HSBC in record rights issue, slashes US jobs
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Reuters
Oluşturulma Tarihi: Mart 03, 2009 00:00
LONDON - HSBC, Europe’s biggest bank, may be the one to survive the global financial storm in the best shape possible, but that does not prevent the lender to resort to a record rights issue.
HSBC launched a 12.5 billion pound ($17.7 billion) rights issue yesterday to shore up its balance sheet after annual profit more than halved and as bad debts soared in the United States.
Europe's biggest bank will offer 5.1 billion shares at 254 pence each, making it Britain's largest-ever rights issue. The issue price is at a 48 percent discount to Friday's close of 491.25 pence. Several investors said last week they support a rights issue, and wanted management to act quickly to remove uncertainty hanging over its share price.
"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.
North America losses
The bank also said yesterday that pretax profit last year fell 62 percent to $9.3 billion from $24.2 billion a year earlier after it was hit by a goodwill impairment charge of $10.6 billion in the United States. Excluding the charge pretax profit fell 18 percent to $19.9 billion which was slightly ahead of the $19 billion expected by analysts.
The bank also cut its dividend for the full year by 29 percent to 64 cents per share and said it would close its U.S. consumer loans business, HFC.
HSBC's losses in North America last year amounted to $15.5 billion, including the $10.6 billion goodwill impairment charge. That stems from its troubled acquisition of Household, the U.S. consumer lending business bought six years ago for $14 billion.
"With the benefit of hindsight, this is an acquisition we wish we had not undertaken," chairman Stephen Green said in a statement.
The bank said it would close the majority of its HFC and Beneficial-branded U.S. branch network, resulting in the loss of 6,100 jobs and that the U.S. divisions would write no further consumer finance business.
Group-wide the bank said that losses on bad loans jumped 44 percent versus 2007 to $24.9 billion.
The rights issue is being underwritten by Goldman Sachs, JPM Cazenove and HSBC. The bank's Hong Kong-listed shares were suspended yesterday. Its London shares closed on Friday at 491.25 pence, valuing the bank at $85 billion, ranking it just ahead of JP Morgan Chase as the biggest bank outside China.
HSBC has traditionally been one of the best-capitalized banks in the world and has not raised capital while others scrambled for cash as the credit crisis deepened.
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," Flint told reporters. "There's nothing on the go but we believe the opportunities will come to banks that have the ability to take such options."
Europe's biggest bank will offer 5.1 billion shares at 254 pence each, making it Britain's largest-ever rights issue. The issue price is at a 48 percent discount to Friday's close of 491.25 pence. Several investors said last week they support a rights issue, and wanted management to act quickly to remove uncertainty hanging over its share price.
"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.
North America losses
The bank also said yesterday that pretax profit last year fell 62 percent to $9.3 billion from $24.2 billion a year earlier after it was hit by a goodwill impairment charge of $10.6 billion in the United States. Excluding the charge pretax profit fell 18 percent to $19.9 billion which was slightly ahead of the $19 billion expected by analysts.
The bank also cut its dividend for the full year by 29 percent to 64 cents per share and said it would close its U.S. consumer loans business, HFC.
HSBC's losses in North America last year amounted to $15.5 billion, including the $10.6 billion goodwill impairment charge. That stems from its troubled acquisition of Household, the U.S. consumer lending business bought six years ago for $14 billion.
"With the benefit of hindsight, this is an acquisition we wish we had not undertaken," chairman Stephen Green said in a statement.
The bank said it would close the majority of its HFC and Beneficial-branded U.S. branch network, resulting in the loss of 6,100 jobs and that the U.S. divisions would write no further consumer finance business.
Group-wide the bank said that losses on bad loans jumped 44 percent versus 2007 to $24.9 billion.
The rights issue is being underwritten by Goldman Sachs, JPM Cazenove and HSBC. The bank's Hong Kong-listed shares were suspended yesterday. Its London shares closed on Friday at 491.25 pence, valuing the bank at $85 billion, ranking it just ahead of JP Morgan Chase as the biggest bank outside China.
HSBC has traditionally been one of the best-capitalized banks in the world and has not raised capital while others scrambled for cash as the credit crisis deepened.
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," Flint told reporters. "There's nothing on the go but we believe the opportunities will come to banks that have the ability to take such options."