HSBC has admitted it could face new fines and costs for its alleged role in banking scandals of more than $1.8bn (£1.1bn) – with more expected to follow.
Included in that figure was a $378m provision to cover a looming fine from the Financial Conduct Authority for the role played by HSBC in alleged attempts to rig the £3trn-a-day London-based foreign exchange market.
But that was far lower than the amount rivals Barclays and Royal Bank of Scotland set aside. Significantly, HSBC said it had not put an amount on any potential fine from US or other global regulators.
This raised questions over whether there will actually be a so-called omnibus deal between the six banks accused of fixing exchange rates, and the UK and US regulators before the end of the year.
The FCA has been pursuing such a deal for its side of the investigation. However, Iain Mackay, HSBC’s finance director, said: “The only detailed settlement in which we are involved is the Financial Conduct Authority. The degree of co-ordination between regulators is limited at this point.”
Privately, sources close to RBS and Barclays accept that their provisions, amounting to a combined £900m, represent only a downpayment on the likely final bill.
The US side of the investigation is complicated by the involvement of multiple regulatory agencies, each of which could levy a hefty penalty.
Among other conduct and compensation costs, HSBC, in common with its peers, took another big hit on mis-selling PPI, with $589m in the last quarter taking its total to $3.9bn.
Its chief executive, Stuart Gulliver, complained that claims management companies – which have become the bête noire of the industry and mobile phone users alike – have renewed their efforts to entice customers to complain. He said: “In August and September we saw a step-up in claims coming from claims management companies who appear to have been reinvigorating their drive to win new clients.”
It was also hit by another $213m bill for matters relating to the Consumer Credit Act in the UK, a $550m settlement in the US over mortgage-backed securities, and a $271m writedown on its stake in China’s Industrial Bank.
Costs are increasing because of the need to hire new staff to bolster its compliance and risk functions. They now account for one in 10 of the global total.
All these issues meant that the bank’s pre-tax profits rose by just 2 per cent to $4.6bn in the third quarter, some way short of the $5bn analysts had been hoping for.
Mr Gulliver said: “Our profits were up in all divisions but we also saw our costs rise. There were higher costs for compliance and there was cost inflation in the industry in Asia and Latin America. But bad debts were down, notably in Europe and North America. We are confident we will go on delivering a progressive dividend.”Reuse content