HSBC prepares to face U.S. money laundering charges


By Howard Mustoe and Gavin Finch

HSBC Holdings Plc (HSBA), Europe’s largest bank by value, said it’s likely to face criminal charges over allegations it broke U.S. anti-money laundering rules and set aside a further $800 million to cover the costs of the probe.

“The resolution of at least some of these matters is likely to involve the filing of corporate criminal as well as civil charges and the imposition of significant fines, penalties and/or monetary forfeitures,” the bank said in a statement today. The London-based bank also reported profit that missed analysts’ estimates today, and set aside $357 million to redress U.K. customers who were mis-sold loan insurance.

Chief Executive Officer Stuart Gulliver’s attempts to overhaul the bank are being hobbled by the looming fines and the need to pay back customers improperly sold interest-rate swaps and consumer-loan insurance. Today’s extra provision brings the bank’s total to $1.5 billion. It set aside $700 million in July for U.S. fines after a Senate committee found it had given terrorists and drug cartels access to the U.S. financial system.

“We are actively engaged in discussions with U.S. authorities to try to reach a resolution, but there is not yet an agreement,” Gulliver said in the statement. “The final amount of the financial penalties could be higher, possibly significantly higher, than the amount accrued.”
PPI Provision

HSBC fell as much as 2.7 percent in London trading and was 1 percent lower at 620 pence as of 8:50 a.m. in London.

The settlement for HSBC that regulators and the Manhattan district attorney were aiming to conclude as early as September may have been slowed when New York’s banking superintendent accused Standard Chartered Plc (STAN) of laundering $250 billion for Iran.

Third-quarter underlying pretax profit rose to $5.04 billion from $2.24 billion a year earlier, the lender said in a statement, missing the $5.6 billion median estimate of eight analysts surveyed by Bloomberg.

For payment-protection insurance, or PPI, the bank has set aside about $2 billion, of which it had spent about $750 million as of June 30. Among other U.K. banks involved in the PPI scandal, Barclays Plc (BARC) last month took a 700 million-pound ($1.1 billion) charge, while Royal Bank of Scotland Group Plc set aside another 400 million pounds. Lloyds Banking Group Plc, Britain’s biggest mortgage lender, made an additional provision of 1 billion pounds, bringing the industry total to about 11 billion pounds.