Europe’s biggest bank, HSBC, has reached a $765m (£591m) settlement with the US Department of Justice to end an investigation into the sale of mortgage-backed securities in the run-up to the 2008 financial crisis. The provisional settlement over the way HSBC packaged up toxic bonds between 2005 and 2007 is smaller than some of the settlements the DoJ has reached with other banks, such as the $4.9bn penalty for Royal Bank of Scotland and the $2bn settlement with Barclays. The details of the settlement came as HSBC unveiled a 4.6% rise in first-half profits before tax to $10.7bn from $10.2bn, following years of restructuring. Revenues rose 4% to $27.3bn in the six months to June, while costs climbed 7% to $17.5bn as the bank spent more on hiring staff and on digital improvements. Profits in Asia jumped 23% to $9.4bn but in North America profits were almost wiped out by the DoJ settlement. John Flint, the new chief executive who took over from Stuart Gulliver in February, recently set out a three-year plan to invest $15bn-$17bn in new technologies and China. He said: “We are taking firm steps to deliver the strategy we outlined in June. We are investing to win new customers, increase our market share and lay the foundations for consistent growth in profits and returns.” However, HSBC, which gets nearly 90% of its profits from Asia, admitted it could take a hit from the unfolding trade war between the US and China. Flint said: “If there is a full-blown trade war, could it impact our business? Of course. But equally, while we recognise the potential threat, we haven’t seen any impact in our business so far.” He added that there had been no meaningful impact on business yet and whether “the rhetoric turns to reality remains to be seen”. Steve Clayton, manager of the Hargreaves Lansdown Select UK Income Shares fund, said: “The potential for growth from China and the wider south-east Asian region ought to be good and HSBC has long thrived from financing global trade flows. “But in a world of tit-for-tat sanctions between the global powers, it could become harder for HSBC to benefit from its deep Asian roots.”
Barclays, Europe’s largest bank, has agreed the settlement with the US Department of Justice (DoJ) in order to bring to a close an investigation into its sale of mortgage-backed securities in the prelude to the 2008 financial crisis. The settlement, which relates to the manner in which Barclays packaged toxic bonds from 2005 to 2007, is smaller than the $4.9bn penalty the DoJ agreed with Royal Bank of Scotland and the $2bn it agreed with HSBC. The settlement emerged as Barclays revealed a 4.6% rise in H1 profits before tax to $10.7bn, following restructuring.