HSBC Is First Big Bank to Spell Out Brexit Bill: $300 Million

(Bloomberg) -- HSBC Holdings Plc faces as much as $300 million in legal and relocation fees as it prepares to move 1,000 staff to Paris, in one of the first indications of the cost of Brexit to the U.K.'s financial industry.

Europe's biggest lender took a $4 million charge in the second-quarter for “costs associated with the U.K.'s exit from the EU,” which Chief Executive Officer Stuart Gulliver said could rise to between $200 million and $300 million. HSBC plans to relocate about a fifth of its London-based investment bankers to its offices in France to maintain uninterrupted access to the European Union's single market.

“The total is effectively the cost of the transition across to France,” Gulliver said on a call with reporters on Monday. “The revenue we think is at risk from Brexit is about $1 billion, but we don't expect to lose it” because moving staff will protect those businesses affected.

London's financial executives have warned of the dire consequences for jobs and investment of a “cliff-edge” Brexit, in which no mutual free trade deal is struck before the two-year renegotiation period ends. With little progress made more than a year after the vote, firms such as Morgan Stanley and Citigroup Inc. have activated their contingency plans to move or hire hundreds of bankers in expanded hubs inside the EU, with Frankfurt and Dublin the biggest beneficiaries so far.

HSBC Chairman Douglas Flint also used the bank's quarterly results to reiterate a warning that the fragmentation of the European banking industry to locations outside London would lead to increased costs and less financing for countries and corporations.

“Europe must not allow its financial capacity and capabilities to be diminished,” Flint said in the earnings statement. There is a question whether “the economies of Europe will continue to have access to at least the same amount of financing capacity and related risk management services, and as readily available and similarly priced, as they have enjoyed with the U.K. as part of the EU.”

For example, the Bank of England has estimated a single basis-point increase that might result from splitting the clearing of interest-rate swaps could cost firms across the euro zone 22 billion euros ($25.8 billion) a year, according to a June 27 report. London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros of assets out of the U.K. on Brexit, according to think-tank Bruegel.

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Jon Menon, Paul Armstrong