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

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

“Regulatory and compliance events in the first six months of theyear overshadowed financial performance,” Chairman Douglas Flintsaid in a statement today. “HSBC has made mistakes in the past, andfor them I am very sorry.”