HSBA Hsbc Holdings Plc

By Frances Yoon 

Shares in HSBC Holdings PLC hit a 25-year low after news articles detailed "suspicious activity reports" filed by it and other major banks to U.S. authorities, putting fresh pressure on a stock that has already dropped sharply this year.

BuzzFeed News, the International Consortium of Investigative Journalists, and partner media organizations published reports Sunday citing documents leaked to BuzzFeed that included more than 2,100 reports filed by financial institutions with the U.S. Treasury Department's Financial Crimes Enforcement Network.

HSBC said "all of the information provided by the ICIJ is historical" and predated the Justice Department's conclusion in 2017 that it had met commitments under a deferred prosecution pact.

That deal, agreed in 2012, required HSBC to fight money laundering in exchange for putting criminal charges on hold. The bank said it spent years overhauling its ability to fight financial crime. "HSBC is a much safer institution than it was in 2012," it said in a statement.

On Monday, the bank's Hong Kong-listed stock closed down 5.3% at 29.30 Hong Kong dollars, the equivalent of $3.78 and the lowest since May 1995. HSBC's U.K.-listed shares also fell sharply, amid a broad selloff in European bank stocks.

Fahed Kunwar, London-based head of European banking research at Redburn, said the FinCEN leaks, plus the prospect of China potentially labeling HSBC an "unreliable entity," were weighing on the stock.

China's Ministry of Commerce said over the weekend that such entities could face restrictions on doing business in mainland China, such as limits on imports and exports, investment and staff in China. It hasn't designated any businesses in this way yet, but the Global Times tabloid said many media reports had named HSBC as a candidate.

Daniel Tabbush, an independent analyst who publishes on the Smartkarma platform, said the BuzzFeed and ICIJ articles raised the prospect of large potential fines or license difficulties, in the event that U.S. authorities found shortcomings at the bank.

Shares in Standard Chartered PLC, which like HSBC is also listed in both London and Hong Kong, fell 6.2% to HK$34.90. It was also cited in the FinCEN reports. "We take our responsibility to fight financial crime extremely seriously and have invested substantially in our compliance programs," Standard Chartered said.

Banks and other financial companies operating in the U.S. are required to file reports of suspicious activities involving their clients to FinCEN when they suspect fraud, money laundering or other potentially illegal activity. Filing such reports doesn't automatically mean that banks engaged in or facilitated any wrongdoing.

Shares in HSBC and many other banks have tumbled this year, as the coronavirus pandemic has wreaked economic damage and forced central banks to slash interest rates, which tends to damage banks' profits.

HSBC shares have more than halved, as has stock in counterparts Wells Fargo & Co., Spain's Banco Santander SA and France's Société Générale SA. HSBC had a market value of about $80 billion as of Friday's close, according to FactSet.

There is little sign of alarm about HSBC in the credit markets. The annual cost of insuring $10 million of HSBC debt against default was $67,000 as of Thursday, according to credit-default-swap prices tracked by Markit. That is down from a peak of $125,000 in March and considerably lower than CDS prices on several continental European banks.

Last month, HSBC said net profit plummeted 96% to $192 million in the second quarter as the impact of the pandemic complicated its efforts to refocus on Asia while dealing with rising U.S.-China political tensions.

In March, the Bank of England directed HSBC and other banks to cancel 2019 dividends to shore up their capital buffers. The move angered some smaller investors in Hong Kong who held the stock largely for regular dividend income.

--Yifan Wang contributed to this article.

Write to Frances Yoon at frances.yoon@wsj.com

(END) Dow Jones Newswires

September 21, 2020 07:50 ET (11:50 GMT)

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