The London-headquartered lender revealed the fallout Monday amid a Luxembourg lawsuit brought by Herald Fund dating back to 2009, when Madoff was sentenced to 150 years in prison for running a pyramid-style scheme.
“The intent with which we are executing our strategy is reflected in our performance this quarter, despite taking legal provisions related to historical matters,” HSBC’s chief executive Georges Elhedery said in a Hong Kong stock exchange filing Tuesday.
The profit of US$7.3 billion — down 14 percent from the same quarter last year — reflected an increase in operating expenses and included legal provisions of US$1.4 billion, HSBC said.
Of those, US$1.1 billion was recognised in connection with the fraud case of Madoff, while US$300 million was related to “certain historical trading activities” under investigation by the French National Financial Prosecutor.
Revenue increased five percent to US$17.8 billion, boosted by higher customer activity, HSBC said.
The bank noted that the global economy showed resilience and continued to grow despite unpredictable US trade policies and increased fiscal concerns.
But it also warned that commercial real estate conditions remain challenging in China, adding that government stimulus has yet to trigger a material improvement in buyer sentiment.
Net interest income increased by US$1.1 billion, or 15 percent, with reported expected credit losses of US$1 billion stable compared with the third-quarter of 2024.
The lender said it is expecting net interest income of US$43 billion or higher in 2025, reflecting increased confidence for policy rates in key markets, including in Hong Kong and Britain.
In Hong Kong, weak demand and over-supply of nonresidential properties continued to put downward pressure on rental and capital values, despite an observed improvement in local sentiment, it said.
Earlier this month, HSBC proposed a US$14 billion buyout to privatise Hang Seng Bank in the finance hub, saying the proposal “represents a significant investment into the Hong Kong economy”.
If approved, Hang Seng will become a wholly owned subsidiary of HSBC and will be delisted from the Hong Kong stock exchange, the firm said in the statement.