HSBC takes massive hit from Poundland parent’s accounting scandal and Carillion collapse

The collapse of Carillion and an accounting scandal at the parent of Black Country-based retailer Poundland have together resulted in HSBC taking a $500m hit to profits.

Announcing its full year results, the bank revealed that two large corporate exposures in Europe had resulted in it having to make the impairment charge.

The bank did not disclose which companies were involved but Sky News has reported the two are the Wolverhampton-based construction group, which collapsed last month, and Steinhoff, which acquired Poundland in 2016 in a deal worth £610m.

Although based in South Africa, Steinhoff is listed on the Frankfurt stock exchange.

It is perhaps ironic that two companies with such close connections to the West Midlands should be causing the bank such problems at a time when it preparing to make the region the new home of its UK banking operation.

Despite reporting a huge increase in 2017 pre-tax profit to $17.2bn (2016: $7.1bn), combined with revenue of $51.4bn (2016: $48bn), the figures fell short of expectations, sending its shares down.

With the full fallout from Carillion yet to be felt and investigations continuing into the depth of the Steinhoff scandal then global investors are braced for yet more pain.

Steinhoff has been mired in controversy since it revealed in December major accounting concerns.

The group’s shares plunged almost 85% when the affair was made public and concerns about the group’s standing have now reached the highest levels of government.

Reporting to the South African parliament, Steinhoff revealed this month that former CEO Markus Jooste had been reported to the Hawks – the South African body responsible for investigating organised crime, economic crime, corruption and other serious crime – on suspicion of breaching the Prevention and Combatting of Corrupt Practices Act.

Mr Jooste had resigned from the Steinhoff board in December once the affair came to light.

The South African group had already been under pressure, with German tax authorities having been investigating its operations for two years.