HSBC settles subprime case for $1.6bn — after 14 yearsComments Off on HSBC settles subprime case for $1.6bn — after 14 years
HSBC has paid a record $1.6 billion (£1.1 billion) to settle a class action by shareholders in Household International, the US subprime credit-card and loan business it fatefully bought in 2002.
The bank reached an agreement hours before a second trial over the case was due to start in Chicago. In 2003, a judge had ordered it to pay $2.46 billion but it won a new trial on appeal.
The 14-year case started before HSBC bought Household for $15 billion in 2002.
Shareholders in the US business claimed its executives had made recklessly misleading statements about its lending practices, the quality of its loan book and its financial results.
Household became a disaster for HSBC, forcing it to write off billions of dollars as its subprime borrowers were unable to repay their debts.
The acquisition did considerable damage to the reputations of then chairman Sir John Bond and chief executive Stephen Green.
HSBC said the eve-of-hearing settlement would knock $484 million off its second-quarter profits.
The settlement is the largest-ever following a securities-fraud class action trial, according to Robbins Geller Rudman & Dowd the legal firm that led the case.
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