at all five years ago.
With its record GBP 1 million-an-hour profits, the bank faces calls for a windfall tax as observers such as the UK’s Independent Banking Advisory Service called the profits “astronomical”, saying that the banking system charges for “almost anything that happens, regardless of the service” and that government should eventually help them to “put their houses in order”.
There has been little debate in Malta on limiting big earners whose profits are increasing enormously every year. A windfall tax remains the simplest method, a one-off tax that slashes off profits into the public coffers.
Another method is increasing company taxation, which Malta taxes on company profits but not on shareholders’ dividends. Other suggestions would include a new tax band for ‘super profits’, although there are doubts about whether this would encourage tax evasion or the relocation of companies abroad.
HSBC started life as the Hong Kong and Shanghai Banking Corporation, 140 years ago, to finance the growing trade between China and Europe. Expanding through acquisitions, today’s profit is mainly derived from the US, the UK and Hong Kong.
According to Chairman Sir John Bond, 2004 was the result of a favourable economic climate but he does not believe UK banks – which generated a quarter of its profits in 2004 – are taking too much money from customers.
Part of HSBC’s success in 2004 included the acquisition of Bank of Bermuda, which HSBC acquired a year ago, as well as positive results in China, with its USD 1.7 billion (Lm555 million) stake in China’s fifth largest bank, the Bank of Communications.
HSBC is not the only corporate multinational whose profits spark outrage. Shell Oil also registered enormous GBP 9.4 billion profits in 2004 from oil and gas – GBP 1 million an hour and equal to nearly one per cent of Britain’s GDP. Consumer groups, environmentalists and trade unions described the figures as “obscene” but Shell warned it could cut investment in the North Sea if there was any attempt to tax it more heavily.
Along with HSBC and Shell, Britain’s five big banks collectively are expected to make GBP 30 billion – 16 per cent more than last year. The five are HSBC, Royal Bank of Scotland, Barclays, HBOS and Lloyds TSB.
In April, Vodafone is forecast to smash Shell’s record by becoming the first British company to pass GBP 10 billion.
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