Profits at HSBC Bank Bermuda shrank by $132 million during 2012, hit largely by a deterioration in the value of loans in North America.The bank‘s net income for the past year was $20 million. However, its revenue remained relatively stable at $397 million (before loan impairment charges), a reduction of seven percent year-on-year.Challenging economic times have also hit Island homeowners and commercial customers, and the bank is working with them to find solutions to their difficulties.Richard Moseley, CEO of HSBC Bank Bermuda, acknowledged there has been an “uptick” in non-performing loans, such as mortgages in arrears.“We’ve put a lot of resources in to try and work with those customers to help them find a solution. It’s a terrible position for people to be in, they have had a home for a while or just [bought one] recently and it is something that’s important to them,” he told The Royal Gazette.“We spend time trying to work out what kind of repayments can they afford, how long it’s going to take until their financial situation will be more like it was before and help them through that situation.“Our efforts are paying off and I think it will pay off in goodwill for us as an organisation as we go through this.”The upward rate of non-performing loans is starting to level off, Mr Moseley observed.The bank’s 2012 profits were reduced in a large part to business it has done in North America. Chief financial officer Michael Schrum said: “The main impact on 2012 performance was higher loan impairment charges — principally the rapid deterioration of certain material and connected commercial real estate related loans in North America.“Additional impairment charges were required as a prudent response to continuing stress in the Bermudian market, reflecting lower values for both commercial and residential property.”CEO Mr Moseley takes heart from the strength of the HSBC Group globally. In its financial report, also released yesterday, the group made a pre-tax profit of $20.6 billion. Although that was down six percent year-on-year, the dividends on ordinary shares for the year improved 10 percent to $0.45 per share.As a group HSBC has had to pay out $1.9 billion in fines and penalties to US authorities and the FSA for past failings with regard to anti-money laundering and sanctions. It has made provision of $1.4 billion in respect of anticipated redress to UK customers who were mis-sold financial products.Global HSBC chief Stuart Gulliver said in a statement: “Banking has been given a huge wake-up call and we are determined to play our part in restoring its reputation and thereby regaining society’s trust.”Those sentiments were echoed locally by Mr Moseley and Mr Schrum.“We are committed to re-establishing the high standards and behaviour. Our leader Stuart Gulliver is committed absolutely to this. We want to be seen as the bank people want to deal with because of the footprint we have and because of our ethos in terms of being an international bank.“We are very embarrassed about what happened last year and our challenge is to demonstrate that we can put that behind us and show we are committed to getting it right,” said Mr Moseley.“That’s also good for Bermuda from a reputational viewpoint, because Bermuda does have a very strong reputation and it benefits from the association of having a bank like HSBC, which is also focused on its reputation.”CFO Mr Schrum said: “Getting it right now is a really big emphasis; making sure that all the business steps coming on are appropriate and meet the highest standards.”Operating costs at HSBC Bank Bermuda fell by $25 million to $212 million last year, partially as a result of the sale of a business in 2011 but also through streamlining initiatives. There has also been some outsourcing.Mr Moseley said that while the headcount at the bank has gone down, it does its best to retrain and relocate staff in other areas. The bank has also seen three Bermuda members of staff rise through the ranks to assume key senior positions, allowing the bank to release a number of expatriate senior staff.He said the bank and the HSBC group had recognised the need to streamline the organisation by reducing layers of bureaucracy, and added: “We’ve seen our revenues very resilient given the market is challenging at the moment.“Our revenue is nearly $400m, which is a seven percent decline on last year, which reflects lower economic activity but also that we’ve de-risked the balance sheet by investing in lower risk assets rather than some of the high risk ones.“We have had headwind from loan impairment charges. From an accounting viewpoint it’s prudent to ‘tell it as it is’ and make sure we reflect that through our profit and loss account.“Notwithstanding all that, we have managed to generate a profit. And while it is less than we’ve seen in the past, it is still a very positive message that we have significant revenue of nearly $400m coming in.”The loan impairment charges have been the biggest area of focus for the bank, and Mr Moseley said HSBC Bank Bermuda would continue to take “an appropriately prudent approach”.“In terms of the Bermuda economy, clearly we will wait and see. We are not anticipating growth in this year but as people start seeing growth coming down the road then they will say ‘Yes, I want to hang on in there’. In 2013 we will be looking for more normal profits.”He added: “We are very much open to business and our financial strength remains second to none. Our membership of group of HSBC which has been able to increase dividend is very powerful message to our customers.”And as the HSBC Group works to rebuild reputation and trust following a challenging past year, so too HSBC Bank Bermuda is working to maintain its standing within the community by reaching out through volunteer programmes and sponsorship. In recent years the bank has clocked up an impressive 7,500 volunteer hours on projects such as the restoration of Cooper’s Island. It has also sponsored community events such as Cup Match and the recent Bermuda Marathon Weekend and Bermuda Festival of the Arts, while Mr Moseley and Mr Schrum have been personally involved in a homework academy at TN Tatem school.