HSBC says sorry as it takes $700 million hit

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LONDON – HSBC PLC apologized to shareholders Monday as it disclosed a $700 million charge to cover the cost of U.S. penalties for lapses including its failure to enforce money-laundering controls in Mexico.

The provision was announced as Europe's biggest bank reported an 11 percent advance in pretax profit in the first half of the year following $4.3 billion in gains from asset sales. For the six months ending June 30, the bank made a pretax profit of $12.7 billion, up from $11.5 billion a year earlier.

However, net profit was down 8.4 percent at $8.4 billion from $9.2 billion the previous year, after accounting for a bigger tax bill.

Most attention focused on the provision HSBC has taken for its legal problems. As well as costs relating to infractions in Mexico, the $700 million provision also takes in possible penalties for violations of the U.S. Bank Secrecy Act in a case going back two years, and any penalties from continuing investigations of possible violations of economic sanctions against Iran and other countries.