HSBC, Europe’s largest bank, reported a steeper-than-estimated decline in first-half profit, marking the first such decrease since 2009, as investment banking weakened.

Pre-tax earnings dropped 12 per cent to $12.3 billion from $14.1 billion a year earlier, the London-based lender said in a statement today.

Investment banking unit profit dropped 12 per cent to $5.03 billion.

Chief executive officer Stuart Gulliver has exited at least 68 businesses since taking over in 2011, eroding revenue, as the bank invests in its most profitable markets amid increased regulation and compliance costs.

HSBC, which gets the bulk of its profit from Asia, is striving to keep bad loans under control and cut as much as $3 billion of expenses as earnings from investment banking falls.

“Whilst regulatory uncertainty persists, our balance sheet remains strong and our continuing ability to generate capital supports both growth and our progressive dividend policy,” Mr Gulliver said in the statement.

The shares fell 0.2 per cent to 628.2 pence at 9.52 am in London trading. Pretax profit in Asia fell 15 per cent to $7.89 billion, while Europe declined 18 per cent to $2.26 billion.

Earnings dropped 20 per cent in Latin America to $374 million.

Bad loan charges and provisions shrank to $1.8 billion from $3.1 billion as the bank invested in risk and compliance functions, the bank said.

Costs as a proportion of revenue rose to 58.6 per cent from from 53.5 per cent, higher than Gulliver’s “mid-50s” target.

Standard Chartered, which makes more than three- quarters of its earnings in Asia, warned in June its first-half profit will probably fall 20 per cent, dragged down by lower financial markets revenue.

Barclays posted a 50 per cent drop in first-half investment-banking profit last week as fewer clients traded in cash equities, rates and currencies.

Bloomberg