HSBC's cash call provides reality check despite Asian promise

HSBC's cash call provides reality check despite Asian promise
HSBC'S awful results are an important reality check for everyone caught up in the global financial crisis.

By Damian Reece
Last Updated: 5:57AM GMT 03 Mar 2009

While our attention here has been focused on domestic trouble and strife to do with which bankers got paid what and when, the world economy continues to go to pot.

The bank's results are truly awful, even before the £17.5bn of write downs including its disastrous US business, but then so is the global financial system in case you'd forgotten.

A £12.5bn rights issue reveals a bank extremely worried about the future, but then so it ought to be.

Its senior executives are foregoing bonuses for 2008 but then so they should, having overseen a company that on the best measure saw an 18pc fall in profits and the worst a 62pc drop.
Stephen Green, HSBC's chairman, sought to explain the causes of the current crisis on Monday with reference to the triangle of Western consumer economies gorging themselves on debt supported by the surpluses of the Far Eastern producer nations and the oil and mineral rich resource nations.

Last year that once golden triangle fast became a Bermuda triangle with the likes of HSBC a piece of the wreckage bobbing around in the ocean – afloat at least and not completely sunk.

These results are no cause to sing out in celebration but neither are they a death knell.

This is a UK-based bank still going without government aid and able to raise a record £12.5bn from investors. It has at least a veneer of credibility left, enough for it to talk of opportunities to pick off acquisitions as competitors seek safe harbour.

The 19pc fall in its shares yesterday reflects the fact that, understandably, pessimists win every argument at the moment.

The outlook is bad enough that no one can be sure that HSBC won't need the financial help of at least one government in future. Markets have got used to expecting the worst only to see those expectations all too often surpassed so they are in no mood to give anyone the benefit of the doubt.

What is in no doubt, however, will be the shift in economic power from West to East as a result of this crisis, an axis that HSBC straddles.

Even now Asia, except Japan, is expected to grow 4.6pc in 2009, a terrible result for the region but at least it's in positive territory in these worst of times.

The region still has the surpluses to stimulate domestic and regional demand while retaining the firepower to buy up the West's distressed assets at knock down prices.

All this at a time when the likes of the UK and the US will have to pay off debt and right the wrongs of their credit binge, further limiting economic recovery here.

http://www.telegraph.co.uk/finance/comment/damianreece/4929190/HSBCs-cash-call-provides-reality-check-despite-Asian-promise.html