Shares in British banks were down on the FTSE 100 in morning trading after HSBC issued a disappointing set of Q1 results and said it would be taking a hit as a result of a need to compensate customers who were wrongly sold payment protection insurance.
HSBC said that pre-tax profit in the first quarter dropped 14 per cent from the same period in the previous year.
The group added that it would be paying £268 million in compensation to those who had been mis-sold insurance. Barclays also said that it would be making a similar provision of a billion pounds.
By 10:15 shares in Lloyds Banking Group dropped 0.78 per cent to 53.58 pence per share, RBS shares fell 1.10 per cent to 42.27 pence per share, Barclays shares declined 1.32 per cent to 273.95 pence per share and HSBC shares were down 1.63 per cent to 641.10 pence per share.
Overall the FTSE 100 was down 0.33 per cent to 5,957.22.
Shares in HSBC were down on the FTSE 100 in morning trading after the group reported a drop in pre-tax profit in the first quarter ended 31 March 2011.
Pre-tax profit in the period fell from $5.7 billion a year ago to $4.9 billion. However the figure was higher than the pre-tax profit of $4.4 billion reported in the fourth quarter of last year.
Loan impairment charges in the period were $2.4 billion, down from $3.8 billion in the same period a year ago.
In addition the group said it had made a £268 million provision for compensation to consumers who had been mis-sold insurance.
Following the results HSBC said it would be raising its dividend from $0.08 per share to $0.09 per share.
Stuart Gulliver, Chief Executive of HSBC, said, "I am pleased to say that April's performance was satisfactory and in line with expectations. I believe HSBC is well placed to capitalise on global business opportunities. Together with my management team, I look forward to presenting our strategy and key priorities on 11 May."
Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, commented, "The update is something of a mixed bag, allowing investors' attention to move on to the strategic update later in the week.
"In the meantime, the rising cost income ratio is something of a concern, even though one off items are contributors, such as the escalating costs of staff acquisition in Asia. The provisions for the UK bank levy and the PPI situation are a further headwind, whilst fears over a slowdown in the burgeoning Asian regions are also weighing. On the plus side, the headline profit figure is encouraging, and the impairment figure has shown a significant improvement.
"The strategic update will now take centre stage in investor thoughts, with particular focus being expected on the dual fronts of cost containment and future strategic intent in hitherto difficult markets such as the US. The share price has struggled to make progress of late, having given up 5% over the last six months as compared to a 2% gain for the wider FTSE100. Despite that sluggish performance, HSBC's underlying financial strength and geographical diversification underpin the market consensus of the shares as a buy."
By 10:55 shares in HSBC were down 1.73 per cent on the FTSE 100 to 640.40 pence per share.