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| HSBC in £12.5bn fund raising plan | HSBC in £12.5bn fund raising plan |
| (10 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. | 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. |
| The bank's chairman Stephen Green said the funds would help the firm in the uncertain economic environment. He also ruled out cash bonuses for 2008. | |
| 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. | 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". | 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 share price HSBC shares were down 10% in early London trading. | |
| Other banking shares were also dragged down, with Royal Bank of Scotland falling 13%, Lloyds Banking Group down 10% and Barclays losing 6%. | Other banking shares were also dragged down, with Royal Bank of Scotland falling 13%, Lloyds Banking Group down 10% and Barclays losing 6%. |
| "Whether the capital raising is precautionary or a war chest for selective acquisitions remains to be seen, but any such positives are of little interest to a disappointed market," said Richard Hunter, head of UK equities at the stockbrokers Hargreaves Lansdown. | "Whether the capital raising is precautionary or a war chest for selective acquisitions remains to be seen, but any such positives are of little interest to a disappointed market," said Richard Hunter, head of UK equities at the stockbrokers Hargreaves Lansdown. |
| 'Targeted acquistions' | 'Targeted acquistions' |
| HSBC has issued the cash call in an attempt to shore up its balance sheet. | 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. | 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. |
| HSBC has traditionally been one of the best capitalised banks in the market | |
| Mr Green said the money would be used both to grow its existing businesses as well as to grow through "targeted acquisitions". | Mr Green said the money would be used both to grow its existing businesses as well as to grow through "targeted acquisitions". |
| "We would focus primarily on emerging markets," he told the BBC. | "We would focus primarily on emerging markets," he told the BBC. |
| "It takes us primarily to Asia, the Middle East, Latin America - those kind of parts of the world in which we have a strong franchise and where it makes sense to invest to grow that further." | "It takes us primarily to Asia, the Middle East, Latin America - those kind of parts of the world in which we have a strong franchise and where it makes sense to invest to grow that further." |
| 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. | 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. | 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 | No executive bonuses |
| HSBC admitted the banking industry had done many things wrong. Inappropriate products were sold inappropriately by many, it added. There is an important need to underscore the critical necessity of good ethical principles in banking Stephen Green, HSBC chairman | HSBC admitted the banking industry had done many things wrong. Inappropriate products were sold inappropriately by many, it added. There is an important need to underscore the critical necessity of good ethical principles in banking Stephen Green, HSBC chairman |
| Mr Green said the bank intended to "play our part in rebuilding public trust in our industry". | 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. | 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. | HSBC said 2008 had been a very difficult year for the financial sector, and it expected 2009 to continue to be challenging. |
| 'Older principles' | 'Older principles' |
| Mr Green admitted that while banks had always had a moral obligation governing their behaviour, it had "not always been honoured in the observance". | Mr Green admitted that while banks had always had a moral obligation governing their behaviour, it had "not always been honoured in the observance". |
| "I think there is an important need to underscore the critical necessity of good ethical principles in banking and in the markets," he said. | "I think there is an important need to underscore the critical necessity of good ethical principles in banking and in the markets," he said. |
| He added that he thought there would be a reversion to some older principles of banking, in terms of "a simpler sense of providing good customer service, good relationship management, and a sensible approach to liquidity". | He added that he thought there would be a reversion to some older principles of banking, in terms of "a simpler sense of providing good customer service, good relationship management, and a sensible approach to liquidity". |
| He also said it was understandable that the government was putting pressure on banks to increase their lending. | He also said it was understandable that the government was putting pressure on banks to increase their lending. |
| HSBC's lending in the UK grew 12% in 2008. | HSBC's lending in the UK grew 12% in 2008. |
| Are you a HSBC shareholder? Will you buy new shares in the company? What do you think of this move by the bank? You can send us your views and experiences using the form below: | Are you a HSBC shareholder? Will you buy new shares in the company? What do you think of this move by the bank? You can send us your views and experiences using the form below: |