HSBC chief says sorry as bank takes £950m hit

The bank said it increased its provision to cover mis-sold payment protection insurance (PPI) by $537m (£341.6m) in the 
three months to June, bringing the total charge to date to $1.7 bn (£1.1 bn).

HSBC also took a $237m (£150m) hit for mis-selling complex financial products known as interest-rate swaps to small businesses, while it has set aside 
$700m (£445m) to deal with money-laundering penalties.

Mr Gulliver said: “We are profoundly sorry for our mistakes, and are committed to putting them right.”

The wave of provisions threatened to overshadow better-than-expected first-half results, which showed a 3 per cent dip in underlying pre-tax profits to $10.6bn (£6.7bn) and a 3 per cent rise in net operating income to $36.9 bn (£23.5bn).

Earlier this month, a Senate investigation revealed that HSBC had inadvertently allowed rogue states and drugs cartels to launder billions of pounds through its US arm.

The bank warned that the total amount of fines and penalties levelled against it could be “significantly higher” than the $700m (£445m) set aside so far.

The findings, which accused HSBC of ignoring warnings and breaching safeguards that should have stopped the laundering of money from Mexico, Iran and 
Syria, led to the resignation 
of head of compliance David Bagley.

The revelations heaped pressure on Business Minister Lord Green, who was chairman of HSBC at the time the failings took place.

Mr Gulliver added: “It is right that we be held accountable and I apologise for our past shortcomings.”

He went on: “HSBC is now run and managed as a genuinely global firm, making it easier to 
set, monitor and enforce standards.”

The charge for interest rate swap mis-selling follows the findings of an investigation by UK regulators which were published at the same time that the Libor-fixing scandal emerged.

The complicated derivatives products may have been sold to businesses as protection – or to act as a hedge – against rising rates without the customer fully grasping the risks.

With regard to Libor, HSBC said it was co-operating with investigations and requests for information from authorities, but added that it was not “practicable at this time” to predict the resolution of the investigations.

The additional provision for PPI mis-selling comes after Lloyds last week increased its provision for PPI claims by £700m to £4.3bn.

Elsewhere, the bank revealed that bad debt charges fell 9 per cent year on year to $4.8bn 
(£3.1bn) in the period, while its return on equity, a key measure for shareholders, improved to 10.5 per cent from 9.5 per cent in the previous half. Shares in the bank rose 1 per cent after yesterday’s results were published.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “HSBC has added to the emerging theme of the banking updates so far – strong headline performance partially offset by corporate contrition.”

He added that there was “much to be said for the numbers themselves”, particularly with strong performances from emerging markets and its investment banking arm.