HSBC warns it could take years to settle Madoff case as bank takes $1.1bn hit
HSBC has warned it could take years to finally settle a lawsuit over the Bernard Madoff Ponzi scheme, as the bank’s profits fell 14% after it took a $1,1bn (£830m) hit on the 2009 scandal,The London-headquartered bank’s finance chief issued the warning as the provision for the case dragged on HSBC profits, offsetting a jump in income in the three months to the end of September,HSBC has so far taken a $1,1bn provision to cover a lawsuit by investors who lost money in the largest Ponzi scheme in history.
Madoff admitted in 2009 to defrauding thousands of investors of about $65bn and was jailed for 150 years.He died in prison in 2021.HSBC provided administrative services to a number of funds that had assets invested with Madoff Securities.The hit to HSBC comes after a court turned down the bank’s efforts to appeal over the case against its Luxembourg arm.The chief financial officer, Pam Kaur, told journalists that the figure could vary and that a settlement over the case could take years.
“This is a complex case,” she said on Tuesday.“This will take a period of time to go through.It could take months, it could take years, as you can imagine this case itself has taken a very long time to come through.”Kaur said the $1.1bn figure was “not some average number we have come up with.
We have come up with the best judgment based upon advice from our accountants, our internal counsel, our external legal counsel,Of course, there could be some variation around that number,”HSBC said it planned to file a further case in the Luxembourg court of appeal and if that fails it will dispute the final amount in later proceedings,The latest provision contributed to a 14% drop in pre-tax profits for HSBC, which fell to $7,3bn for the three months to 30 September.
That was down from $8.5bn during the equivalent period last year.The lender said the Madoff provision fed into a 24% jump in operating costs to $10bn.However, that figure also included restructuring costs that covered severance for bankers let go as part of a shake-up under the chief executive, Georges Elhedery, announced last year.HSBC also put aside another $1bn to deal with the ripple effects of China and Hong Kong’s real estate downturn, which has hit the banking sector with a rise in bad debts linked to the crash in property prices.
Together, the provisions offset a 15% rise in net interest income to $8.8bn, and a 12% jump in net fee income to $3.5bn.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionKaur also commented on HSBC’s links to the private credit market, which has come under scrutiny after two US company bankruptcies and warnings from the International Monetary Fund and the Bank of England.The Bank of England’s governor, Andrew Bailey, said last week that the recent failures had worrying echoes of the sub-prime mortgage crisis that kicked off the global financial crash of 2008.
Meanwhile, the IMF warned that a downturn could have ripple effects across the financial system, given that banks were increasingly exposed to a largely unregulated private credit industry,There are concerns that a downturn could destabilise traditional banks that issue loans to the shadow banking sector,HSBC’s own direct exposure to the private credit industry was small and in the “single-digit billions”, Kaur said, adding: “We are not a big player in this space at all,” Its rival Barclays revealed – and played down – its own £20bn exposure last week,“What is very important in these situations is to consider the second- and third-order risks of other smaller banks or hedge funds that we may be dealing with, and that becomes a primary focus for us,” Kaur said.
HSBC is “monitoring the situation very carefully”, she added.Elhedery said in a statement released alongside the bank’s results: “We are becoming a simple, more agile, focused bank, built on our core strengths.The intent with which we are executing our strategy is reflected in our performance this quarter, despite taking legal provisions related to historical matters.“We remain fully focused on helping our customers navigate new economic realities, putting their changing needs at the heart of everything we do.”
HSBC warns it could take years to settle Madoff case as bank takes $1.1bn hit
HSBC has warned it could take years to finally settle a lawsuit over the Bernard Madoff Ponzi scheme, as the bank’s profits fell 14% after it took a $1.1bn (£830m) hit on the 2009 scandal.The London-headquartered bank’s finance chief issued the warning as the provision for the case dragged on HSBC profits, offsetting a jump in income in the three months to the end of September.HSBC has so far taken a $1.1bn provision to cover a lawsuit by investors who lost money in the largest Ponzi scheme in history
Steeper UK productivity cut of more than £20bn makes tax rises more likely
Rachel Reeves will have to account for a bigger-than-expected £20bn hit to the UK public finances in next month’s budget, increasing the likelihood that the chancellor will breach a key Labour’s manifesto pledge not to raise income tax.The Treasury’s forecaster is preparing a steeper than anticipated cut to UK productivity for the next five years, the Guardian understands.The Office for Budget Responsibility (OBR) is planning to cut its trend productivity growth prediction by 0.3 percentage points after a downgrade of the UK’s economic momentum since the 2008 financial crash.Reeves is understood to be furious that the OBR has chosen her second budget to downgrade the figure, which indicates how effectively workers can do their jobs and underpins forecasts of economic growth
After my car was damaged in a Tesco car wash it has washed its hands of my complaint
The tail spoiler and brake light of my car were ripped off in an automated car wash which I use regularly at my local Tesco superstore. Staff there commented on the frequency with which cars are damaged. The repair cost has been estimated at £750, but Tesco is refusing to accept liability. It cites a maintenance report, prepared by the company it contracts to provide and maintain the car washes, which apparently found no fault. It refused to let me see the report because of “company policy”
CSL share price plummets amid shareholder revolt over executive pay plans
The Australian biotech company CSL has been delivered a “second strike” by shareholders over its executive pay plans, but has survived a push to spill its board.Amid frustration over its depressed share price, which fell even further on Tuesday, the blood plasma therapy firm saw more than 40% of votes cast against its executive pay plans at its annual general meeting in Melbourne on Tuesday.The result was well above the 25% threshold required to trigger a “strike”, the company’s second in a row.Despite hitting the two-strikes trigger – which opened the door for a board spill resolution – shareholders voted overwhelmingly against removing the board of the former commonwealth entity –.“We passed that hurdle,” said the CSL chair, Brian McNamee, in reaction to the spill vote
RBA governor dismisses jobs fears but hints at rates hold after inflation uptick
The Reserve Bank governor has dismissed warnings of rising unemployment and hinted at an interest rate hold, saying the labour market will not “fall off a cliff”.Michele Bullock said the RBA had been surprised by September’s jump in joblessness and an uptick in inflation but emphasised job creation was slowing broadly as the RBA expected.“There are still jobs being created, just not as many,” Bullock said on Monday night.“We’d always thought [unemployment] would drift up a bit. Maybe it’s drifted up a bit further than we thought, but it’s not a huge amount yet
Cobar: two people killed in Endeavour mine explosion in far western NSW
Two people have been killed by an explosion at the Endeavour mine in western New South Wales, devastating the local community of Cobar.Police said emergency services had been called to the mine on Endeavour Mine Road at Cobar, about 600km north-west of Sydney, at about 3.45am on Tuesday.Officers were told that a man, believed to be in his 60s, had been confirmed dead after the underground explosion.Two women were brought to the surface, but one, a woman in her 20s, later died
From White Teeth to Swing Time: Zadie Smith’s best books - ranked!
Ardal O’Hanlon: ‘I fell asleep on stage once – I could hear someone doing my material, got annoyed and woke up’
My cultural awakening: A Jim Carrey series made me embrace baldness – and shave my head on the spot
From Springsteen: Deliver Me from Nowhere to IT: Welcome to Derry – your complete entertainment guide to the week ahead
John Deere obituary
Timely assurance from Lear’s Kent | Letters