Asia-focused bank HSBC said Monday that net profits sank 16.5 percent to $14.03 billion in 2012, due to US money-laundering fines, mis-selling scandals, rising taxation and a huge accounting charge.
Profit after tax fell to the equivalent of 10.78 billion euros last year, compared with $16.8 billion in 2011, London-headquartered HSBC said in a results statement.
Pre-tax profits slid six percent to $20.65 billion, while revenues dipped one percent to $82.55 billion.
HSBC's performance was hit by a $1.9-billion fine to settle US allegations of money laundering that were said to have helped Mexican drug cartels, terrorists and Iran.
The bank had admitted in December to having "inadequate" controls in place and accepted responsibility for the group's past mistakes, as part of an agreement with several US authorities including the Department of Justice.
HSBC's annual results were also dented by a vast $5.2-billion charge against the falling value of its own debt.
And it set aside another $1.4 billion to cover compensation in Britain for mis-selling scandals. That included an extra $1.0 billion to compensate clients who were mis-sold payment protection insurance on credit products.
However, the lender's capital position improved following a string of asset sales, including its stake in Chinese insurance giant Ping An. As a result, the bank pledged to pay out more in shareholder dividends this year.
And bad debts -- or consumer loans that have turned sour -- fell to $8.31 billion from $12.13 billion last time around.
Underlying profits, stripping out exceptional items, climbed by 18 percent to $16.4 billion, with strong growth in Hong Kong and Asia and a sharp turnaround in Europe.
"HSBC made significant progress in 2012. First and foremost, we grew our business. We increased revenues, performed well in most faster-growing markets and enjoyed a record year in commercial banking," said chief executive Stuart Gulliver in the earnings release.
"We've made the business easier to manage and control by disposing of non-core businesses and surpassed our sustainable savings target.
"We also agreed a settlement with the US and UK authorities in respect of our past anti-money laundering and sanctions failings."
HSBC also revealed that its cost-cutting programme had exceeded the group's target.
Two years ago, in 2011, the bank announced a large restructuring programme, including plans to save up to $3.5 billion by 2013 and to axe 30,000 jobs globally.
However, it added Monday that it had generated extra savings of $2.0 billion, giving an annualised total of $3.6 billion.
Gulliver will meanwhile receive a deferred annual bonus of just under £2.0 million ($3.0 million, 2.3 million euros) as part of a total package worth £7.4 million. That compared with an overall figure of £8.0 million in 2011.
HSBC is Europe's biggest bank by assets, was founded in Hong Kong, and sees Asia as its main market despite being headquartered in London.
The group's share price sank 2.43 percent to 710.40 pence in afternoon deals on London's FTSE 100 index of leading companies, which was 0.63 percent lower.
"HSBC posted an annual (pre-tax) profit of $20.6 billion; this would have been more than sufficient to make their FTSE-based competitors happy, though the figure did miss their own targets," noted analyst Alastair McCaig at traders IG.