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HSBC sets aside £237m for currency probe as profits rise
Britain's biggest bank is third in UK to set aside hundreds of millions for expected settlements related to foreign exchange manipulation
British banks’ total bill for currency rigging has climbed above £1bn after HSBC took a $387m (£237m) charge related to an expected settlement with the City watchdog.
Europe’s largest bank disclosed the provision as part of $1.6bn worth of misconduct-related provisions, which also included $589m worth of PPI compensation costs.
The charges also included a recent $550m settlement reached in September with US regulators over mis-selling mortgage bonds, and other UK customer redress programmes. This contributed to a 12pc decline in underlying profits at the bank, although swings in the value of the bank’s debt meant a rise in unadjusted profits.
Six banks are expected to settle with the Financial Conduct Authority (FCA) this month over allegations that they manipulated foreign exchange rates.
Barclays and Royal Bank of Scotland (RBS) set aside £900m between them last week, while Citigroup, JPMorgan and UBS have all made heavy provisions. Between them, the three British banks have now set aside £1.14bn.
Unlike Barclays and RBS, who said their provisions covered multiple investigations, HSBC said the money it set aside only covered the FCA. Iain Mackay, its finance director, said the UK regulator was the only one to have held “detailed settlement discussions” with the bank.
On top of this provision and the PPI charge – which Mr Mackay attributed to “a very significant step up in the number of claims coming from claims management companies” – the bank also revealed that French authorities were considering a criminal investigation against its Swiss private bank over tax issues.
Any fines related to this have the potential to be “significant”, the bank said.
HSBC also pointed to the soaring cost of regulation. Operating expenses rose by 15pc to $11.1bn in the third quarter of the year, or 6pc discounting the effects of the one-off provisions.
This meant the bank’s underlying profits in the third quarter fell from $5bn a year ago to $4.4bn. The fall came despite revenues rising by 4.6pc, reversing a decline seen in the first half of the year, as its trading division benefited from increasing market volatility and improved lending activity in the UK and Asia.
Shares in the bank fell as analysts said profits had missed their forecasts. HSBC was trading around 1.5pc down on Monday afternoon.
Stuart Gulliver, HSBC's chief executive, underlined the bank’s commitment to Hong Kong, where it splits its head office operations with the UK, despite the widespread protests in the region.
“HSBC has been here since 1865 and Hong Kong has been through some very difficult times. In comparison to the more extreme tough times this is not a significant threat,” he said.