HSBC raising US$17.7bn as profits plunge
03-03-2009
HSBC has launched a US$17.7 billion rights issue to shore up its balance sheet after annual profit more than halved and bad debts soared in the United States. The bank will offer 5.1 billion shares at HK$28 each - a discount of about 50 percent. "The rights issue is priced below market expectations, but it is a positive for existing shareholders who can maintain their holding without breaking the bank," said Y.K. Lee, analyst at Core Pacific-Yamaichi in Hong Kong. Pretax profit last year fell 62 percent to US$9.3 billion from US$24.2 billion a year earlier, after the bank was hit by a goodwill impairment charge of US$10.6 billion in the United States. Excluding the charge, pretax profit fell 18 percent to US$19.9 billion - slightly ahead of analysts predictions. Profits from the bank's Hong Kong operations slid 26 percent. The annual dividend has been cut by 29 percent to 64 US cents per share. The bank also said it would close its troubled US consumer loans business HFC - slashing 60,000 jobs. Its losses in North America last year amounted to US$15.5 billion, including the goodwill impairment charge. "With the benefit of hindsight, this is an acquisition we wish we had not undertaken," said HSBC chairman Stephen Green. Group-wide the bank said that losses on bad loans jumped 44 percent versus 2007 to US$24.9 billion. However, Mr Green insisted that HSBC's capital position remained strong, and its share sale would enable it to take advantage of opportunities. Group-wide the bank said that losses on bad loans jumped 44 percent versus 2007 to US$24.9 billion. Finance director Douglas Flint said the bank may want to finance acquisitions as weaker rivals retreat from international markets, especially those that have had to take state help. "We want to position ourselves both defensively for turbulent times and opportunistically for the options that will appear," Mr Flint said. "There's nothing on the go but we believe the opportunities will come to banks that have the ability to take such options."
