HSBC Holdings has agreed to pay US$1.92 billion in fines to resolve a lengthy criminal investigation by US authorities into money laundering and terrorist financing, a record bank penalty.
The London-based bank, Europe's largest lender, said yesterday that it had entered a deferred prosecution agreement to settle the accusation of suspicious big-ticket money transactions between its Mexico and US units, and terrorist and illegal financing in the Middle East.
"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again," said Stuart Gulliver, HSBC's group chief executive.
The price of HSBC shares edged up by 0.3 per cent to HK$79.70 yesterday in Hong Kong, while they rose 0.1 per cent to 642 pence each in London by 1.30pm London time.
"The HSBC of today is a fundamentally different organisation from the one that made those mistakes," Gulliver said in a statement. "Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong, and to participate actively with government authorities in bringing to light and addressing these matters."
The HSBC settlement follows one struck on Monday by Standard Chartered, a British-headquartered but emerging-markets-focused bank, for US$327 million for violating US sanctions on Iran, Myanmar, Libya and Sudan. That came on top of a US$340 million settlement made in August to resolve a related allegation by the New York state banking regulator.
Analysts and investors cheered the fact that the overall fines levied on HSBC came in at less than the market had feared, which will help the bank achieve its profit goals.
Gulliver, who took over in January last year, pledged a few months later in May to boost profitability by slashing costs, retreating from retail business where HSBC had little operating scale and exiting non-core businesses, such as insurance and credit cards.
Steven Chan, a banking analyst at Citic Securities International, said investors reacted positively to the news because the bank would only have to set aside about US$400 million in the current quarter to pay the fines, after having made provisions to pay US$1.5 billion in the first nine months of this year. That suggested the fines would have minimal impact on HSBC's earnings next year, he said.
Last week HSBC said it would sell its 15.6 per cent stake in China's second-biggest life insurer, Ping An, to companies controlled by Thailand's Charoen Pokphand Group for US$9.4 billion, part of the bank's plan to withdraw from non-core businesses. If the deal is completed, the bank expects to book a net gain of US$2.6 billion.