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HSBC Hurt by Fines


Things aren’t looking too bright for banks. This time, it’s HSBC Holdings plc (HSBC) in the limelight. After the British bank recorded a 12% drop in third-quarter earnings, its stock fell by 3%.

Adding more salt to the wound… while analysts expected pre-tax profits to jump by 16% year over year, they only rose by a measly 2%, hitting $4.6 billion.

So who’s to blame? The bank suggests that higher costs (which rose as much as 6%) are the culprit.

Financial Consequences

And now, the bank has to put cash away for settlements in three different areas. Let’s look at the damages…

First, over $500 million is going out the window for misspelling loan insurance in Britain. Then, about the same amount has to be coughed up to cover fines for “allegedly” misspelling U.S. mortgage-related securities. Group those with an additional $378 million for potential fines linked to an investigation in the rigging of currency markets.

Despite all of the financial hits, HSBC is still a long-term winner, at least, according to Dominic Elliott (of Reuters Breakingviews).

As he puts it: “It’s still got those huge risks that ‘too big to fail’ institutions have, but on the other hand, it has done better in some of its businesses than a lot of the other competitors. In Hong Kong, impairments were down a lot less than some of the other banks have seen, and so it looks as though it’s got a fairly good balance in terms of businesses, and that should be a factor that helps it over the years.”

While things look promising for HSBC in the long haul, the same can’t be said for Standard Chartered (STAN.L), its competitor. It’s facing a U.S. investigation for more potential U.S. sanction violations linked to alleged dealings with Iran.

As if the $670 million it coughed up for U.S. authorities in 2012 over breaches wasn’t enough… the latest just adds to an ongoing headache for Peter Sands, Standard’s Chief Executive.

Ahead of the tape,

Stocks Research Team