HSBC is braced for a settlement with US regulators that could top $2 billion, according to analysts, as the UK bank seeks to draw a line under months of uncertainty over the penalties it faces from its involvement in alleged money laundering and other rule breaches.
But investors appear unperturbed about the financial impact of the affair.
“The final number could be $2 billion or even $3 billion but it wouldn’t hurt the fundamental financials of the bank,” said one leading bank analyst, pointing to HSBC’s $166 billion equity buffer and recovering underlying performance.
HSBC yesterday added $1.1 billion to its provisions to cover US fines and UK compensation to those who have been mis-sold payment protection insurance, dragging down profits for the third quarter of the year. UK PPI provisioning increased by $353 million, taking HSBC’s total charge so far to $1.8 billion and the total across Britain’s big banks to more than £11 billion. But the bulk of the provisions comprised an $800 million top-up to set aside $1.5 billion to cover the anticipated fine from US authorities for a range of breaches, including a failure to prevent the laundering of drug money.
HSBC warned the final fine could be much larger. “The US authorities have substantial discretion in deciding exactly how to resolve this matter,” chief executive Stuart Gulliver said. US officials said a settlement could be finalised in weeks.
The additional provisioning came as HSBC announced pre-tax profit for the three months to the end of September down 51 per cent to $3.5 billion, taking return on equity down from 13.2 per cent to 5.8 per cent. – (Copyright The Financial Times Limited 2012)
