HSBC Holdings PLC, Europe’s largest bank by market value, yesterday posted lower-than-expected third-quarter profit as it set aside more than US$1 billion for customer redress and an investigation into rigging currency markets.
Pretax profit rose to US$4.61 billion from US$4.53 billion in the year-earlier period, the London-based lender said in a statement. That compares with the US$5.47 billion average estimate of seven analysts compiled by Bloomberg.
The bank made a US$378 million provision toward a settlement of the currency benchmark-rigging investigation and set aside an additional US$701 million for customer redress in the UK.
“Regulatory cost inflation continues to be a headwind,” Sanford C Bernstein Ltd banking analyst Chirantan Barua said. The provision was still “much lower than peers.”
HSBC brings US$2.4 billion to the total banks have set aside to settle allegations traders used instant-message groups to share information about their positions and client orders to rig the US$5.3 trillion per day foreign exchange market.
Last week, Royal Bank of Scotland Group PLC set aside ￡400 million (US$639 million) for the matter, Barclays PLC ￡500 million, and Citigroup Inc took a US$600 million charge.
Shares fell 0.3 percent to ￡6.37 pence at 9:23am in London trading. The stock has fallen 3.8 percent so far this year, for a market value of about ￡122 billion.
Provisions for mis-selling payment protection insurance accounted for US$589 million of the UK customer redress program this quarter, the lender said.
The bank also took a US$550 million charge to resolve accusations of misconduct in its handling of mortgage securities sold to taxpayers before the financial crisis. The deal was reached in September.
Pretax profit at HSBC’s global banking and markets unit fell 49 percent to US$941 million from US$1.9 billion in the third quarter last year.
Revenue at the markets business increased to US$1.87 billion from US$1.58 billion in the year-earlier period.
HSBC’s common equity Tier 1 ratio, a measure of its holdings of the highest-quality form of capital, increased to 11.4 percent from 11.3 percent in the first half.
The lender’s estimated leverage ratio, a gauge of equity capital against assets, was 4.6 percent, compared with 4.3 percent in the first half.
The Bank of England last week said UK banks would have to meet a minimum ratio of 4.05 percent by 2019.
HSBC also made a US$760 million provision for souring loans, compared with US$1.59 billion a year earlier.
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