HSBC has warned that it could take years to settle a lawsuit related to the Bernard Madoff Ponzi scheme, after the bank took a $1.1bn (£830m) provision that contributed to a 14% drop in quarterly profits.
The London-headquartered lender’s finance chief, Pam Kaur, said the case against its Luxembourg arm was complex and could take months or years to resolve. HSBC provided administrative services to funds invested with Madoff Securities, which collapsed in 2009 after defrauding investors of about $65bn.
The provision contributed to a drop in pre-tax profit to $7.3bn in the three months to 30 September, down from $8.5bn a year earlier. Operating costs rose 24% to $10bn, partly due to the Madoff provision and restructuring costs.
HSBC also set aside $1bn to cover potential losses from the downturn in Chinese and Hong Kong property markets, offsetting a 15% rise in net interest income to $8.8bn and a 12% increase in net fee income to $3.5bn.
Kaur said the bank’s direct exposure to the private credit market was small, but that it was monitoring second- and third-order risks. Chief executive Georges Elhedery said the bank remained focused on its core strengths despite the legal provisions.
