HSBC Slides as Money Laundering Bill Hits $1.5 Billion


LONDON -- The shares of HSBC (ISE: HSBA.L) (NYS: HBC) slid 15 pence, or 2%, to 611 pence during early London trade this morning after the bank set aside a further $800 million in relation to U.S. money-laundering investigations.

Today's charge came after a U.S. Senate subcommittee concluded earlier this year that the FTSE 100 bank had "exposed the U.S. financial system to a wide array of money laundering, drug trafficking and terrorist financing risks due to poor anti-money laundering controls."

The $800 million cost was revealed within HBCS's third-quarter results, and bumps up the bank's total money-laundering provision to $1.5 billion after $700 million was set aside for the investigation within August's half-year figures.

Referring to the money-laundering investigation, Stuart Gulliver, HSBC's chief executive, said today: "We are actively engaged in discussions with U.S. authorities to try to reach a resolution, but there is not yet an agreement. The U.S. authorities have substantial discretion in deciding exactly how to resolve this matter."

Gulliver also warned that "the final amount of the financial penalties could be higher, possibly significantly higher, than the amount accrued."

HSBC's third-quarter numbers revealed a further $353 million charge to compensate U.K. customers that were mis-sold payment protection insurance.

The provisions did not seem to hinder HSBC's wider progress, however, as the bank claimed underlying profits gained 125% to $5 billion during July, August, and September. Profits for the first nine months of the year advanced 21% to almost $15 billion.

Prior to today, City experts had forecast HSBC's full-year underlying earnings to be approximately 56 pence per share and the 2012 dividend to come in around 28 pence per share. These projections mean the shares currently trade at about 11 times potential profits and yield a possible 4.6%.

Whether HSBC is a "buy" based on this morning's third-quarter update, its share-price rating and the general outlook for the banking sector remains your decision.

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