HSBC has admitted it is breaching a US regulator’s order to bolster its defences against financial crime, as the UK’s biggest bank announced a slump in first-half profits in “turbulent” markets hit by Brexit.

The bank announced its first share buyback of $2.5bn (£1.8bn) – following the sale of its Brazilian business – which buoyed its shares despite the 29% fall in first-half profits to $9.7bn.

The shares rose 4.5% even as promises of rising dividends were quashed and it scrapped a timetable to achieve by 2017 a 10% return on equity – a closely watched measure of performance for shareholders.

A series of legal disclosures confirmed it had received requests for information from regulators around the world about Mossack Fonseca, the Panama law firm linked to tax haven companies, and was continuing to be investigated for tax avoidance activities of its Swiss arm.

Among the legal disclosures was a reference to an order dated October 2010 with the US Office of the Comptroller of the Currency requiring it to set up “effective compliance risk management programme across HSBC’s US businesses”.

The bank said: “HSBC Bank USA is not currently in compliance with the OCC order. Steps are being taken to address the requirements of the orders.”

In February, the bank revealed an official monitor, which the US authorities installed after a $1.9bn fine over money laundering four years ago, had raised significant concerns about the slow pace of change to its procedures to combat crime.

A senior HSBC currency trader was arrested in New York last month over allegations of defrauding clients, a move which the bank acknowledged had sparked some queries from customers.

Stuart Gulliver, the chief executive, focused on adjusted profit of $10.8bn, down 14%, which the bank described as a “reasonable performance in the face of considerable uncertainty”.

He said another buyback could take place next year when the bank’s US arm releases cash to the wider group for the first time in a decade. Explaining why the bank had abandoned a “progressive” dividend policy, Gulliver said: “People assumed it would mean we automatically increased the dividend irrespective of what was going in the world.” Instead the payout would be set 0.51c per share - its current level and quashing fears it would be cut.

The share buyback had to be approved by the Bank of England, and comes after stress tests on 51 European banks which sparked concerns among investors about the financial strength of some major lenders.

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Some analysts were cautious. Gary Greenwood, an analyst at Shore Capital, pointed out the 10% return on equity target being abandoned was only set a year ago. “It is therefore clear to us that the fundamentals of the business continue to deteriorate and the decision to return a small amount of capital to shareholders by way of a share buy-back should not detract from this,” he said.

The HSBC chairman, Douglas Flint, who is to leave next year, described the first half a turbulent period during which the vote for Brexit had sparked “exceptional volatility” in markets.

“Now is a time for calm consideration of all the issues at hand and careful assessment of how prosperity, growth and a dynamic economy for both the UK and the rest of Europe can be ensured following an orderly transition period,” he said. “Critical elements include securing the best possible outcome on continuing terms of trade and market access, and ensuring the UK remains attractive for inward investment and has access to all the skills necessary to be fully competitive.”

He urged regulators not to force banks to hold more capital which might restrict lending and “lean against the increased public policy emphasis on stimulating economic growth at the time of elevated uncertainties”.

Before the EU referendum Gulliver said 1,000 UK roles may need to be moved to France and that “it is still too early to tell which parts may be impacted and to what extent”. The decision last year to keep its head office in the UK would not be affected.

Amid expectations that the Bank of England could cut rates from 0.5% on Thursday, Gulliver played down any idea HSBC would copy Royal Bank of Scotland in writing to UK business customers to warn it may charge for holding deposits. But, he said, if rates did turn negative, they would probably be passed on to banks and hedge funds, as is the case in currencies where rates were negative. Retail customers were not affected. A cut to 0.25% would cost HSBC $100m in the coming six months.

A year ago, Gulliver announced plans to axe 25,000 roles around the world, cutting costs and slimming down global ambitions from 88 countries to 71. The bank is “pivoting” towards Asia but keeping a focus on the UK and the US



The interim dividend was increased by 3% to 0.31 cents a share.

