HSBC in £12.5bn cash call to shareholders

Mar 3 2009 by Iain Laing, The Journal

EUROPE’S biggest bank HSBC has joined the growing list of financial institutions looking for help to weather the recession, with a call on shareholders for a record £12.5bn after its profits slid 62% last year.

HSBC wants the extra cash to shore up its finances after unveiling bad debt provisions totalling £17.5bn, as it revealed pre-tax profits had slid to £6.5bn in 2008 and announced plans to close its troubled US consumer lending business.

The heavily discounted rights issue surpasses the £12bn fundraising exercise carried out by Royal Bank of Scotland nearly a year ago, before the bank was forced into state support.

HSBC has so far avoided calling on the taxpayer for cash and chairman Stephen Green said he was “determined that HSBC should maintain its signature financial strength”. He also confirmed that executives would not be claiming their bonuses this year.

But the firm also bore the scars of a tumultuous year for the banking sector in the severe blow to its profits and lowered its dividend payouts.

HSBC’s decision to run down its US consumer lending operation is an embarrassing blow to the group’s strategy after it spent billions on the Household business in 2003.