HSBC announces $1.1bn provision related to Madoff court case

(Sharecast News) - HSBC has announced that it will take a $1.1bn impairment charge in its third-quarter results after losing an appeal in a long-running lawsuit in Luxembourg related to Bernard Madoff's multibillion-dollar Ponzi scheme. HSBC Securities Services Luxembourg is defending a claim brought by Herald Fund SPC for the restitution of securities and cash lost in the Madoff fraud, but was denied an appeal in respect of the securities restitution claim.

HSSL will now pursue a second appeal and, if unsuccessful, will contest the amount it is required to pay in subsequent proceedings before the Court of Appeal, HSBC said.

HSBC provided custodial and admin services to several funds that invested with Bernard L. Madoff Investment Securities LLC, and in 2009 was sued by Herald Fund SPC for the restitution of assets lost in the Ponzi scheme.

The $1.1bn provision, which was announced just one day before its quarterly results, will also dent the bank's CET1 capital ratio by 15 basis points.

However, since the impairment will be classified as a "material notable item" on its accounts, it will not impact return on tangible equity or dividend payments to shareholders.

"Given the pendency of the second appeal and the complexities and uncertainties associated with determining the quantum of restitution, the eventual financial impact could be significantly different," HSBC said in a statement on Monday.