Tuesday, 28 October 2025
HSBC’s third-quarter results revealed a setback as the bank’s profit fell 14% year-on-year, largely due to a substantial legal provision connected to an ongoing case stemming from the collapse of Bernard Madoff’s investment empire more than 15 years ago.
The London-based lender confirmed that it has allocated around $1.1 billion to cover potential costs following a court ruling in Luxembourg related to its past business ties with funds that had invested through Madoff’s fraudulent operation. The case, which dates back to the early 2000s, concerns HSBC’s role in servicing investment vehicles later found to be part of the scheme that unravelled in 2008, causing losses across the global financial system.
Although the charge weighed heavily on quarterly results, HSBC stressed that the impact on its capital strength is manageable. The bank continues to contest aspects of the ruling through appeals and maintains that it has adequate provisions to meet potential liabilities.
Aside from the legal provision, the bank’s underlying business performance remained broadly solid. Revenue from core lending activities and fee income improved compared with last year, suggesting that the group’s diversified operations across Asia, Europe, and the Middle East continue to perform despite a more challenging environment.
The provision, however, has revived questions about the long shadow cast by legacy cases on global financial institutions. Analysts say the Madoff-related charge underscores how historical compliance risks can still disrupt balance sheets years later, even for banks that have since overhauled their governance frameworks.
The timing is also sensitive: investors have been watching how Europe’s largest banks manage rising costs, higher regulatory scrutiny, and slower economic growth. HSBC’s management said that despite the legal setback, its balance sheet remains strong and its overall income outlook for the year is unchanged.
The Madoff scandal, one of the most notorious frauds in financial history, continues to generate litigation as investors seek restitution from institutions that acted as intermediaries or custodians. For HSBC, the renewed legal costs are a reminder that the past can still shape the future — even as it focuses on streamlining its global business and adapting to shifting economic conditions.
Source: FNLondon, Reuters, FT and HSBC
