Global banking giant HSBC ? which bought Bank of Bermuda last February for $1.3 billion ? held its annual general meeting in London on Friday to the backdrop of some UK employees staging a one-day strike.

According to union representatives, a new pay contract will leave ten percent of employees without any pay increase at all and more than 40 percent with raises that are below the rate of inflation. However, group chairman Sir John Bond told investors on Friday that 60 percent of the bank's clerical staff were on better-than-market salaries which prompted the bank to channel pay rises to those on lower salaries to bring them up to market levels.

"Only one percent of our staff received no pay rise and no bonus and most of them because of unsatisfactory performance," Sir John told investors. "Our dispute with the union is about those who have received no rise, or a rise less than inflation. It is in essence, therefore, a dispute about HSBC's policy of paying market rates and rewarding performance."

Sir John told investors that while HSBC recognised the right of staff to stage strike action, only 4 percent of the bank's staff in the UK had voted to strike while 96 percent reported for work.

Sir John also defended his total compensation which rose 69 percent to ?3.65 million, from ?2.15 million a year earlier, according to the company's annual report. Sir John said his compensation took into account a 37 percent rise in annual profits to ?9.18 billion last year and the bank's successful expansion strategy in the US in determining his rise.

Sir John also addressed investors on HSBC's plans for the future as it eyes three major influences impacting the industry in the next 25 years.

A rebalancing of the global economy will see so-called emerging markets such as China, India, Brazil and Mexico contributing a much higher proportion of the world's total GNP. As such, HSBC made a "highly successful investment" in Mexico in 2002 as well as an investment of US$3 billion in China with plans to invest a further $1 billion to secure a 19.9 percent stake in Ping An Insurance, China's second largest life insurer.

HSBC expects demographic trends to impact the sector with increasing numbers of retirees in the developed world boosting the demand for pensions and related services while growing incomes and consumer markets in emerging markets creating demand for consumer financial services.

The Internet is also impacting the sector as customers now may perform transactions themselves at their convenience.

"This will result in major changes in the way that banks are structured and, perhaps, in the human resources they require," Sir John said, noting that 19.6 customers were registered to use Internet services last year, a 34 percent rise over the previous year.

"In the UK, while visits to branches are falling, Internet visits are rising by 40 percent a year. Already over 50 percent of customer contact is now made over the telephone and Internet."

In the first quarter of 2005, Sir John said HSBC was making encouraging progress developing personal and commercial businesses in emerging market while progress in the major developed markets has been broadly favourable.

The group's results for the first quarter of 2005 were in line with expectations and the 'well diversified' nature of the bank's business made it an 'excellent investment proposition', he said.

"Although the world economy is growing more slowly than in 2004, we see significant scope for HSBC to build its business. In the developed world, where capacity exceeds demand, there will be further pressure on margins and consolidation in the financial services industry. In emerging markets, however, demand and deregulation will bring new opportunities for growth. We are generating sufficient cash from our established businesses to respond to them."