Legal Business Blogs

UK banking financials: Lloyds, Standard Chartered and HSBC ramp up legal provisions

With the UK banking reporting season in full swing, Lloyds Banking Group, Standard Chartered and HSBC have all upped their provisions for settlements and legal claims.

Lloyds annual accounts for the 2015 financial year showed provisions for legal actions and regulatory matters came in at £813m, an increase from £521m the previous year. Last year the bank agreed a £117m settlement with UK regulator the Financial Conduct Authority, following its investigation into PPI – a long-running investigation that cost the bank £16bn. The bank also incurred a £837m charge to cover potential fines and compensation claims, of which £720m related to products sold through the branch network.

Lloyds, which posted underlying profits up 5%, continues to battle it out in the English Courts with Visa and MasterCard, as it faces a group action brought by several retailers seeking damages for allegations of ‘overpaid’ interchange fees.

Meanwhile, shares in Standard Chartered suffered a 4% drop on Tuesday (23 February) to a record low of 418.7p, with chief executive Bill Winters calling the bank’s 2015 performance ‘poor’. The bank’s provisions for regulatory settlements and legal claims rose by 6% to $115m, according to its 2015 annual report.

HSBC which saw its underlying profits dip by 7% in 2015, revealed its legal settlements and provisions increased to $1.7bn from $1.2bn the previous year.

HSBC, which has plans to move 10% of its legal team to Birmingham in line with ring-fencing rules, said its costs to achieve a UK ring-fenced bank for 2015 came in at $89m. The bank also confirmed that it is among several firms being investigated by the US Securities and Exchange Commission over its hiring practices in Asia.

RBS is expected to report tomorrow, having already warned it will post its eight successive full-year loss in 2015 after stating a £3.6bn loss from pension costs and new misconduct charges. The bank said in January it has set aside £2bn for past scandals including claims relating to mortgage-backed securities and payment protection insurance.

Last month the major US banks released fourth quarter 2015 results, with Goldman Sachs blaming poor profits on legal costs, while others benefiting from a decline in legal expenses included Bank of America and Morgan Stanley.

For more see: ‘The end of the tunnel – litigation and regulatory challenges in financial services’