HSBC says sorry, takes $700 mn hit for US fraud
London: HSBC Monday said it has set aside USD 700 million for potential penal actions against the bank in the US, where it has found to have had inadequate safeguards against money laundering and terrorist financing activities.
Reporting a 8.43 percent drop in net profit to USD 8.43 billion for the six months ended June 30, 2012, the UK-based banking giant also apologised for its past mistakes and promised to ensure compliance with various regulations more effectively going ahead.
The company witnessed an overall revenue growth primarily on the contribution of emerging markets like India and China but increased cost and provision for potential regulatory actions have dragged down its profits.
"We apologies for our past mistakes in relation to anti-money laundering controls, and it is a priority for senior management to build on steps already taken to manage risk and ensure compliance more effectively," HSBC Holding Plc's Group CEO Stuart Gulliver said.
HSBC's overall underlying revenues grew four percent from the year-ago period to USD 34.76 billion in the January-June period of 2012 mainly on account robust performance of faster-growing markets such as Asia.
"We experienced double-digit revenue growth in the priority markets of mainland China, India, Brazil and Argentina," the bank said.
The Asia-focused bank said it has set aside USD 700 million to cover potential penalties following a report by the US Senate alleging that HSBC of exposing the American financial system to various terror financing, money laundering and drug trafficking activities with transactions worth billions of dollars, due to poor risk control systems at the bank.
HSBC also said it was putting USD 1.35 billion aside primarily to cover the misselling of payment-protection insurance to customers.
"Underlying costs were USD 1.9 billion higher than in the first half of 2011 reflecting a number of notable items, including UK customer redress provisions of USD 1.3 billion, provisions for certain US law enforcement and regulatory matters of USD 700 million and restructuring costs of USD 6 million," HSBC said.
HSBC Group Chairman Douglas Flint said,"HSBC has made mistakes in the past, and for them I am very sorry. Candidly, in particular areas we fell short of the standards that I, my colleagues, our regulators, customers, and investors expect.
"We cannot undo the mistakes but I can assure you that Stuart Gulliver and I are determined, and have made it our most important priority, to strengthen HSBC and reinforce our values. Our business practices and actions must stand up to scrutiny wherever we operate," he added.
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