HSBC announces £898m drop in quarterly profits

HSBC reported pre-tax profits of 7.3 billion US dollars (£5.5 billion) for the third quarter – a drop of 1.2 billion US dollars (£898 million) on the same period 12 months ago.

The announcement comes a day after the banking giant revealed it will set aside 1.1 billion US dollars (£826 million) 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 1.4 billion US dollars (£1.04 billion), the bulk of which was related to the Madoff lawsuit.

Profits after tax also fell 1.2 billion US dollars (£898 million) to 5.5 billion US dollars (£4.1 billion) 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 65 billion US dollars (£48.8 billion).

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.