It’s been a good year for HSBC overall. The leading bank has been able to record strong wealth fees, it has defended its tight cost control and continued its strategic clean-up. However the results were slightly marred by the Madoff court ruling that happened in Luxembourg this week.
Investors were keen to hear about the most recent financial results. HSBC didn’t fail them. The bank reported growth in revenue by +$0.5 billion year-on-year. It reported an increase of 29 percent in Wealth fee and other income. Additionally, HSBC showed an +$86 billion deposit growth year-on-year, amid talk that the bank is poised to increase its shareholding in Hang Seng bank.
Revenue is up on the third quarter of 2024 by 3 percent in total. But interestingly the revenue of HSBC in Hong Kong and the UK has increased marginally compared to the same period in 2024.
Another area of growth has been Securities Services. An increase of 15 percent is down to higher asset balances. This is because of improved valuations and new customer mandates, particularly in Asia and the Middle East.
In Hong Kong the bank reported a 21 percent increase in customers since January 2023. These customers have driven almost 50 percent of growth in deposits and 20 percent growth in investment product invested assets. The insurance arm of the bank has also done well during the period.
What is the Market Reaction?
Max Harper, Analyst at Third Bridge shared with DisruptionBanking: “HSBC’s latest results show solid progress toward its 2027 goals, proving the bank can still deliver despite legacy headwinds, with a 14% drop in pre-tax profit linked to the Madoff Ponzi scheme.
“Revenue beat consensus expectations by 5.9%, with strength across both net interest income and fees. The $1 billion upgrade to NII guidance should be well received, reflecting how the bank’s streamlined operating model is driving greater efficiency and returns.
“Our experts have highlighted leadership in transactional banking, though continued market exits, caused by their shift toward more profitable regions could weaken the global network model that underpins its long-term income potential.”
Headwinds
“The group’s defensive strategy, focused on reallocating growth to more profitable regions, runs counter to its traditional global network model, which could limit longer-term income opportunities and wallet share capture.”
What is the Madoff Provision?
The “Madoff provision” refers to a $1.1 billion charge HSBC booked in its Q3 2025 results (announced October 28, 2025) to cover potential liabilities from ongoing litigation tied to Bernard Madoff‘s infamous Ponzi scheme. Madoff’s fraud, uncovered in 2008, defrauded investors of up to $65 billion over decades. HSBC’s Luxembourg unit (HSBC Securities Services Luxembourg) acted as a custodian and administrator for funds (like Herald Fund SPC) that invested in Madoff’s firm. Herald sued in 2009, seeking restitution of ~$2.5 billion in securities plus interest (or up to $5.6 billion in damages). A Luxembourg Court of Cassation ruling on October 25, 2025, rejected HSBC’s appeal on the securities claim but upheld it on cash restitution, prompting this provision as a conservative estimate while further appeals drag on (potentially years).
This isn’t the first time HSBC has had to grapple this type of problem. The bank settled with other funds (e.g., Kalix in 2012) and it has provisioned $1B+ historically. The case highlights risks in custodial roles for opaque investments, but HSBC’s pivot to Asia (e.g., Hang Seng privatization) and wealth/digital growth (30% fee jump to $2.7B) cushioned the blow. CEO Georges Elhedery called it a “one-off” amid “positive progress,” with no credit impairment changes.
Author: Andy Samu
