17th Jun 2016 08:38
LONDON (Alliance News) - HSBC Finance Corp, a unit of HSBC Holdings PLC, on Thursday said it has agreed to pay USD1.58 billion to settle a 14-year shareholder class action based on events that took place prior to HSBC's acquisition of Household International Inc in 2003.
The bank said it could have faced liability up to USD3.6 billion.
The settlement is expected to result in a pretax charge to HSBC Finance of about USD585 million, including legal fees and expenses, in the second quarter of 2016. The settlement is subject to court approval.
"We assume that this will also be reflected in the group accounts upon consolidation. We had not previously included this charge in our estimates and, while notable in the context of our current year adjusted pretax profit forecast of USD20.7 billion, we do not expect it to have a material impact on valuation or the share price," Gary Greenwood, an analyst at Shore Capital, said in a note on Friday.
The case was filed in 2002, and a federal jury in Chicago in 2009 ruled that executives at Household made recklessly misleading comments. In October 2013, a judge entered a USD2.46 billion judgement against HSBC on some claims.
In May 2015, the US Court of Appeals for the Seventh Circuit reversed a partial final judgement against Household International Inc, the predecessor entity to HSBC Finance, and remanded the case for a new trial on loss causation and damages.
HSBC Holdings acquired Household International Inc in March 2003. In December 2004, Household merged with HSBC subsidiary Household Finance Corp and became known as HSBC Finance Corp.
Shares in HSBC Holdings were up 0.7% at 429.67 pence on Friday morning in London.
By Samuel Agini; [email protected]; @samuelagini
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