HSBC Swiss tax scrutiny set to overshadow $21 billion profit

Fri Feb 20, 2015 1:18pm EST
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By Steve Slater

LONDON (Reuters) - When HSBC's marketing team began drawing up plans for next month's 150th anniversary celebrations, they weren't expecting top managers to spend the run-up to the event apologizing to investors and lawmakers.

Yet allegations that HSBC's Swiss private bank helped clients dodge taxes will cast a shadow over its anniversary plans in the first week of March and over its annual results this Monday. Its bosses will also be grilled on the issue by members of the UK parliament on Wednesday.

Stuart Gulliver, the chief executive of Europe's biggest bank, has admitted failings in its Swiss arm in the period up to 2007 and apologized to investors and customers, but said the business has been transformed and standards are now up to scratch.

Geneva's public prosecutor and Britain's financial watchdog are investigating the bank after details about how its Swiss private bank allegedly helped wealthy clients dodge taxes were leaked to the media and published last week.

The biggest concern for HSBC could be that U.S. authorities may look at re-opening a 2012 deferred prosecution agreement.

That followed a $1.9 billion fine after it was found to have allowed hundreds of millions of dollars in illicit drug money to move through the U.S. financial system.

HSBC's shares have fallen 2 percent since the Swiss tax allegations were widely reported, lagging a 4 percent rise by the European bank index in that period.

The tax allegations and HSBC's $618 million penalty last year when it was among six banks fined for alleged manipulation of foreign exchange markets will increase scrutiny on bonuses paid to executives and staff when these details are also released on Monday.   Continued...

A HSBC logo is pictured behind the flag of the canton of Geneva at a Swiss branch of the bank in Geneva February 18, 2015. REUTERS/Denis Balibouse