HSBC has reported a 14% decline in third-quarter profits to $7.3 billion (£5.5 billion), as the bank faced a dual setback from the Hong Kong real estate downturn and a lawsuit linked to the Bernard Madoff Ponzi scheme.
The London-based banking giant also saw operating costs surge 24% to $10.1 billion, reflecting both restructuring expenses — including severance payments tied to a major organisational overhaul led by CEO Georges Elhedery — and a $1.1 billion provision set aside for the ongoing Madoff-related legal case.
The lawsuit, which dates back to 2009, involves investors seeking compensation for losses from Madoff’s $65 billion (£48.8 billion) fraud. HSBC’s Luxembourg appeal was recently dismissed, prompting the bank to confirm plans for a further appeal to the Luxembourg Court of Appeal. Should that fail, HSBC said it would contest the final settlement amount in subsequent proceedings.
Adding to the pressure, HSBC also made a $1 billion provision to cover potential losses from the property market crisis in China and Hong Kong, which has triggered a rise in bad debts and weighed heavily on regional banks.
Despite these challenges, HSBC remains focused on navigating market headwinds while executing its restructuring strategy aimed at improving long-term profitability.
Chief executive Georges Elhedery 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.
He added:
We remain fully focused on helping our customers navigate new economic realities, putting their changing needs at the heart of everything we do.
