Russ Mould, investment director at AJ Bell, said: “As Halloween approaches, an episode out of what feels like the dim and distant past has returned to haunt HSBC and hardly set the scene for the bank’s third-quarter update tomorrow in a way it would have wanted.
“A ruling from Luxembourg’s highest court on a lawsuit, brought by investors who lost money in Bernard Madoff’s multibillion-dollar Ponzi scheme, will see HSBC set aside a material sum.
“Although, it is testament to the bank’s scale that a provision of more than $1 billion is a relatively minor irritation rather than a disaster.
“Several HSBC businesses provided custodial and administrative services to funds whose assets were invested with Madoff Securities, including HSSL, the company’s Luxembourg securities arm which is affected by this legal action.
“Impairments marred the company’s second-quarter numbers too, with the company affected by its exposure to a struggling Hong Kong commercial property sector.
“CEO Georges Elhedery’s restructuring plan for HSBC has, for the most part, been well received since he took charge just over 12 months ago.
“However, this latest setback, following on from a poorly received decision to put buybacks on the back burner as HSBC puts cash towards buying out minority investors in Hong Kong lender Hang Seng Bank, does put the chief executive under a bit of pressure.
“The recent departure of chair Mark Tucker means he is lacking a bit of boardroom support too.”
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