THE head of HSBC’s controversial American loan company is to leave a year early with a $4.5 million (£2.3 million) payoff as HSBC admitted yesterday that margins at the US subsidiary had fallen by more than expected.

William Aldinger, the head of Household International, the US firm bought by HSBC two years ago, is to leave in April, 12 months ahead of schedule.

The bank said that the departure of Mr Aldinger, who will also get a $9 million share award, reflected the fact that the integration of Household had been completed earlier than expected.

The American banker’s arrival at HSBC with the $15 billion acquisition of Household caused controversy because of his $37 million three-year pay deal. The deal also provided dental treatment for life for the banker and his wife.

Yesterday, despite the record profits delivered by HSBC and Household, Doug Flint, the finance director of HSBC, admitted that the drop in profit margin in the US had been more severe than the bank had expected. He said that margins in the US had fallen because of increased competition and a jump in the cost of funding that followed the rise in US interest rates.

He added: “There has also been a trend for consumers to take advantage of house price rises in the US to remortgage at a lower rate.” Household offers unsecured lending to consumers who find it difficult to get loans from mainstream banks.

Despite the the squeeze on margins, Household contributed a record $2.7 billion net to the group’s record total profit.

Sir John Bond, chairman of HSBC, said that 2004 had been another good year overall for the bank as he unveiled a 37 per cent rise in profits for the group. Total profits were $17 billion compared with $12.8 billion last time. Sir John said that the increase had been generated by strong revenue growth and benign economic conditions globally.

He added: “A gradual economic recovery in the US contributed to improved employment levels. Interest rates and inflation remained low, encouraging consumer confidence and spending.”

HSBC also said that it had nearly finished reorganising its investment banking division. Profits at the division rose by 11 per cent to $5.1 billion. However, costs at the division also increased by 16 per cent to $5.6 billion for the year as the bank recruited nearly 2,000 new staff. One trader at the bank earned £13.6 million last year, making him or her the highest paid executive at HSBC.

Although the Household acquisition has dramatically increased the contribution made by America to HSBC’s overall profits, a quarter of total earnings are still made by the UK division. Total profits in the UK were £1.5 billion, 19 per cent higher than last time.

Michael Geoghegan, the new head of HSBC in the UK, said that recent initiatives to increase the competitiveness of HSBC in the high street were beginning to pay off.

The bank raised its dividend by 10 per cent to 66 cents. HSBC shares dropped 25p to 686p as profits came in at the lower end of expectations.

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