HSBC sets aside $378m for forex manipulation probe
LONDON: HSBC Holdings has set aside $378 million for a potential settlement with Britain’s financial watchdog for alleged manipulation of currency markets as the bank reported a 12 percent fall in underlying profit in the third quarter.
Europe’s largest bank by market value provided $1.8 billion in total in the quarter for fines, settlements and compensation costs related to misselling loan insurance.
HSBC’s provision for the forex investigation was lower than the 500 million pounds (800.15 million US dollar) set aside by Barclays and 400 million pound provision by Royal Bank of Scotland.
The bank said on Monday the British regulator had proposed a resolution of its investigation into alleged manipulation in the $5.3 trillion-a-day global forex markets. HSBC is one of six banks in talks with the regulator to pay about 1.5 billion pounds in a group settlement, sources have said.
Banks in Europe and the US have recently set aside as much as $6.9 billion for possible forex settlements.
The banking industry has already paid out billions of dollars to settle investigations across a range of activities, including mortgages and benchmark interest rates as authorities have tried to crack down on the excesses that led to the financial crisis.
The forex manipulation, revealed after banks were already under scrutiny for profiteering in the setting of benchmark lending rates, relates to daily fixing rates which traders are alleged to have manipulated.
HSBC’s results showed underlying profit was $4.4 billion.
The underlying profit strips out price moves in the bank’s own debt and adjusts for businesses sold or bought.
On a statutory basis, analysts had been expecting pretax profits to
The banking industry has already paid out billions of dollars to settle investigations across a range of activities, including mortgages and benchmark interest rates.
climb 16 percent in the quarter compared with last year but they rose just 2 percent to $4.6 billion.
“If you strip out the regulatory provisions it’s a strong operating quarter — unfortunately you can’t strip out the provisions,” Richard Hunter, head of equities at Hargreaves Lansdown, said.
HSBC’s shares fell 3 percent when the results were first announced but were down 0.3 percent at 637 pence by mid-morning.
“The results are OK, but I wouldn’t want to buy them at these levels,” Beaufort Securities sales trader Basil Petrides said. I’d rather buy HSBC shares around the 600 pence level. There are still too many ongoing regulatory issues with them,”
US authorities are also examining the alleged rigging of foreign exchange benchmarks and any settlement there is likely to be more costly. The US Department of Justice has shown it has the power and willingness to push through multi- billion dollar fines on banks for misconduct.
HSBC said the British regulator was the only authority it was holding “detailed” settlement discussions with.
“At the moment the only detailed settlement discussions in which we are involved is with the FCA,” Iain Mackay, HSBC finance director said, referring to Britain’s Financial Conduct Authority.
“There are a number of other jurisdictions that have expressed interest in this topic and we are working closely with authorities in each of those to work through those issues.”
Estimates on how much banks could pay out in total in the forex probe vary wildly.
Earlier this year, banking research firm Autonomous put the worldwide total at around $35 billion, which would dwarf the $6 billion paid by 10 financial firms to settle an international investigation into the manipulation of benchmark interest rates.
HSBC also said it had been summoned to appear before French magistrates over whether its Swiss private bank had helped French citizens to evade tax.
The $ 1.8 billion HSBC has set aside includes $ 701 million to compensate British customers who were mis-sold products and a $ 550 million settlement with a US government agency over allegations the bank mis- sold mortgage- backed securities.
HSBC’s adjusted revenues in the third- quarter were flat at $ 15.6 billion.