HSBC Sets Aside $2 Bln for Fines, Suits

Bank apologizes to investors for failings on compliance.

HSBC Holdings Plc, the British bank accused of laundering money for Mexican drug lords, apologized to investors for compliance failings as it set aside $2 billion more to cover the costs of regulatory fines and lawsuits.

The lender made a $1.3 billion provision in the first half to compensate British clients wrongly sold payment-protection insurance and derivatives, HSBC said in a statement today as it posted an 8.3 percent drop in net income. It also made a $700 million provision for U.S. fines after a Senate committee found the bank gave terrorists, drug cartels and criminals access to the U.S. financial system, a sum Chief Executive Officer Stuart Gulliver said may increase.

Investment Bank

Pretax profit at HSBC’s investment bank, overseen by Samir Assaf, increased to $5.05 billion from $4.81 billion. Wall Street’s five biggest banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., posted the lowest first-half revenue since 2008 in the first half of 2012 as trading and deal-making dried up.

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