HSBC Faces $1.1bn Loss from Madoff Lawsuit, Profit Impact Expected

HSBC has taken a $1.1 billion provision related to a long-running lawsuit stemming from its involvement in the Bernard Madoff Ponzi scheme, which has significantly impacted its financial results. The provision contributed to a 14% drop in pre-tax profits for the third quarter, with expenses rising 24% to $10.1 billion, partly due to legal costs from the Madoff case. The lawsuit originated from investors, including the Herald Fund SPC, seeking restitution for losses tied to Madoff's $65 billion fraud. HSBC’s Luxembourg arm lost a key appeal on securities restitution, though the bank plans further legal challenges on the cash restitution claim, meaning the settlement could take years to finalize. Despite the setback, HSBC remains financially robust with strong revenue and profitability metrics, though its shares fell following the announcement. The provision is expected to slightly reduce HSBC's common equity Tier 1 capital ratio by about 0.15%.