*

HSBC ( HSBC ) says eventual financial impact could be very

different from

estimate

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Third-quarter earnings due on Tuesday

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Shares little affected

(Writes through with details of case, analyst comment)

By Rishav Chatterjee and Selena Li

Oct 27 (Reuters) - HSBC Holdings ( HSBC ) said on Monday

it will book a $1.1 billion provision in its third-quarter

results after losing part of an appeal in a long-running lawsuit

tied to Bernard Madoff's Ponzi scheme.

HSBC ( HSBC ) acted as a service provider to several funds that

invested with Bernard L. Madoff Investment Securities LLC.

Herald Fund SPC sued HSBC's ( HSBC ) Luxembourg unit in 2009 seeking

restitution of assets it said were lost in the fraud.

Last Friday, the Luxembourg Court of Cassation rejected an

appeal by HSBC's ( HSBC ) unit over the restitution of securities claimed

by Herald, although it accepted its appeal on a separate cash

restitution claim, the bank said.

HSBC ( HSBC ) now plans to lodge a second appeal with the Luxembourg

Court of Appeal and if unsuccessful, the bank said it would

contest the amount to be paid.

It added that the eventual financial impact could differ

significantly from its current estimate.

Europe's largest bank by assets, which reports its

third-quarter earnings on Tuesday, said in July that Herald,

which is in liquidation, was seeking the restitution of

securities and cash worth $2.5 billion plus interest or damages

of $5.6 billion plus interest.

HSBC ( HSBC ) did not immediately respond to a request for

comment on the separate securities and cash amounts that Herald

is seeking. The principal liquidators of Herald also did not

immediately respond to a request for comment.

The bank estimated that the provision would have an impact

of around 15 basis points on its common equity tier 1 (CET1)

capital ratio.

That would come on top of a 125 basis points impact arising

from its $13.6 billion deal to take its majority-owned Hong Kong

unit Hang Seng Bank ( HSNGF ) private.

The charge could weigh on sentiment slightly but the impact

should be limited as HSBC ( HSBC ) has already suspended dividend

payments for the next three quarters due to the acquisition of

Hang Seng Bank ( HSNGF ), said Lorraine Tan, director of equity research

(Asia) for Morningstar.

The bank's Hong Kong-listed shares were flat in morning

trade, trailing a 1% increase for the benchmark Hang Seng Index

.

Madoff's fraud was estimated as high as $64.8 billion.

It went undiscovered for many years until Madoff confessed

to his sons in December 2008, one day after his firm's Christmas

party. Madoff eventually pleaded guilty to 11 criminal counts.

He died at age 82 in April 2021 while serving a 150-year prison

sentence.

HSBC ( HSBC ) in 2012 settled with Kalix Fund for an undisclosed

amount, also over losses the fund had suffered during the

collapse of Madoff's financial empire. The fund had sued the

bank for $35.6 million.