[ by Melanie Gretchen ] HSBC reported disappointing financial results for the 2nd quarter of 2012 that, in part, includes very large provisions for legal costs relating to regulatory investigations.  While HSBC cannot ascertain how much it will have to pay to fully resolve these regulatory matters, it currently is estimating the "damage" at $2 billion. The bank has reserved around $700 million to cover potential fines, settlements and other expenses related to repeated charges of money laundering violations.  The bank made a further $1.3 billion provision for a regulatory settlement related to payment protection plans for consumer loans – credit card loans, home mortgages, and other consumer borrowings. HSBC Chief Executive Stuart Gulliver apologized on Monday for the bank's wayward actions, stating, "I very much regret HSBC’s past failures and I apologize for them."  He further admitted the "tremendous uncertainty" around HSBC's obligations in the money-laundering case, and said the "number could be significantly higher."  He referred to the $700 million provision as "a best estimate based on the facts that we currently know." However, in the end, both the CEO's apology and the $2 billion provision may not be enough.  HSBC's net income for the first 6 months of 2012 slipped to $8.4 billion, from $9.2 billion in the previous year.  [C-I Note: Without further information, we're unable to draw any conclusions as to whether Mr. Gulliver is being optimistic or naive.] Earlier this year, the U.S. Senate Permanent Subcommittee on Investigations alleged that HSBC served as a conduit for money flowing illegally into the United States from Mexican drug traffickers and from Middle Eastern banks with ties to terrorists.  An outside audit found nearly 25,000 transactions related to Iran involving more than $19 billion, which were handled by HSBC’s American unit but were not properly disclosed to American regulators. Since then, the bank also has become a target of investigators who are probing the manipulation of Libor and Euribor, the Euro interbank offered rate.  HSBC said that it had made no provision for potential fines or regulatory settlements related to those latter global investigations, because it was "far too soon to make any estimate on Libor or Euribor," Mr. Gulliver said.

"We are providing information to various regulators simply because we are a panel bank, and therefore we don’t have any information that gives us any ability to make a provision for future costs that may result from anything do with Euribor or Libor."

Since assuming the helm in January 2011, Mr. Gulliver has focused on cutting costs, selling less-profitable businesses, and focusing new investment on faster-growing economies of Asia.  [C-I Note: Perhaps he should focus on raising capital, as well.] For further details, go to:  [Dealbook, 7/30/12]. Readers may also wish to read the 7/30/12 WHO'S News story, ["HSBC: Job Cuts Coming"].