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HSBC profits up as mis-selling scandal goes on

The bank is also still being investigated by 11 different US regulators over money laundering

Nick Goodway
Sunday 04 November 2012 01:00 GMT
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Europe's biggest bank, HSBC, will tomorrow unveil the highest rise in profits of any of the banks that have reported in the past week. However, all eyes will be on what the chief executive, Stuart Gulliver, has to say about money laundering and increased provisions for mis-selling payment protection insurance (PPI).

Mr Gulliver said in July that a US Senate report that had described HSBC as "pervasively polluted for a long time" had been "shameful and embarrassing" for the bank.

At that time, HSBC set aside $700m (£437m) to cover any likely fine, while warning that any actual outcome could be "higher or significantly higher".

Its rival, Standard Chartered, has already paid $340m to the New York Department of Finance over accusations that it broke US sanctions over Iran. It has yet to settle with other regulators.

HSBC is being investigated by 11 different regulators in the US over money laundering. The lead investigation is by the Department of Justice, but the Federal Reserve, Office of Foreign Assets Control and the Office of the Comptroller of the Currency are also major players.

Mr Gulliver is not expected to announce whether the bank has settled with the regulators, but the mood music is likely to be that a deal is nearing conclusion.

When it comes to PPI mis-selling, HSBC has already set aside £1.1bn and is likely to increase this, following large rises in provisions from Lloyds, Barclays and RBS.

However, HSBC was one of the smaller players in the PPI market and it also stopped selling earlier than most of its rivals in 2007. So an increase of £200m to £300m would not come as great shock to the City.

Profits at HSBC are set to rocket in the third quarter by more than 80 per cent to $5.4bn, according to average analysts' forecasts. The main drivers will be continued growth in the Far East and a bounce-back in earnings from the investment bank against a very weak third quarter in 2011.

Mr Gulliver is also set to please analysts with a strong update on how rapidly the bank is disposing of small non-core businesses and cutting costs across the group.

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