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HSBC hurt by $2bn hit

Jul 30 2012 11:57
AFP

London - HSBC on Monday said its first-half profit fell after Europe's biggest bank took a $2bn hit to cover penalties from a money-laundering scandal in the United States and insurance mis-selling claims.

Earnings after tax dropped 8% to $8.44bn (€6.88bn) in the six months to June, compared with the same period last year, the Asia-focused bank said in a results statement .

HSBC took a provision of $700m to cover fines for failing to apply anti-money laundering rules, apologised again for the scandal and warned the overall cost could be "significantly higher."

The bank said it also set aside $1.3bn in the first half to compensate clients in Britain who were mis-sold insurance.

The London-based lender said it continued to cooperate with authorities after US lawmakers last month accused it of failing to apply anti-laundering rules, benefiting Iran, terrorists and drug dealers.

"It is not possible at this time for HSBC to know the terms on which a resolution of the ongoing investigations could be achieved or the form or timing of any such resolution," it said.

"Based on the facts currently known, HSBC has recognised a provision of $700m, which reflects HSBC's best estimate of the aggregate amount of fines and penalties that are likely to be imposed in connection with these matters.

"There is a high degree of uncertainty in making this estimate and it is possible that the amounts when finally determined could be higher, possibly significantly higher."

HSBC was thrown into crisis last month when a US Senate report found that it had allowed affiliates in countries such as Mexico, Saudi Arabia and Bangladesh to move billions of dollars in suspect funds into the United States without adequate controls.

Lawmakers said money laundered through HSBC-linked accounts benefited Mexican drug lords and terrorist networks, and skirted US sanctions on Iran.

HSBC apologised again on Monday for the crisis which has already sparked the resignation of its head of compliance David Bagley.

"We apologise 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," chief executive Stuart Gulliver said.

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