HSBC has admitted it is breaching a US regulator’s order to bolster its defences against financial crime as it announced a slump in first-half profits.
The UK’s biggest bank also announced a $2.5bn (£1.8bn) share buyback following the sale of its Brazilian business in a move intended to demonstrate its financial strength.
As the bank reported a 29% fall in first-half profits to $9.7bn, it also made a series of legal disclosures that confirmed it had received requests for information from various regulatory and law enforcement authorities around the world in relation to Mossack Fonseca, the Panama law firm linked to tax-haven companies.
Among the legal disclosures is a reference to an order agreed in October 2010 with the US Office of the Comptroller of the Currency which required the bank to “establish an effective compliance risk management programme across HSBC’s US businesses”.
“HSBC Bank USA is not currently in compliance with the OCC order. Steps are being taken to address the requirements of the orders,” HSBC said, without providing details.
In February the bank had revealed an official monitor it installed after a $1.9bn fine over money laundering four years ago had raised “significant concerns” about the slow pace of change to its procedures to combat crime. “Through his country-level reviews the monitor identified potential anti-money laundering and sanctions compliance issues that the [department of justice] and HSBC are reviewing further.”
Stuart Gulliver, the bank’s chief executive, focused on adjusted profit of $10.8bn, down 14%, which the bank described as a “a reasonable performance in the face of considerable uncertainty”.
“While economic conditions remain difficult we are making progress in all
of the areas within our control,” said Gulliver, who a year ago announced plans to axe 25,000 roles around the world, cutting costs and slimming down global ambitions.
He pointed to the uncertainty sparked by the UK’s vote on 23 June to leave the European Union, which in the past he has said could require the bank to move 1,000 roles to France.
“Following the outcome of the referendum on the UK’s membership of the European Union, there has been a period of volatility and uncertainty which is likely to continue for some time. We are actively monitoring our portfolio to quickly identify any areas of stress, however it is still too early to tell which parts may be impacted and to what extent,” he said.
Chairman Douglas Flint – who is to leave in 2017 – said the bank was helping customers and staff deal with the Brexit vote.
“Now is a time for calm consideration of all the issues at hand and careful assessment of how prosperity, growth and a dynamic economy for both the UK and the rest of Europe can be ensured following an orderly transition period. Critical elements include securing the best possible outcome on continuing terms of trade and market access, and ensuring the UK remains attractive for inward investment and has access to all the skills necessary to be fully competitive,” Flint said.
A plan to achieve a 10% return on equity – a measure of performance monitored by shareholders – will no longer be hit by 2017 as previously envisaged.
This article was written by Jill Treanor, for theguardian.com on Wednesday 3rd August 2016 06.27 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010