Picture: REUTERS
Picture: REUTERS

GENEVA — HSBC Holdings Plc, Europe’s largest lender, said full-year earnings at its private bank dropped 81% as customers pulled money from its Swiss cross-border business.

Pretax profit from private banking declined to $193m from more than $1bn a year earlier, when the company benefited from one-time asset sales, London-based HSBC said on Monday. Earnings were also depressed by a write-down in the value of HSBC’s Monaco business.

Client assets fell to $382bn as of December 31, down from $398bn a year earlier, after net outflows of $26bn, including withdrawals from Switzerland, and the disposal of operations in Panama and a business in Luxembourg.

"We continued to address legacy issues and reposition our business model and client base in global private banking," CEO Stuart Gulliver said in the statement.

Mr Gulliver’s initiatives to transform the private bank reduced underlying pretax profit by $700m, according to the statement. He said in 2012 that the Swiss offshore private-banking model built on secrecy was disappearing.

Mr Gulliver appointed Peter Boyles, who joined the firm in 1975, to oversee a transition at the unit after HSBC suffered "reputation and financial damage" from the theft of client data in 2009.

HSBC wants its global private banking business, which includes units in Switzerland, the UK and Asia, to attract new customers by focusing on wealth created in emerging economies and onshore domestic markets, and also to grow through referrals from within the firm. The data theft by Hervé Falciani, a former software technician in Geneva, led to probes of tax dodgers by France, Spain and the UK.

Swiss banks are increasing due diligence of affluent individuals seeking to deposit funds in the world’s largest cross-border financial haven.

Switzerland amassed about $2.2-trillion in accounts opened for foreigners, prompting a crackdown on tax evasion by the US and some European governments.

HSBC is planning to sell parts of its Swiss private bank, people with knowledge of the matter said earlier this month.

HSBC’s Geneva-based unit is one of at least 14 Swiss banks under investigation by the US Department of Justice for allegedly helping Americans hide money from the Internal Revenue Service.

As one of the banks already being probed, HSBC is not eligible for a voluntary disclosure programme announced by the US justice department on August 29 and accepted by the Swiss government.

Through the programme, banks may seek a non-prosecution agreement in exchange for a fine, or a non-target letter if they show they did not help clients break US tax laws.

Bloomberg