HSBC, Europe’s biggest bank, plans to raise more than £12 billion ($17 billion) in a share sale aimed at propping up its capital base in order to cope with the economic crisis, the Financial Times reported on Saturday.
The FT said the share issue would likely be announced alongside its full-year 2008 results due on Monday. The newspaper quoted unidentified people involved in the discussions as saying the offer price for the sale had not been set and the deal could still be postponed.
The bank is also expected to announce a cut in its dividend, the FT reported on its website. It said the share sale was underwritten by Goldman Sachs and JPMorgan Cazenove and the deal could set a new record in Britain for a rights issue funded by private investors after Royal Bank of Scotland’s £12 billion share offering last April.
HSBC has traditionally been one of the best capitalized banks in the world and has not raised capital while rivals have scrambled for cash as the credit crisis has deepened.
But some analysts have said that has eroded its competitive advantage and could encourage it to raise funds to protect it against rising bad debts across its businesses. Shares in HSBC closed 6.8% lower on Friday, while European banking stocks ended the session down 4.8%. (Reuters)