HSBC today set aside $2 billion (£1.3 billion) to pay for likely US legal costs in connection to extraordinary money-laundering investigations and for mis-selling products to customers in Britain.
The bank is under intense fire for allowing Mexican cocaine lords to use its accounts to launder drug money, as well as for its suspected involvement in a series of other scandals that have rocked the industry, notably the Libor interest rate-rigging furore.
HSBC this morning said in the first half of the year profit was down 3% to $10.6 billion. Of greater note was the $700 million reserved to cover “certain law enforcement and regulatory matters” in America and $1.3 billion to pay for claims from customers mis-sold payment protection insurance and interest rate-hedging products.
It did not set aside any money for Libor or Euribor, saying it is not possible to measure what the costs could be. It also admits charges for the other scandals could be “profoundly higher” than the figures revealed today.
The bank said it is “profoundly sorry” for the pain it has caused customers and shareholders but insisted these problems were not indicative of the culture of what is a gigantic organisation.
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”.
He said the banking industry is operating in a “hostile climate”, “so we must double our efforts to convince our regulators, customers and investors that we are striving for the highest possible standards”.
A US Senate report this month slammed HSBC for letting clients shift funds from dangerous and secretive countries.
Chief executive Stuart Gulliver is midway through a shake-up to cut costs.
He admitted the Mexican issue was “shameful, embarrassing and painful”, and that the firm had “seriously lost its way” over the money laundering.
