HSBC to take $1.1 billion hit following Luxembourg court ruling in Madoff case
HSBC Holdings will book a $1.1 billion provision in its third-quarter results after losing part of an appeal in a longstanding lawsuit connected to Bernard Madoff’s Ponzi scheme, the bank said on Monday.
The case involves Herald Fund SPC, which sued HSBC’s Luxembourg unit in 2009, claiming restitution for assets lost in the Madoff fraud. Last Friday, the Luxembourg Court of Cassation rejected HSBC’s appeal over the restitution of securities but accepted a separate cash restitution claim. HSBC plans a second appeal to the Luxembourg Court of Appeal and, if necessary, will contest the payment amount, News.Az reports, citing Reuters.
The bank noted that the final financial impact could differ significantly from the current $1.1 billion estimate. The provision is expected to affect around 15 basis points of HSBC’s common equity tier 1 (CET1) capital ratio, adding to a 125 basis-point impact from its $13.6 billion deal to privatize its majority-owned Hang Seng Bank.
Shares of HSBC in Hong Kong remained largely flat, reflecting limited immediate market impact. Analysts note the charge could weigh slightly on sentiment but is partly mitigated as HSBC has suspended share buybacks for the next three quarters due to the Hang Seng acquisition.
Madoff’s fraud, estimated at $64.8 billion, went undiscovered until December 2008. He pleaded guilty to 11 criminal counts and died in prison in April 2021.
HSBC previously settled in 2012 with Kalix Fund over similar Madoff-related losses.
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