HSBC faces £398m hit in US

THE US division of global banking giant HSBC has had to make a larger-than-expected provision of $575m (£398m) to cover expected lawsuit claims from Japanese investors following its acquisition of Republic Bank of New York for $9.85bn.

HSBC negotiated a price reduction of $450m because of the possible claims. The Japanese allege that a subsidiary of Republic, Philadelphia-based fund manager Princeton Global Management, issued fraudulent promissory notes and are suing Republic for about $1bn. The $575m provision will be in anticipation of any settlement HSBC may agree with the Japanese, or following the outcome of court action.

The charge pushed the bank's US division into a $167m loss in the third quarter of the year although net income rose by 28% to $184m. Analysts now believe HSBC paid too much for Republic.