HSBC considers $20bn cash call from investors
Sunday, 22 February 2009
Sources close to HSBC, Europe’s biggest bank, have refused to rule out tapping its investors for new capital, amid speculation that it is considering a $20bn (£14bn) rights issue.
HSBC chief executive, Michael Geoghegan, is expected to meet with key institutional investors in the Square Mile this week to gauge support for any cash call ahead of the bank’s full year results next Monday. Meanwhile, later this week, Royal Bank of Scotland (RBS) will confirm the biggest loss in British corporate history when it reports results on Thursday.
Last month HSBC said in a carefully worded statement that it had “not sought capital support from the UK Government and cannot envisage circumstances where such action would be necessary”. The bank stressed that its key capital ratio measurement remained robust, while it reaffirmed its commitment to lend as much as £15bn in mortgages this year.
Knight Vinke, the activist investor which is expected to renew its assault on HSBC’s management this week, said in January that it was “convinced a substantial rights issue is inevitable and the longer HSBC leaves it, the worse the problem will become”.
One leading HSBC shareholder, commenting on the likelihood of a rights issue, said: “They’ll have to raise the cash – it’s just a case of when. We’d be supportive of a move sooner rather than later. Let’s see what nasties are revealed next week.”
Another investor said: “If HSBC’s management aren’t careful events are going to overtake them. If its American subsidiary is subject to the stress testing that’s being talked about a cash call is simply inevitable.”
Further writedowns in HSBC’s ailing American Household subprime lending unit will be revealed next Monday. As much as $10bn in goodwill alone could be wiped off its value in 2009, one analyst said last week. HSBC shares closed down more than 4 per cent on Friday at 477.25p – a near halving of the price since October last year. An HSBC spokesman declined to comment.
Speculation about a HSBC rights issue comes ahead of RBS’s full-year results which will reveal as much as a £28bn loss in 2008. Chief executive Stephen Hester is expected to detail a retreat from Asia to shrink the £2 trillion balance sheet. RBS, which is nearly 70 per cent owned by UK taxpayers, is also expected to cut more jobs from its 170,000-strong global workforce.
On Friday, Lloyds banking group chief, Eric Daniels, will face further scrutiny from shareholders, angry at the purchase of HBOS, which racked up £10bn in losses last year. Sources suggest there are growing tensions between Mr Daniels and his chairman, Sir Victor Blank, with some institutional investors calling for heads to roll over the botched HBOS deal.
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Comments
Stanford and Poor
It's going broke (not the directrs tho) and wants the poor and unemployed to fund the gravy from itheir taxes on consumption
QED Robin Hood in reverse
The share holders and investors are tosavvy to bail out the Ninja notgages
Wheres Madoff when you need a punter?
Those who fail to read and learn from history are bound to repeat it. I feel that based on various articles, complaints and its current business plan, HSBC will soon follow UBS, Fannie May, Fredie Mack, and AGI. Its leadership at present are more intent on reaping large profits at the expense of its customers. US regulatory agencies sooner or later will take some action against HSBC, being forced by the large number of complaints being registered by its customers. Everything I stated above can be verifed by going to various consumer web sites, the National Better Business Beaure, and regulatory agencies. HSBC may soon see the men in the blue jackets with the big yellow letters walking in the door.
I am a Hong Kong resident and former shareholder and am very disappointed at the way HSBC has handled the last few months. To me they have been aware for a long time of the need to raise extra capital and should have come clean about it. Like some of your readers I have seen the negative press and feelings here; yet NOTHING is ever said. Poker is a game for the intelligent, not bankers and generally needs confidence that there is a good hand, not ongoing bluff.The continuing fall in the share price says it all, as does the comment of minority shareholders who provide a useful service to us all and the negativity of the US websites. I am also sure that there will be huge retribution in US, but hope that the world will be ready for the problems that any fall of HSBC to the levels of CITIBANK would bring. In Hong Kong it would be catastrophic. It is also I am afraid a sign of the moral decay of the financial elite and until people like Thain, Madof and their ilk are flushed out of the system there will be no change.There are still good stocks on the Hong Kong market, but HSBC is not one of them. Caveat emptor and as the author of Fooled by Randomness, Nassim Nicholas Taleb points out , banks are a risky investment; they have the chance to have their loans go bad and yet do not have the ability to benefit greatly if they back the right companies. A living example of this is Li Kar Shing, backed by Sandberg of HSBC in his initial takeover activity that founded his empire.Mr Li is cash rich while HSBC is now rumoured to require a huge rights issue.Please be careful and think things through Mr Geoghan and remember it must all come out in due course, however much you feel that it should not. In my opinion earlier honesty would have been more prudent.
Anthony P Fussell MBA
Hong Kong
Jimmy Kilpatrick
EducationNews.org
Jimmy Kilpatrick
EducationNews.org
If you go read on some of the credit message boards like creditforum, apparently HSBC has done this to nearly all their credit card customers, worldwide. No company would do that without being severely desperate. In fact, I expect HSBC to declare bankruptcy very, very soon. Within two weeks at the most.
Geneschumann@aol.com
I urge all of you not to be bullied by your creditors, show them who the customer is!
When we have talks with the Executive Bank level Management, they tell us they are not interested in private capital.
It is interesting that the banks cry through the media, but when we show up to offer assistance, they will not even listen to what we have to offer.
Lets face it, HSBC's track record in this country, after haing purchased Household International, having found guilty of the RICO ACT, has continued to operate with the attitude that the customers mean very little. Customers service is very poor, payments get lost or are posted late, charges its customers to make sure payments on time. So Why would anyone want to do business with this company?
As to a $300.00 credit limit sounds like to Premier Bank game. What can you do with $300.00 in todays world. By time you get done applying interest, the charges, member fees, whar left $50 or $75.00. CUT IT UP and send them packing. Lets give them another TEA PARTY.