HSBC hits 25-year low as allegations add to pressures

The London-based bank was named at the weekend in media reports alleging international banks had alerted US authorities to trillions of dollars of suspicious money transfers.

HSBC moved money linked to a Ponzi scheme trough its US business to HSBC accounts in Hong Kong in 2013 and 2014, according to the BBC, whose Panorama programme is part of a consortium of news outlets that investigated leaked files.

Along with Standard Chartered, HSBC was one of the five banks mentioned most often in US Treasury documents showing suspicious transactions flagged by banks between 1999 and 2017. The documents were leaked to BuzzFeed and the investigation was coordinated by the International Consortium of Investigative Journalists (ICIJ).

HSBC shares fell 4.7% to 289.85p at 09:51 BST - their lowest price since mid-1995. The shares were also affected by a report that China was considering adding HSBC to a list of "unreliable entities" whose activities undermine the country's interests.

Standard Chartered fell 4.6% to 342.90p. Shares of Barclays, also mentioned in the leaked files, dropped 6% to 91.5p.

HSBC told the Financial Times “all the information provided by the ICIJ is historical” and predated the conclusion of the bank’s deferred prosecution agreement with the US Department of Justice in 2017. Standard Chartered said: "We take our responsibility to fight financial crime extremely seriously and have invested substantially in our compliance programmes."

Before the financial crisis, HSBC was seen as a conservative, bureaucratic bank with operations in high-growth markets established during the days of the British empire. But after a period of rapid expansion the bank was revealed to have laundered money for Mexican drug gangs and helped clients engage in aggressive tax avoidance, tarnishing its reputation.

HSBC's shares had already halved in 2020 as the bank faced pressure from low interest rates and rising bad debts linked to Covid-19 and turbulence in its biggest market of Hong Kong. Its decision to obey a Bank of England order to withhold dividends angered investors in Hong Kong.

Russ Mould, investment director at AJ Bell, said: "HSBC’s shares hitting a 25-year low is an embarrassment for one of the world’s best-known banking brands. The company has already been facing serious headwinds because of the pandemic. If many investors were sceptical about owning the shares because of those reasons, they are certainly not going to be rushing to buy them when there are allegations of money laundering."

Shares of all the UK's big banks fell with the government expected to introduce renewed restrictions after Covid-19 infections rose to levels scientists said were alarming. Shares of Lloyds and NatWest, whose fortunes are closely tied to the UK economy, fell 5.7% and 5.8% respectively.

Richard Hunter, head of markets at Interactive Investor, said: "Prospects for a sharp economic recovery have all but disappeared, as global growth receives the new threat of a resurgent pandemic. With the banks generally under pressure and with interest rates at historically low levels, the immediate outlook is bleak."