HSBC sets aside $378m on the back of currency trading investigations

3rd November 2014

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Like Barclays last week, HSBC has now set aside a lump sum to cover any potential costs, which could arise from investigations into currency trading.

HSBC announced today that its pretax profits for the third quarter edged slightly up from the $4.5bn achieved over the same period last year to $4.6bn.

In its market update, it confirmed that it had put aside $378m “relating to the estimated liability in connection with the ongoing foreign exchange investigation” by the UK City watchdog, the Financial Conduct Authority (FCA).

In addition it has set aside $589m to deal with any further Payment Protection Insurance (PPI) mis-selling claims.

Commenting on the latest set of results, HSBC group chief executive, Stuart Gulliver, described the third quarter as “a period of continued progress”. He added that despite the rising regulatory expectations, he was confident that the business model remains sustainable and that it can deliver further value for shareholders .

He said: “Revenue continued to grow in Commercial Banking, dominated by growth in our home markets of Hong Kong and the United Kingdom. Global Banking and Markets contributed a strong revenue performance with its differentiated business model.”

Graham Spooner, investment research analyst at The Share Centre claimed the bank’s results are “mixed” and were were dominated by an increase in provisions and higher costs, largely as a result of regulatory demands.

He said: “We continue to suggest income seeking investors ‘buy’ for the longer term and build a holding over time by drip feeding into the stock. HSBC has remained a significant dividend payer and though progress may be slow, we believe the shares could be a better option than other banks. HSBC is viewed as more conservatively managed with a superior balance sheet and deposits.

“The CEO’s three year plan includes a return on equity target of 12-15% which it aims to achieve through cutting significant parts of its US operations, along with other businesses around the world. The business plan also concentrates on organic growth from a few key areas that trade heavily with each other.”

Last week Barclays announced it had a £500m pot to cover any potential fines over foreign exchange rate rigging and it has also earmarked an additional £170m to deal with compensation for customers mis-sold PPI.

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