Auditors 'think twice over US$1b HSBC deal'

HSBC (0005) is preparing to tender next year for the audit of its accounts from 2025 but it faces a struggle to attract bids from other auditors except for the current one PricewaterhouseCoopers, the Financial Times reported.

The annual audit fee is US$94 million (HK$733.2 million) and the role will last 10 years, totaling nearly US$1 billion, but three of the other Big Four accountants - Deloitte, EY and KPMG - are concerned with the resources required by the audit, the report said.

One of the people familiar with the matter told the newspaper that the number of jurisdictions HSBC operates, the resources and technology required, and the risks involved are all issues concerning auditors to bid.

If they make a mistake, they may face large fines from the regulatory authorities, so the risk of being the London-based company's audit is relatively high.

"You know it's bad when people are talking about turning down a US$1 billion contract. That doesn't happen in any other industry," the report said, citing sources.

The UK lender's annual report showed that it paid PwC US$130 million in audit and related fees last year, more than the entire audit revenues of any accountants other than BDO and Grant Thornton in Britain, the newspaper said.

PwC has been HSBC's auditor since 2015. Prior to that, the role had been played by KPMG since 1991.

Rival accounting companies are also worried that spending time and resources on pitching will not be worth it as they believe the current auditor, PwC, will be the favorite to win the contract, the FT report stated.

Banks have come under pressure to change their auditors more frequently to keep accountants on their toes after lenders, some of whom have used the same auditor for over a century, were given a clean bill of health just before they were rescued in the 2008 financial crisis.

HSBC is among global lenders that have been battered by billions of dollars in fines for misconduct since the global financial crisis. Europe's largest bank paid US$1.92 billion to settle US probes of money laundering in 2012.

Shares of HSBC dropped 1.1 percent yesterday to HK$45.55.