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March 1, 2009

HSBC to announce £12bn right issue

by Gill Montia

Story link: HSBC to announce £12bn right issue

HSBC is expected to unveil plans for a £12 billion rights issue this week.

Europe’s largest bank is known to be well capitalised, having emerged relatively unscathed from the credit crisis because of its focus on emerging markets business.

However, it has been hit by losses from its US operations, writing down $4.3 billion in relation to its US personal financial services business and $600 million at its investment banking unit.

According to reports, the fundraising would bolstering capital reserves in preparation for a prolonged global economic downturn and at the same time give the group scope to buy assets from its less fortunate rivals.

For example, last month Royal Bank of Scotland announced that it was selling at least one-fifth of its business and had identified between £200 billion and £300 billion worth of non-core assets for disposal.

HSBC is due to report its full-year 2008 results this week and analysts expect the group to post a 22% fall in profits.

However, the bank remains confident of its financial strength, having recently stated that it was unlikely to be taking advantage of any government bail-out scheme and could not envisage circumstances where it would need help from the Treasury.

 

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