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HSBC hurt by fines

Monday, November 03, 2014 - 01:49

The pressure is piling on HSBC as the financial heavyweight misses third quarter earnings expectations. Melanie Ralph looks at how long it will take Europe's largest bank to bounce back from pending fines in currency manipulation and mis-selling insurance.

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More bad news for banks, and this time HSBC's is in the spotlight. Shares in the British bank fell 3 percent after it reported a 12 percent drop in underlying third-quarter earnings. Analysts were expecting pretax profits to rise by 16 percent compared with last year, but they rose just 2 percent to $4.6 billion The bank is blaming higher costs, rising as much as 6 percent. It's having to set aside cash for settlements in three different areas. Over 500 million dollars for mis-selling loan insurance in Britain. About the same amount to cover fines for allegedly mis-selling US mortgage related securities. And an additional 378 million dollars to cover potential fines linked to an investigation into the rigging of currency markets. Despite the costs, Dominic Elliot from Reuters Breakingviews says HSBC is one of the long term winners. (SOUNDBITE) (ENGLISH) REUTERS REPORTER, DOMINIC ELLIOT, SAYING: "It's still got those huge risks that too big to fail institutions have but on the other hand it has done better in some of its businesses than a lot of the other competitors. In Hong Kong impairments were down a lot less than some of the other banks have seen, and so it looks as though its got a fairly good balance in terms of businesses, and that should be a factor that helps it over the years." There might be light at the end of the tunnel for HSBC but the same can't be said for its competitor Standard Chartered. U.S. authorities are reportedly investigating the London-based bank for more potential U.S. sanctions violations linked to alleged dealings with Iran. Standard Chartered has already paid almost $670 million to U.S. authorities over breaches in 2012. The latest investigation is yet another headache for Chief Executive Peter Sands who was already under pressure from shareholders.

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HSBC hurt by fines

Monday, November 03, 2014 - 01:49