'We are becoming a more agile, focused bank': HSBC announces drop in quarterly profits
Banking giant HSBC has delivered a drop in quarterly profits although analysts said there was growing evidence that its new strategic plan is working.
HSBC reported pre-tax profits of $7.3bn (£5.5bn) for the third quarter – a drop of $1.2bn (£898m) on the same period 12 months ago.
The announcement comes a day after the banking giant revealed it will set aside $1.1bn (£826m) following a court ruling related to a long-running lawsuit brought by investors who lost money in Bernard Madoff’s investment fraud.
The British lender said the drop in profits compared to 2024 “reflected an increase in operating expenses” during the third quarter which included legal provisions of $1.4bn (£1.04bn), the bulk of which was related to the Madoff lawsuit.
Profits after tax also fell $1.2bn (£898m) to $5.5bn (£4.1bn) for the third quarter.
Group chief executive Georges Elhedery said the bank remained “fully focused on helping our customers navigate new economic realities”.
He said: “We are becoming a simple, more agile, focused bank, built on our core strengths. The intent with which we are executing our strategy is reflected in our performance this quarter, despite taking legal provisions related to historical matters.”
The provision to set aside money for Madoff investors came after the bank lost part of an appeal in a Luxembourg court ruling last Friday.
It follows a case brought by Herald Fund SPC, which in 2009 sued HSBC Securities Services Luxembourg (HSSL), claiming losses of cash and securities linked to Madoff’s Ponzi scheme, which was one of the largest financial scandals in history.
Last week, the Luxembourg Court of Cassation rejected HSSL’s appeal on Herald’s securities restitution claim, but upheld its appeal concerning the cash restitution claim.
HSSL now plans to pursue a second appeal before the Luxembourg Court of Appeal to contest the amount it may be required to pay.
Madoff, who died in prison in 2021, admitted in 2009 to defrauding thousands of investors of around $65bn US dollars (£48.8bn).
Various HSBC companies had been named as defendants in lawsuits arising out of the Madoff fraud scandal.
Herald Fund SPC is a European fund that put money into Madoff investment funds, for which HSBC’s Luxembourg securities arm, HSSL, was the custodian.
Richard Hunter, Head of Markets at interactive investor, commented: “The numbers are messy given recent provision and acquisition announcements, but underneath the bonnet there are many signs of comfort leading to the conclusion that HSBC is comfortably able to forge ahead with its growth ambitions."
"For all the noise, there is also evidence of growing success for its strategic plan, which is significant but simple. Whereas HSBC had been moving towards becoming a business with a slavish reliance on interest rate movements and levels, the revised and increasing focus on the growth in affluent wealth, especially in Asia, is key to the new offering.”
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “HSBC’s headline numbers might look disappointing at first glance, but dig a little deeper and the story flips. Strip out the hefty $1.1bn Madoff-related provision and other one-offs, and profit before tax rose 3 per cent year-on-year to $9.1bn – a good clip ahead of expectations."