HSBC, Europe's biggest bank by market value, has set aside a further $1.15 billion to cover potential US fines for failing to stop money-laundering in its Mexican unit and compensate its UK customers for mis-selling payment protection insurance.
The provisions were announced Monday alongside a 52 percent fall in third-quarter net profit to $2.5 billion compared to $5.2
billion a year earlier.
HSBC shares were down 2.5 percent in early trading in London.
The bank raised its total provision arising from the US money-laundering investigation by $800 million to $1.5 billion, though it warned that the cost could go even higher. It also set aside an extra $353 million to compensate U.K. customers, raising the total estimated cost for payment protection insurance to $1.8
billion.
HSBC says it is also likely to face criminal charges in the money laundering case.
“The US authorities have substantial discretion, and prior settlements can provide no assurance as to how the US authorities will proceed in these matters,” the bank said.
Earlier this year, HSBC paid a fine of $28 million - 379 million Mexican pesos - to Mexican authorities for non-compliance with money laundering controls.
A US Senate investigative committee also reported that in 2007 and 2008 HSBC Mexico sent to the United States about $7 billion in cash. “Bulk cash shipments could reach that volume only if they included illegal drug proceeds,” the committee concluded.
HSBC Mexico acknowledged that it failed to report 39 suspicious transactions and had been late in reporting 1,729 others.
Despite the bank's legal problems, Chief Executive Stuart Gulliver was upbeat about the company's performance, with underlying earnings - the bank's own measure of performance - up from $500 million last year to $2.8 billion in the recent quarter.
Pretax profit was down 51 percent to $3.5 billion, and operating income was down 14 percent to $18.4 billion. Loan impairment charges were down 27 percent to $14.6 billion, mainly due to improvements in North America, Gulliver said. - Sapa-AP