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HSBC in £12.5bn fund raising plan | HSBC in £12.5bn fund raising plan |
(40 minutes later) | |
Europe's biggest bank, HSBC, has confirmed it is seeking to raise £12.5bn ($17.7bn) from shareholders through a rights issue in the UK. | |
HSBC chairman Stephen Green said the cash raised would help the firm to deal with the impact of an uncertain economic environment. | |
The news came as HSBC revealed pre-tax profits for 2008 of $9.3bn (£6.5bn), down 62% on the previous year. | The news came as HSBC revealed pre-tax profits for 2008 of $9.3bn (£6.5bn), down 62% on the previous year. |
The bank has been hit by losses in the US sub-prime mortgage market. | The bank has been hit by losses in the US sub-prime mortgage market. |
In North America, HSBC reported a loss of $15.5bn and said it planned to close the majority of its consumer lending business in the US. This is expected to result in the loss of about 6,100 jobs. | |
However, it said it remained "committed to the US". | |
WHAT IS A RIGHTS ISSUE? Companies issue extra shares to raise moneyThey are offered to existing shareholders, usually at a discount to the current share priceShares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones | |
HSBC has issued the cash call in an attempt to shore up its balance sheet. | |
It is offering just over 5 billion shares at 254 pence each - a price that is 48% lower than Friday's close of 491.25p. | |
In the UK, HSBC has not sought any financial help from the government. | In the UK, HSBC has not sought any financial help from the government. |
Last April, Royal Bank of Scotland announced a similar plan, asking its shareholders for £12bn. | |
However, last week it announced a record loss of £24.1bn for 2008, and will now receive an additional £13bn from the taxpayer. | |
No executive bonuses | |
HSBC admitted the banking industry had done many things wrong. Inappropriate products were sold inappropriately by many, it added. | |
In a statement, Mr Green said the bank intended to "play our part in rebuilding public trust in our industry". | |
He confirmed that no executive directors would receive any cash bonuses for 2008, nor would any performance share awards be made for the year. | |
HSBC said 2008 had been a very difficult year for the financial sector, and it expected 2009 to continue to be challenging. |