HSBC faced an embarrassing setback in dealing with the Swiss tax evasion scandal this weekend.
Details emerged over how HSBC’s CEO Stuart Gulliver “sheltered £5 million of his own money at a Panamanian company with Swiss HSBC account.“
HSBC confirmed the report on 23 February and highlighted the fact that Gulliver lives in Hong Kong and pays taxes in that jurisdiction. It added that he has also paid taxes in the UK.
However, it looks like the bank is not interested in giving out any more details, for now, over how many other of the bank’s executives are also on Herve Falciani’s leaked list of 100,000 HSBC client accounts.
“If you look at the issues we have been dealing with, it’s pre-2010. We’ve been dealing with [overall] legacy issues for some time now. All we can do now is to provide the marketplace with clarity over how much it is going to cost with dealing with these problems,” said Iain Mackay, HSBC’s group finance director, on an analyst call.
“Our work to reshape the group started before this and we continue to do this. [Investors] should focus on the work we do on a day-to-day basis.”
HSBC’s representatives did not respond to Business Insider’s questions over email, about how many other executives are on the Falciani’s list, following the analyst call that did not field questions from journalists.
Swiss banking woes continue.
handed over 100,000 HSBC client accounts to French authorities in 2008. In total, the accounts are worth £78 billion in assets. Since then, France, Spain and the UK have recovered over £500 million in tax from the data.
On February 18, police raided HSBC’s Switzerland office in Geneva while the Swiss prosecution office confirmed it was investigating the subsidiary and “persons unknown for suspected aggravated money laundering.”
In HSBC’s 2014 results statement, the bank revealed that the number of customer accounts in its Swiss private bank is now “
nearly 70% lower than at its peak.“
“We continued to remodel the Private Bank in 2014, which included the sale of a customer portfolio in Switzerland to LGT Bank. One consequence of this remodelling was a reduction in revenue.”
In June last year, a bank owned by the family of the prince of Liechtenstein, LGT agreed to buy £7.3 billion worth HSBC’s Swiss Private Bank’s clients’ assets.
Investors aren’t happy.
It cited “significant items” hitting the bank’s balance sheet, including “fines, settlements, UK customer redress and associated provisions.” This included its fine for FX rigging in November 2014.
Investors aren’t happy. Shares tanked around 6% to 566.935p in the market open.
Many people are focusing on HSBC’s litany of legal woes, surrounding the Swiss bank account scandal, and potential fines in the future.
HSBC revealed that it has also set aside £358 million to cover more fines related to FX rigging investigations that are still ongoing. Moreover, it also warned that its bill for compensating US victims of the mis-selling of debt protection products could rise to more than £325 million.
However, analysts at Investec warn that some “pockets of weakness” in the underlying results are hurting the share price.
“For all the recent media furore around potential conduct issues, it is the “underlying” performance which, we believe, should be the greatest cause of investor concern — right across revenues, costs and impairments,” said Ian Gordon, analyst at Investec Securities. “By contrast, “exceptionals”, including $US1.2bn [£782 million] for conduct, were generally less surprising.”
HSBC’s notable “pockets of weakness” were seen across global banking and markets’ revenues, which were
“exceptionally weak,” said Investec.
“Foreign Exchange earnings also were sharply lower” in the fourth quarter of last year.