HSBC earmarks $800 mn more for possible penal actions in US

HSBC earmarks $800 mn more for possible penal actions in US London: Global banking major HSBC Monday said it has set aside an additional USD 800 million for potential penal actions against the bank in the US taking the total provision for the matter to USD 1.5 billion.

In July, the bank had earmarked USD 700 million for possible regulatory fines in the US.

This was announced as the banking entity posted a sharp plunge in net profit to USD 2.5 billion in the three months ended September 30, 2012 compared to USD 5.22 billion in the year-ago period.

The funds has been earmarked 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's revenue rose 20 percent from the year-ago period to USD 16.13 billion in July-September quarter of 2012.

The bank said it is putting USD 353 million aside primarily to cover the mis-selling of payment?protection insurance to customers taking the total earmarked funds to USD 1.15 billion announced Monday.

However, HSBC warned that the ultimate fine could be much larger.

"The US authorities have substantial discretion in deciding exactly how to resolve this matter. Indeed, the final amount of the financial penalties could be higher, possibly significantly higher, than the amount accrued," HSBC Group Chief Executive Stuart Gulliver said in a statement.

HSBC's underlying profit (excluding the impact of changes in the value of its debt) more than doubled to USD 5.04 billion in the September quarter from USD 2.24 billion a year earlier.

The bank attributed increase in underlying profit to revenue growth in segments such as global banking and markets, and commercial banking operation.

"The third quarter results include an additional provision of USD 800 million in relation to the ongoing US anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control investigations. We are actively engaged in discussions with US authorities to try to reach a resolution, but there is not yet an agreement," he said.

PTI