HSBC says likely to see criminal charges on money laundering

Cost Burden

Costs as a proportion of revenue, excluding the fair value of HSBC’s own debt, decreased to 64 percent from 66 percent in the year-earlier period as revenue from continuing operations increased. That’s still higher than Gulliver’s target range of 48 percent to 52 percent.

“Today’s cost performance is very disappointing,” Maughan said. “It raises a question mark about how rapidly these efficiencies can be made by Gulliver and his team.”

HSBC has cut about 21,000 workers in the last nine months, Finance Director Iain Mackay said on the call, cutting total employment to about 266,700 workers. Gulliver said today that the bank may eliminate more jobs.

“We are going to continue to manage the cost base of the firm very tightly, and we are probably likely to see the headcount reduce further from where we are at this moment at time,” Gulliver said.

U.S. Regulators

HSBC has been in talks with U.S. regulators over allegations it laundered funds of sanctioned nations including Iran and Sudan. The probes prompted Standard & Poor’s to question whether the lender, Europe’s largest by market value, is too big to be managed effectively.

A settlement of $1.5 billion would be the biggest reached in the U.S. over such allegations, topping the $619 million in penalties paid in June by ING Groep NV, the biggest Dutch financial-services company.

The provision “is based on the discussions we’ve had with the various departments of the U.S. government” since June, Gulliver told reporters on a conference call today. He said it was up to the U.S. as to when the matter would be settled, and declined to comment further.

The provision for PPI brings to $2.1 billion the amount HSBC has set aside after regulators ordered banks to compensate clients who were forced to buy, or didn’t know they had bought insurance to cover their repayments on mortgages, credit cards and other loans. Of that, HSBC had paid out $1 billion in claims by the end of the third quarter.

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