HSBC revenues sag, says may face $1.6 billion U.S. lawsuit hit

Mon Aug 5, 2013 1:47pm EDT
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By Steve Slater

LONDON (Reuters) - HSBC (HSBA.L: Quote) posted lower than expected earnings on Monday and said it might have to pay $1.6 billion in damages over a U.S. lawsuit, reviving concerns over legacy issues and growth prospects at Europe's biggest bank.

Its shares fell more than 4 percent, after a slowdown in emerging markets contributed to a steeper than expected 12 percent drop in revenues in the first half of the year.

The London-based bank also said it may face a $1.6 billion settlement with a U.S. regulator over allegations it mis-sold mortgage-backed bonds during the housing bubble.

The Federal Housing Finance Agency (FHFA), the conservator of Fannie Mae and Freddie Mac, has alleged 18 banks misrepresented the quality of the collateral backing securities they sold between 2005 and 2008.

"Based upon the information currently available, it is possible that these damages could be as high as $1.6 billion," HSBC said.

HSBC had previously said the financial impact of any litigation could be significant but had never estimated the scale. Analysts said it might be about $900 million.

Swiss bank UBS UBSN.VX paid $885 million in a settlement with the FHFA last month and two other lenders have settled for undisclosed sums. Other banks have set aside money for potential settlements.

HSBC Chief Executive Stuart Gulliver is attempting to repair the bank's reputation in the United States after authorities there last year fined it $1.9 billion for compliance failings in Mexico.   Continued...

A woman uses a cash point machine at a HSBC bank in the City of London February 28, 2011. REUTERS/Andrew Winning