HSBC makes $1.1 billion charge after court ruling in Madoff case

HSBC Holdings PLC on Monday said it will set aside USD1.1 billion after an adverse court ruling related to the Bernard Madoff investment fraud.

Shares in the London-based Asia-focused bank were down 0.7% at 997.20 pence each in London on Monday morning.

The FTSE 100 listing said the Luxembourg Court of Cassation denied HSBC Securities Services Luxembourg's appeal in respect of Herald Fund's securities restitution claim, but accepted HSSL's appeal of Herald's cash restitution claim.

In a 2009 lawsuit relating to the Madoff fraud, HSSL was defending a claim brought by Herald Fund for the restitution of securities and cash.

HSSL said it will now pursue a second appeal before the Luxembourg Court of Appeal.

If it is unsuccessful in the appeal, HSSL said it will contest the amount it is required to pay.

HSBC said it will recognise a USD1.1 billion provision in its third quarter results, due on Tuesday, with a 15 basis point impact on its CET1 capital ratio.

The provision will be classified as a material notable item and will not impact 2025 return on tangible equity, excluding notable items or any dividend.

"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 noted.

Madoff, who died in a North Carolina prison in 2021, admitted to defrauding thousands of investors of around USD65 billion dollars through a ponzi scheme.