HSBC reported a fall in its global private banking profit in the first six months of 2012, while it estimated facing a $700 million fine for AML violations.

HSBC reported a profit in its global private banking segment of $527 million for the first half of the year, down from $552 million for the same period in 2011 but up from $392 million for six months ended 31 December. Meanwhile, the banking giant estimated facing fines of $700 million stemming from anti-money laundering failings that have been exposed by a US investigation.

In wealth management and retail banking, the UK and Hong Kong-listed institution more than doubled its pre-tax profit year-on-year to $6.410 billion in the six months to 30 June.

Across its divisions, HSBC made a profit before tax of $12.7 billion, 11 per cent higher than in the first half of 2011, including $4.3 billion in gains from disposals and $2.2 billion of adverse movements in the fair value of its own debt. The bank's underlying profit dropped 3 per cent year-on-year to $10.6 billion.

HSBC attributed revenue growth of 4 per cent to increases in the faster-growing regions of Hong Kong and the rest of Asia-Pacific as well as markets in Latin America. The bank also said its core tier 1 ratio stood at 11.3 per cent at the end of June, an improvement from 10.8 per cent a year earlier.

In its interim financial and management statements published today, the bank addressed the many ongoing regulatory investigations it is involved in.

With regards to the anti-money laundering scandal in the US, HSBC estimated it will face fines totalling $700 million based on facts currently known. The lender recognises, however, that "there is a high degree of uncertainty in making this estimate, and it is possible that the amounts when finally determined could be higher - possibly significantly higher". Analysts at the Financial Times have previously predicted around $1 billion in fines for HSBC for flawed anti-money laundering controls.

HSBC Mexico has already paid a fine imposed by the Mexican National Banking and Securities Commission amounting to 379 million Mexican pesos ($28 million) in connection with non-compliance with anti-money laundering systems and controls.

In mid-July, the compliance chief of the bank, David Bagley, resigned in front of a US Senate Committee hearing into the bank’s anti-money laundering failings. Bagley, HSBC’s global head of compliance, had worked at the firm for 20 years. Bagley, who will remain at the bank, said the UK/Hong Kong-listed banking giant had “fallen short of our own and regulators’ expectations”.

On July 16, the bank issued a statement ahead of the hearing in which it outlined measures it has already taken, it said, to tighten up on its AML procedures, among other steps.

In the interim report published today, the bank said it continues to co-operate with ongoing investigations by the Department of Justice, the Federal Reserve, the Office of the Comptroller of the Currency and the US Department of Treasury’s Financial Crimes Enforcement Network in connection with AML/BSA compliance including cross-border transactions involving its cash handling business in Mexico and banknotes business in the US.

"We apologise for our past mistakes in relation to anti-money laundering controls, and it is a priority for senior management to build on steps already taken to manage risk and ensure compliance more effectively," group chief executive Stuart Gulliver said in a statement.

The bank also said it is co-operating with investigations into the LIBOR rigging scandal, which has already resulted in a £290 million ($455 million) fine for Barclays and for which Royal Bank of Scotland has said publicly that it expects to be punished.

Moreover, the bank announced that it has set aside $1.3 billion relating to redress for the mis-selling of payment protection insurance and interest rate swaps in the UK market.