HSBC Q3 2025: US$1.1 Billion Provision Impacts CET1 Capital Ratio

HSBC (HSBC.US) reported a significant development for Q3 2025, announcing a provision of US$1.1 billion in its consolidated financial results. This provision is related to ongoing litigation concerning the Madoff fraud, specifically a claim brought by Herald Fund SPC against HSBC Securities Services Luxembourg (HSSL). The provision is expected to have an approximately 15 basis points impact on the Group's CET1 capital ratio.

Litigation and Provision Details

The US$1.1 billion provision stems from a 2009 lawsuit in Luxembourg, where HSSL is defending a claim for restitution of securities and cash. On October 24, 2025, the Luxembourg Court of Cassation denied HSSL's appeal regarding Herald's securities restitution claim but accepted its appeal concerning the cash restitution claim. HSSL will pursue a second appeal before the Luxembourg Court of Appeal.

The company noted that the eventual financial impact could be significantly different due to the pending second appeal and the complexities in determining the quantum of restitution. Despite this, the provision will be classified as a material notable item and will not affect the FY25 RoTE excluding notable items or any dividend.

Impact on Capital and Future Outlook

The US$1.1 billion provision is expected to impact the Group's CET1 capital ratio by approximately 15 basis points. While this is a notable figure, HSBC emphasized that the Q3 2025 results will be announced as planned on October 28, 2025. The company will continue to pursue legal avenues to contest the amount it may be required to pay.