HSBC yesterday set aside $2bn (£1.3bn) to pay for likely sanctions in connection to extraordinary money-laundering allegations in America and mis-selling products to customers in Britain, but warned that the final bill could be much higher.
Chief executive Stuart Gulliver, paid nearly £8m last year, said he was sorry for the "shameful" and "embarrassing" failures to prevent laundering at the biggest bank in Europe. "It's very painful for all of us in the firm," he said.
A US Senate report this month slammed HSBC for letting clients shift funds from dangerous and secretive countries in the latest and probably most dramatic crisis to hit the banking industry. Among those said to have used the bank to clean dirty money are Mexican cocaine lords, terrorists and pariah states such as Iran and Syria.
The scandal has drawn in trade minister Lord Stephen Green, a former chief executive of the bank. He is likely to face questioning by investigators about what he knew and when.
Yesterday HSBC reserved $700m to cover "certain law enforcement and regulatory matters" in America and $1.3bn to pay for claims from customers who were mis-sold payment protection insurance (PPI) and interest rate hedging products.
It did not set aside any money for the Libor or Euribor interest rate rigging scandals, saying it is not possible to measure what the costs could be –but said it is co-operating with inquiries from watchdogs.
It also admits that charges for the other scandals could be "higher, possibly significantly higher" than it has now set aside. The bank said it is profoundly sorry for the pain it has caused customers and shareholders.
A number of people have left the bank as a result of internal inquiries, but HSBC declined to say how many.
In the first half of this year, profits were down 3 per cent to $10.6bn (£6.75bn) – an amount campaigners say shows that banks still do not operate in the public interest.
HSBC chairman Douglas Flint said he finds it "extremely frustrating and infuriating when we discover areas where the behaviour of HSBC has fallen short of the standards we expect... This group is made up of many legal entities around the world, all with their own traditions and heritage, but we have only one reputation". Mr Gulliver is mid-way through a shake-up to cut costs, sell or shrink unprofitable businesses, and to direct investment to faster growing Asian markets.
The bank employs 271,500 full-time staff around the world – 27,500 less than it did six months ago. That is indicative of the jobs squeeze across finance industries.
HSBC made $4.3bn from disposing of certain businesses around the world. The bank notes that it has $150bn on account with the world's central banks, a sign of both its financial strength and the lack of demand for credit, it said.
Last month, Barclays was fined £290m by UK and US regulators for giving false Libor submissions, and other banks are expected to be caught up in the scandal. It also forecast that the eurozone economy would shrink this year.