HSBC shares tumbled more than 6 per cent today (September 21) to £2.86 — their lowest level since the summer of 1995 — after reports alleging the bank has moved Ponzi scheme money were published by the International Consortium of Investigative Journalists and other media outlets such as the BBC and Buzzfeed.
The BBC alleges that HSBC, Britain’s biggest bank, allowed fraudsters to transfer millions of dollars around the world even after it had learned of their scam.
The allegations stem from leaked documents, named the ‘FinCEN Files’, which the media outlets say cover more than 2,100 suspicious transactions worth more than $2tn (£1.56tn) dating back to 2013 and 2014.
HSBC says it has always met its legal duties on reporting such activity and described the information used by the ICIJ as “historical”.
It said: “Starting in 2012, HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime across more than 60 jurisdictions. HSBC is a much safer institution than it was in 2012.”
Tough year for popular stock
HSBC, like most banks, is a popular holding among UK Equity Income funds and often accounts for up to 5 per cent of funds’ investments.
Scottish Widows, UBS, HSBC itself, BNY Mellon, BMO, AXA Framlington and Ardevora all hold the bank within their top 10 holdings.
Such funds have already been hit by HSBC’s falling share price.
The beleaguered stock has dived 52 per cent since the start of the year as the coronavirus crisis and general pressure on the banking sector has hurt its value.
UK banks have historically been a popular choice for income seekers due to their high dividend yields. Lloyds pays out 10.5 per cent, while Barclays and HSBC have yields of 9.6 and 9 per cent respectively.
But in April they were forced to scrap their dividend payments for the rest of the year following pressure from the central bank to maintain a cash buffer for the coronavirus crisis.
Richard Hunter, head of markets at Interactive Investor, said: “With the banks generally under pressure and with interest rates at historically low levels, the immediate outlook is bleak and investors are gravitating towards any of the banks with more obvious prospects, as opposed to those in full firefighting mode.
“The market consensus of the shares as a sell has been in place for some time and is likely to be consolidated following the reports.”