HSBC share price steady after $1.6bn Household settlement

on Jun 17, 2016
Updated: Oct 21, 2019

HSBC Holdings (LON:HSBA) has agreed to pay nearly $1.6 billion to settle a 14-year shareholder class action related to the Household International consumer finance business which the Asia-focused lender acquired in 2003. The settlement is expected to result in a $585-million pre-tax charge for the division.

HSBC’s share price has climbed into positive territory this morning, having gained 0.48 percent to 428.55p as of 08:09 BST, slightly underperforming the benchmark FTSE 100 index which is currently 0.79 percent better off at 5,997.71 points. The group’s shares have lost nearly 28 percent of their value over the past year, and are down by over a fifth in the year-to-date.
HSBC announced in a statement this morning that it had agreed to pay $1.58 (£1.1 billion) to settle claims in the Jaffe v. Household International lawsuit. The Asia-focused lender had previously flagged a potential exposure of up to $3.6 billion.

The litigation began back in 2002, when Household shareholders accused the company of inflating its share price by misleading them about its poor lending practices and loan quality. While a jury ruled in favour of the plaintiffs in 2009, last year, the US Court of Appeals for the Seventh Circuit reversed a partial final judgment against Household, now known as HSBC Finance, and remanded the case for a new trial on loss causation and damages.
HSBC noted that the settlement, subject to court approval, is expected to result in a pretax charge to HSBC Finance of about $585 million in the second quarter.
“We are pleased to resolve this 14-year case that’s based on events that took place before HSBC acquired Household,” a spokesman for the FTSE 100 bank in New York told The Times. The Financial Times meanwhile quoted Mike Dowd of Robbins Geller Rudman & Dowd, the lead law firm for the plaintiffs, as saying that his firm had been “ready to go” for the retrial.
“We felt we were right, and I think the settlement demonstrates that we were,” he pointed out.
As of 08:36 BST, Friday, 17 June, HSBC Holdings plc share price is 426.50p.