Showing posts with label HSBC. Show all posts
Showing posts with label HSBC. Show all posts

Thursday 5 July 2012

A UK Blue-Chip Starter Portfolio


Company
Industry
Share Price (Pence)
P/E
Yield (%)
HSBCFinancials5619.05.2
Royal Dutch ShellOil & Gas2,2257.65.0
BHP Billiton (LSE: BLT.L  )Basic Materials1,8067.64.3
British American TobaccoConsumer Goods3,24214.64.5
Tesco (LSE: TSCO.L  )Consumer Services3108.85.0
GlaxoSmithKlineHealth Care1,44711.45.3
Vodafone (LSE: VOD.L  )Telecommunications17910.97.4
Rolls-RoyceIndustrials85814.22.4
National GridUtilities67612.46.1
ARM HoldingsTechnology50632.20.9

Excluding tech share ARM, the companies have an average P/E of 10.7 and an average yield of 5.0%. The numbers were 9.8 and 5.2%, respectively, when I last carried out this exercise in October 2011.
So, the group is rated a bit more highly today than it was nine months ago. However, I think it still veers towards the value end of the spectrum, because my rule of thumb for this group of nine is that an average P/E below 10 is firmly in "good value" territory, while a P/E above 14 starts to move toward expensive.


Tuesday 6 December 2011

HSBC fined £10m for mis-selling to pensioners


HSBC has been hit with a record £10.5m fine for mis-selling investment products to elderly customers needing long term care.





Pensioner counting change - Pensioners' inflation '10 times national rate'
HSBC has been hit with a record £10.5m fine for mis-selling investment products to elderly customers needing long term care. Photo: IAN JONES
HSBC has been hit with a record £10.5m fine for mis-selling investment products to elderly customers needing long term care.
This is the biggest ever fine issued by the Financial Services Authority to a retail financial services company. It has ordered HSBC to pay almost £30m compensation to those affected.
The FSA said that between 2005 and 2010, a subsidiary of the bank, NHFA (previously known as the Nursing Home Fees Agency) advised 2,485 customers to invest in investment bonds, and other asset-based products, to fund long-term care costs. The average age of these customers was 83 – and a sample review suggested that almost 90pc of these cases were mis-sold.
In total the amount invested in these products was close to £285m – meaning the average amount invested per customer was about £115,000.
The FSA ruled that this advice was unsuitable, because these products were designed to be held for a minimum of five years; but many of these customers were not expected to live this long. A combination of capital withdraw, and high product charges meant that people's money was reduced far faster than if they had been recommended alternatives – such as a high-interest fixed-rate account, or an Isa.
In addition the FSA said it was also apparent that the banks advisers had failed to consider the tax status of customers before making these recommendations.
Tracey McDermott, acting director of enforcement and financial crime said: "NHFA was trusted by its vulnerable and elderly customers, It breached that trust to sell the unsuitable products. This type of behaviour undermines confidence in the financial services sector.
"This penalty should serve as a warning to firms that they must have the right systems and controls in place to manage and identify risks when they acquire new businesses. A failure to do so can lead not only to detriment to their customers but to significant reputational and regulatory cost."
She added that the FSA viewed the as particularly significant because NHFA's customers were very vulnerable, due to their age and health. NHFA was also the leading supplier in the UK of independent advice on long-term care products with a market share in recent years approaching 60pc.
Separately, HSBC announced that it would cut 330 jobs in the UK due to "the very challenging economic environment".
"HSBC is today announcing some proposed changes to various areas of our business that will result in the loss of approximately 330 roles in the UK ... in response to the very challenging economic environment and the bank's need to ensure it is working as efficiently as possible," a statement said.

Saturday 11 December 2010

Madoff trustee sues HSBC for nine billion dollars

Business 2010-12-07 11:56

NEW YORK, Tuesday 7 December 2010 (AFP) - The trustee charged with recouping assets for victims of Wall Street fraudster Bernard Madoff is suing British banking giant HSBC and related entities for at least nine billion dollars.

In a statement issued Sunday, Irving Picard accused the firms of enabling Madoff's massive Ponzi scheme by creating, marketing and supporting "an international network of a dozen feeder funds based in Europe, the Caribbean and Central America."

HSBC and the related funds led investors to direct over 8.9 billion dollars into Bernard L. Madoff Investment Securities LLC (BLMIS) -- Madoff's fraudulent investment advisory business, according to Picard.

"The defendants also earned hundreds of millions of dollars by selling, marketing, lending to and investing in financial instruments designed to substantially assist Madoff by pumping money into BLMIS and prolonging the Ponzi scheme," despite being aware of the fraud, he added.

Italian bank UniCredit, Austrian banker Sonja Kohn and her Bank Medici are among those accused of helping the former Nasdaq chairman expand his scheme.

"Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Picard said.

"The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff."

Last week, Picard said he was seeking 6.4 billion dollars from JPMorgan Chase for supporting the scam and he has filed a suit against Swiss bank UBS seeking two billion dollars in damages for its part in the massive fraud.

Madoff, who touted himself as one of New York's most successful money managers, was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison.

Madoff's victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades.

The crime rocked Wall Street, where Madoff was a pillar of the New York and Florida Jewish communities.

Madoff's right hand man, Frank DiPascali, and his accountant, David Friehling, have since pleaded guilty in an investigation that has yet to fully unravel the crime or compensate the approximately 16,000 direct victims.

Even the amount of money stolen remains elusive: Madoff originally claimed to have been managing 65 billion dollars, but in October the court-appointed liquidator said the real bottom line was 21.2 billion dollars.

Madoff has insisted he acted alone, but a handful of others, including an assistant, two executives, computer experts and a bookkeeper have also been arrested.

Madoff, who rose from a humble start as a lifeguard in New York to become one of Wall Street's most trusted and powerful money managers, is incarcerated in North Carolina.

His luxury watches, piano and other personal items were sold at auction to raise money for his fraud victims on November 13.

MySinchew 2010.12.07

Thursday 16 September 2010

Market report: HSBC could double dividend, say analysts

HSBC was in focus as City analysts suggested the banking behemoth could double the size of its dividend from its 2009 low.

 
By Ben Harrington
Published: 9:07PM BST 15 Sep 2010

FTSE 100
"We think the rebound in profitability and confirmation of Basel capital requirements will allow the bank to step up its dividend materially," said Michael Helsby, an analyst at Bank of America Merrill Lynch.
Mr Helsby argued that even after factoring in a higher dividend, HSBC would have around $15bn (£9.6bn) of surplus capital by 2012.
"Investor perception of HSBC is dominated by the outlook for interest rates. Consensus suggests that HSBC cannot turn around its operating performance without an [interest] rates increase. We are more bullish," said Mr Helsby, as he raised his target price on the stock to 905p and reiterated his "buy" rating.

He concluded: "The bank's risk appetite has recovered and in our view top line growth will respond."
HSBC shares edged up 0.4 to 676.6p.

http://www.telegraph.co.uk/finance/markets/marketreport/8005404/Market-report-HSBC-could-double-dividend-say-analysts.html

Thursday 15 October 2009

'Financial shares to rally 20pc'

'Financial shares to rally 20pc'
Jupiter's well-respected financials fund manager Philip Gibbs says the sector should enjoy a further 20pc gain before the current rally peters out.

By Matt Goodburn
Published: 3:24PM BST 01 Oct 2009

Mr Gibbs, the only manager to have been AAA-rated by Citywire for the entire ratings coverage, was also optimistic about the prospects for equities as a whole over the next few months. Mr Gibbs says he believes corporate earnings for the financials sector will be ''very much beating expectations'' after the current round of trading updates are released.

"The run could go a very long way. We are down over 50pc in global financials and the numbers are compelling. I think if the sector returns to more normal valuations it will stage a more significant rally of more than 20pc and individual stocks could do very well.''

Mr Gibbs' top fund holding is Barclays, which comprises 7pc of his £1.3bn Jupiter Financial Opportunities fund. He picked the bank as ''a winner from the credit crunch'' compared to rivals Lloyds and Royal Bank of Scotland: ''Lloyds is a microcosm of the sector. It is a very leveraged play on the UK consumer, but still has some very horrible problems, especially in commercial property. It is still undercapitalised and wrestling with the issue of paying a huge premium to the Government.
I prefer HSBC and Barclays.''

According to fund statisticians Lipper, Jupiter Financial Opportunities has posted a total return of 857pc since launch in June 1997 to the end of August, making it by far the most successful UK unit trust over the period, with an annualised return of 19.8pc.

http://www.telegraph.co.uk/finance/personalfinance/investing/6251200/Financial-shares-to-rally-20pc.html

Tuesday 4 August 2009

Investment Banking Buoys HSBC and Barclays

Investment Banking Buoys HSBC and Barclays


By JULIA WERDIGIER
Published: August 3, 2009

LONDON — HSBC Holdings and Barclays reported robust first-half profits Monday based largely on the performance of their investment-banking businesses, along with their Wall Street peers. Yet the banks also set aside a combined $22 billion to cover potentially bad debts as recession and high unemployment lead to more retail loans going sour.

The two banks, among the largest in Britain, were the first of a group of European banks, including UBS and Royal Bank of Scotland, to report earnings this week. Some analysts predict that the industry will continue to struggle because fewer clients can repay their debts as the global downturn continues.

HSBC’s profit fell 57 percent from a year ago after the bank set aside $13.9 billion in credit risk provisions and said the timing and scale of a “recovery in the wider economy remains highly uncertain.” Profit at Barclays increased 10 percent after earnings at its investment banking unit almost doubled but reserves against anticipated loan losses, also called impairment charges, reached £4.6 billion, or $7.7 billion.

“The underlying trend is rising bad debts and there are still at least one or two more quarters to come,” said Julian Chillingworth, chief investment officer at Rathbone in London.

HSBC and Barclays joined banks like Credit Suisse and JPMorgan Chase in benefiting from a strong performance of their investment-banking units even as loan loss provisions climbed. Demand for investment banking services rose because more companies are seeking to sell shares and bonds to raise capital.

As it has among Wall Street banks, a rift is emerging in Europe between those banks that remained relatively unscathed during the financial crisis and can now grow and benefit from their investment banking services and those that accepted government funds and needed to scale back riskier operations.

HSBC and Barclays could expand their investment banking operations while rivals like Royal Bank of Scotland and Lloyds, which accepted government funds, are struggling to cut costs and recover from huge losses. Rather than accept government assistance, HSBC conducted a rights offer and Barclays tapped foreign investors to raise capital.

Shares in HSBC gained about 5 percent in London on Monday and shares in Barclays jumped 7 percent. The share price of Barclays has more than doubled since the beginning of this year, while HSBC stock is down about 5 percent amid concern about rising loan-loss provisions and its struggling mortgage lending business in the United States.

Rising loan losses among European banks continue to spook investors. Deutsche Bank’s loan provisions of 1 billion euros, or $1.4 billion, for the second quarter sent the company’s shares lower even though the bank’s net income rose and revenue from sales and trading at its investment bank unit more than doubled.

Barclays said profit rose to £1.89 billion in the first half of this year from £1.72 billion. Impairment charges increased 86 percent to £4.6 billion and pretax profit at its British retail business dropped 61 percent. At Barclays Capital, its investment-banking unit, earnings rose to £1.05 billion from £524 million.

Barclays is benefiting from an expansion into investment banking services; it bought Lehman Brothers’ American businesses and has been hiring senior bankers in Europe and Asia this year.

Robert E. Diamond Jr., president of Barclays, said Barclays Capital’s expansion is about two-thirds done “but more is to do in Asia.” He expects income from the cash-equities and advisory business to continue to grow and said the pipeline for financing, fixed-income and risk management services is “very big.”

Barclays, which said it planned to resume paying dividends before the end of this year, struck a note of caution Monday, predicting that loan losses will continue to go hand-in-hand with unemployment rates. “We expect the remainder of 2009 to be challenging,” John Varley, the bank’s chief executive, said in a statement. “We expect credit-market losses to be lower than in the first half but impairment trends to be consistent with those experienced over the first half.”

Stephen Green, HSBC’s chairman, was more optimistic when he said that “it may be that we have passed, or are about to pass, the bottom of the cycle in the financial markets.”


http://www.nytimes.com/2009/08/04/business/global/04banks.html?ref=business

HSBC first-half profits fall 51pc as bad debts soar


HSBC first-half profits fall 51pc as bad debts soar
HSBC said profits had more than halved in the first six months of the year, after bad-debt charges soared.

By Telegraph Staff
Published: 10:07AM BST 03 Aug 2009

HSBC Hldgs
The 51pc drop in pre-tax profits to $5bn (£2.98bn) came after its bad debt charges soared 39pc to $13.9bn, the bank reported on Monday.

Rival Barclays said earlier this morning its profits climbed 8pc to £2.98bn for the same period.


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HSBC raised $17.8bn in a rights issue in April to shore up its capital position, and it had a Tier 1 ratio of 10.1pc at the end of the first half. The bank has had to make some $67bn of bad loan provisions in the last three and a half years, in part because of its purchase of US subprime lender Household International in 2003.

“It may be that we have passed, or are about to pass the bottom of the cycle in the financial markets,” HSBC chairman Stephen Green said in the statement. “Operating conditions in the financial sector have continued to improve as the effects of government and central bank policies work through the system.”

In its global banking and markets business, profit before tax more than doubled to $6.3bn on an increase in currency trading and underwriting bond sales.

The shares were up 3.1pc to 624.6p in morning trading.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5964507/HSBC-first-half-profits-fall-51pc-as-bad-debts-soar.html

HSBC is a great business – but buy Standard Chartered

HSBC is a great business – but buy Standard Chartered

By Garry White
Published: 5:17PM BST 03 Aug 2009

HSBC

635.9p +30.15


Related Articles
Baldrick banks could be wrong to look overseas
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Questor says AVOID

This column has shied away from recommending Western banks over the last six months, as there were too many uncertainties in their balance sheets. The full impact of bad loans has not worked its way through the system and there are a number of new regulatory hoops that look likely to be imposed. Caution continues to be the order of the day.

HSBC did not need to take government funds when other institutions were crumbling at the foundations, although it tapped existing shareholders for more money through a rights issue in April, raising $17.8bn (£10.5bn). This is a major positive for the group.

Yesterday's first-half report was relatively reassuring. Pre-tax profits in the six-month period to June 30 fell 51pc to $5bn on a year-on-year basis on revenues that were 10pc ahead of last year. Reassuringly, its Tier One ratio rose to 10.1pc from 8.3pc six months ago.

This is ahead of the 7.5pc – 10pc range targeted by the bank, with most of this extra funding coming from the group's cash call earlier this year.

HSBC still owns Household in the US – a sub-prime lender. The company paid $15bn for the business in 2003 and the bank – after defending the purchase for quite some time – admitted that it has made a mistake earlier this year. "With the benefit of hindsight, this is an acquisition we wish we had not undertaken," Stephen Green, HSBC's chairman, said in March.

Rising bad debts in the US, Europe and Asia forced the bank to write off $13.9bn, which was one-third higher than in the same period last year. This is a lot of money – even for a bank of the size of HSBC. The bank has had to make some $67bn of bad loan provisions in the last three-and-a-half years, most of these associated with Household.

Although there is the suggestion that bad debts could have peaked, this may not be the case. If you look at the stock market's recent performance, you would think that the future is rosy and bright. It is not. Unemployment looks set to rise and bad debts are going to take some time to work their way through they system. This is the main reason Questor is cautious

It is easy to argue that HSBC is managed better than most other "western" banks – because it's probably true – and there is no doubt that it has a great future ahead of it. The company's heavy exposure to Asia is a real positive.

However, it's a question of valuation. The shares have rallied substantially from their lows, more than doubling since March. This means that the shares are trading on a December 2009 earnings multiple of 28.6, falling to 21.5 next year and 13.8 in 2011. This looks pretty steep. The shares are only yielding 3pc as well, which is hardly earth shattering when compared to some of the dividend plays we have in the Questor portfolio such as Northern Foods (7.4pc) and BP (6.8pc).

Questor advises readers to buy shares in Standard Chartered instead. The bank was recommended when its shares were at £12.40 and they are now 18pc ahead of their initial recommendation price.

The shares are yielding just 2.4pc this year, but this is not a share to buy for income, it's a share to buy for long-term growth. The company operates in markets that have significant growth ahead and is heavily exposed to the Middle East. It escaped the collapse in global financial markets relatively unscathed and it is trading on a December 2009 earnings multiple of 15.7 times.

Standard Chartered publishes its interim figures today. Consensus is for earnings per share of 91 cents, with a range of 80 cents to $1.07.

So, although things are looking relatively good for HSBC, concerns about bad debts remains and the valuation looks pretty rich. Questor advises avoiding shares in HSBC for now, playing the banking sector through Standard Chartered which is highly geared to most of the long-term growth markets in the world.

http://www.telegraph.co.uk/finance/markets/questor/5967064/iHSBC-is-a-great-business-i-but-buy-Standard-Chartered.html

Wednesday 11 March 2009

HSBC Stock Plunge Prompts Regulator Probe of Trade

HSBC Stock Plunge Prompts Regulator Probe of Trade (Update2)
Share Email Print A A A
By Hanny Wan and Kelvin Wong
March 10 (Bloomberg) -- HSBC Holdings Plc’s 24 percent plunge in Hong Kong yesterday prompted a government probe and the stock exchange to consider bringing forward changes to end- of-day trading processes. The shares rallied 14 percent today.
The Securities and Futures Commission is investigating trades put through at yesterday’s close, Financial Secretary John Tsang told reporters today in comments broadcast by local television. Hong Kong Exchanges & Clearing Ltd. may accelerate the implementation of a 2 percent cap on stock fluctuations during so-called closing auction sessions, a spokesman said.
“Yesterday’s closing auction exposes the flaw in our stock trading system that allows these kinds of trades,” said Chim Pui-chung, a Hong Kong legislator who represents the financial services industry. “The SFC needs to take responsibility for this and to investigate immediately, and release their findings to let investors know what happened.”
The closing auction process, used by the exchange since May last year, has attracted criticism from lawmakers and investors who claim it distorts stock pricing. The session extends trading by 10 minutes from the original 4 p.m. local time close, during which buy and sell orders are matched by an auction trading mechanism.
Four days after the closing auction was introduced, eight stocks moved by more than 10 percent from the last traded price at 4 p.m., which Hong Kong Exchanges said was due to a rebalancing of MSCI Barra indexes.
‘Annoys The Market’
“It annoys the market and especially retail investors,” said Andrew Sullivan, a sales trader at Mainfirst Securities Hong Kong Ltd., referring to the stock fluctuations during the auctions.
The sessions are an international practice aimed at providing a “fair and market-driven method” to determine closing stock prices, the exchange said in October 2007 when it announced the new system.
Hong Kong Exchanges said March 5 that it planned to implement a 2 percent limit on the changes of stock prices within the auctions on June 22.
“Our plan hasn’t changed, but we can’t rule out the possibility of pushing the plan forward,” spokesman Henry Law said in an interview today. “It depends on how soon the market can upgrade its trading systems.”
All brokerages need to finish testing the parameters they set for the closing auction session before the exchange can go ahead with the new volatility cap, he said.
HSBC Shares Rally
The bourse said in November 2008 that the Tokyo Stock Exchange, Korea Exchange, Taiwan Stock Exchange, and Shenzhen Stock Exchange had price controls in their closing auction sessions, whereas the New York Stock Exchange, London Stock Exchange, and Australian Securities Exchange do not.
HSBC’s 24 percent tumble yesterday wasn’t the result of “panic selling, it was technical trades,” Sandy Flockhart, chief executive officer of the bank’s Asian business told reporters in Hong Kong today.
The stock, the second-largest constituent on the benchmark Hang Seng Index, fell more than 10 percent during the closing auction session, dragging the shares to the lowest since May 1995. The shares rallied 14 percent today to HK$37.60.
“HSBC is a very unique stock and it has an intricate relationship with Hong Kong people’s lives,” said legislator Chim. “When it fluctuates like yesterday it has a huge impact on people’s sentiment and wealth.”
To contact the reporters on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net; Kelvin Wong in Hong Kong at kwong40@bloomberg.net. Last Updated: March 10, 2009 05:28 EDT

http://www.bloomberg.com/apps/news?pid=20601089&refer=china&sid=aQ_lndHEmwUg

http://www.breakingviews.com/2009/03/10/HSBC.aspx?sg=nytimes

Wednesday 4 March 2009

Q&A: Should I buy into HSBC's rights issue?

From Times OnlineMarch 2, 2009

Q&A: Should I buy into HSBC's rights issue?
We answer the pressing questions for shareholders and borrowers as the bank announces plans to raise billionsKathryn Cooper

BANKING giant HSBC today asked shareholders to stump up £12.5 billion to help it through the economic downturn, but stockbrokers gave the rights issue a lukewarm reception.

Britain’s biggest bank announced the country’s largest-ever cash call alongside a 62 per cent fall in pre-tax profits to $9.3 billion (£6.5 billion). It also cut its dividend for the full year by 29 per cent.

However, the results contained some good news for mortgage borrowers: the bank said it would aim to lend £15 billion this year, double 2007’s total.

The announcement will raise hopes that the mortgage freeze that has prevented buyers getting into the property market could be starting to thaw.

Under the terms of the rights issue, shareholders will be offered five new shares for every 12 they already own at a reduced price of 254p, a discount of 48 per cent to Friday’s close of 491.25p.

Investors who do not take up their rights will see the value of their holding diluted because there will be more shares in issue.

We answer your questions.

Q: I’m a shareholder. Should I take up the rights?

A: HSBC shares are not as widely held as those of Halifax Bank of Scotland (now part of Lloyds Banking Group), but thousands of small investors will still have to decide whether to take part in the fund raising.

Expert opinion is divided on what they should do.

Jonathan Jackson, head of equities at stockbroker Killik & Co said: “The group says the rights issue enhances its ability to deal with the impact of an uncertain economic environment, and to respond to unforeseen events, whilst providing options in relation to opportunities for those with superior financial strength.

“However, we believe it is more a reflection of the sharp deterioration in the group’s markets and the prospect of continued weakness to come. Against this background, the market will continue to worry about the group’s capital position and we would continue to avoid the shares.”

However, Nick Raynor, investment adviser at The Share Centre, another broker, drew comfort from the fact that the issue will be ‘fully underwritten’ – in other words, investment banks will take up the shares if investors do not.

“If clients can afford to, they should take up the rights,” he said. “The issue should put HSBC in a strong position in that it should not need fresh capital from either the government, or Middle Eastern investors, as with Barclays.”

Q: What are my options?

A: The first option is simply to take up the shares. The second is to sell the entitlement, known as the nil-paid rights, in the market for cash (alternatively the investor could let the rights lapse, and receive a cheque at the end of the issue).

The third option is to 'tail swallow', or to take up as many rights as possible to leave the investor in a cash neutral position.

According to Richard Hunter of Hargreaves Lansdown Stockbrokers, you should ask if you are happy with how the company plans to use the money, and whether putting in more money would make your portfolio overly heavy in banks.

Q: Are rights issues a good thing?

A: It depends. A study by JP Morgan of rights issues between 1989 and 1994 suggested they are a signal to buy only if the economy is showing signs of a recovery.

On the other hand, a study by Morgan Stanley found that the bigger the rights issue, the better – which bodes well for HSBC’s huge cash call.

Q: I’m a borrower. Is this good news for me?

A: Yes, in the sense it shows some banks are still willing to lend. As well as doubling the amount of money available for new loans, HSBC said it lent £17.1 billion in 2008, up from £9.1 billion in 2007. Its share of the gross mortgage market also went up from 2.4 per cent to 7 per cent.

One of its big successes was Ratematcher, when it offered to match borrowers’ cheap two-year deals from rivals when they came up for renewal. This led to a 200 per cent increase in mortgage sales.

Q: I’m remortgaging. Is HSBC a good bet?

A: It has some market leading deals if you have a big deposit, although it is always worth shopping around.

It has a market-leading five-year fix at just 3.99 per cent with a £999 fee if you have equity of 40 per cent and want to borrow no more than £250,000. It also has a two-year fix at 2.99 per cent with a £599 fee on the same basis

http://www.timesonline.co.uk/tol/money/article5832350.ece

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

Tuesday 3 March 2009

FTSE loses billions of pounds within hours

FTSE loses billions of pounds within hours
Billions of pounds have been wiped off the value of Britain's leading companies after losses at HSBC and AIG drove share prices to a six-year low.

By Graham Ruddick and Myra Butterworth
Last Updated: 5:37PM GMT 02 Mar 2009

HSBC Hldgs
The FTSE 100 index of top UK shares dropped after HSBC confirmed a £12.5 billion rights issue.

It fell by 5.3 per cent and below the 3,700 mark for the first time since April 2003, losing investors £47.7 billion.

The sharp decline took the FTSE 100 below the lows experienced last October as UK banks teetered on the edge of collapse and were bailed out by the Government.

It came as analysts expressed concerns about the state of the UK economy, saying the financial crisis could spill over into other industries.

Investors were spooked by HSBC's rights issue after the UK's biggest bank asked for extra cash from shareholders to boost its balance sheet.

The request was made despite HSBC being one of the British banks least affected by the credit crisis.

HSBC's share issue is the biggest ever in Britain, surpassing the £12 billion request by Royal Bank of Scotland last year before it was forced into state support.

HSBC said the rights issue should help its 'ability to deal with the impact of an uncertain economic environment and to respond to unforeseen events'.

The move sent shares in HSBC down almost 19 per cent and also pulled Standard Chartered, which like HSBC conducts a significant amount of business in Asia, down by a similar amount.

Other UK banks also saw their share price tumble, including Royal Bank of Scotland (which closed down 2.6 per cent), Lloyds Banking Group (down 15 per cent) and Barclays (down 6 per cent).

At the same time, one of the world's largest insurers AIG - which was first saved from collapse in September with a package that grew to $150 billion last year - has had to ask for help again after failing to sell enough assets to repay the US.

Simon Denham, managing director of spread-betting company Capital Spreads, said: "The slowly falling indices are dragging ever more of the total economy into the mire and there is a very real possibility of the problem accelerating into an absolute disaster as opposed to a problem mainly constrained to the financial sector at the moment."

The FTSE 100 has not closed below 3,700 since the outbreak of war in Iraq at the end of March 2003. It was at 3,625.83 at the close of play.

David Buik of BGC Partners pointed out that the FTSE 100 is now lower than when Tony Blair won the 1997 general election. "What a waste of a decade that was," he said.

http://www.telegraph.co.uk/finance/newsbysector/epic/hsba/4928648/FTSE-losses-billions-of-pounds-within-hours.html

Sunday 1 March 2009

HSBC takes £17bn hit on bad loans

From The Sunday TimesMarch 1, 2009

HSBC takes £17bn hit on bad loans
Bank set to launch Britain’s biggest rights issue to guard against the global recessionIain Dey and John Waples

HSBC is to own up to the full horror of its American sub-prime business, Household, when it unveils a £7 billion goodwill write-off in addition to a £17 billion provision against rising bad loans.

The provisions will be announced tomorrow alongside a heavily discounted £12 billion rights issue — the biggest ever held in Britain — and a dividend cut, as Stephen Green, the bank’s chairman, moves to shore up its balance sheet.

The fundraising will make HSBC the strongest bank in the world that has not received a cash injection from the state.

Its tier-one ratio, a key measure of financial strength, will rise from 8.5% to 10.5%. Analysts say it will provide a $40 billion (£28 billion) buffer against further bad debts.

Even after the dividend is halved, the annual yield is expected to be about 5.5%, making it one of the highest in the FTSE 100. And despite the scale of the bad debts, the group will still be profitable.

The HSBC board has decided to waive its bonuses in light of the fundraising, including an estimated £1m bonus for chief executive Michael Geoghegan.

Household has now lost the bank more than $30 billion since the summer of 2006 — more than twice what HSBC paid for the bank just six years ago.

Large parts of the operation will now be closed down and almost all the value attributed to the business will be wiped out. Out of the $24 billion of provisions, two-thirds was against Household.

HSBC briefed its biggest investors about the rights issue on Friday and yesterday morning spoke to a further 30 banks. The offering is being underwritten by Goldman Sachs and JP Morgan Cazenove.

The decision to press ahead with the fundraising follows a worsening economic outlook for Asia, Europe, Latin America and the US.

- Lloyds Banking Group is poised to re-open negotiations with the Treasury over plans to dump £250 billion of toxic loans into the government’s asset-protection scheme.

Talks broke down last week after the government told Lloyds it would have to pay higher fees to take part than Royal Bank of Scotland.

As part of the deal, the government stake in Lloyds is expected to rise above 50%. Lloyds will also have to agree to defer bonuses for top managers over two years.


http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5822089.ece


Related Links
Toxic loans an unknown bill to taxpayers
HSBC’s triumph has been to stay independent

Wednesday 24 December 2008

For HSBC, Questions of Vitality

For HSBC, Questions of Vitality

By LANDON THOMAS Jr. and JULIA WERDIGIER
Published: December 22, 2008
LONDON — Through more than a year of giant bailouts and bankruptcies, HSBC was one of the few big banks to emerge with its reputation largely intact.

Related Times Topics: HSBC Holdings PLC. HSBC Finance Corporation Credit Crisis — The Essentials

HSBC, the global financial giant, did bet on subprime mortgages — and lost. But it nonetheless managed to maintain a robust market value compared with its diminished peers, lending it an aura of unrivaled durability.
So much so that during a recent parliamentary debate in Britain, where HSBC is based, an opposition politician scorned the government’s borrowing policies by asserting that Britain’s creditworthiness had fallen behind that of HSBC.
Now, as the bank faces a sharp slowdown in the emerging markets where it earns the bulk of its profit, many investors are questioning HSBC’s ability to maintain this exalted standing.
Last week, HSBC shares listed in London sank more than 17 percent, hit by several analysts’ reports contending that the bank would be required to raise money or to cut its dividend sharply. On Monday, HSBC shares in Hong Kong fell 3.3 percent, after falling more than 9 percent late last week. In addition, there was the acknowledgment that HSBC might have lost the $1 billion it had invested with Bernard L. Madoff, the New York money manager who authorities say has confessed to running a $50 billion Ponzi scheme.
As banks throughout the world face uncertain futures amid the worst financial crisis since the Depression, HSBC — which spans the globe from its original home in Hong Kong to the Middle East, Latin America and North America — offered a vivid counterpoint.
Its share price outpaced the main indexes and still trades near its book value. Its assets are growing, with the $2.3 trillion on its books expected to grow by almost 20 percent this year.
Not only has the bank spurned government money, it has been — at least so far — one of the few financial institutions of size not to be required to raise capital.
But with the recent drop in its shares, HSBC’s critics are raising questions about the bank’s globe-girdling strategy, particularly its insistence on sticking with its struggling consumer finance unit in the United States.
HSBC gets three-quarters of its profit from emerging markets, which have underpinned its recent success. But three-quarters of its loans are still exposed to the stricken markets of the United States and Britain, which some investors argue will hold it back, after the global economy recovers.
HSBC became the world’s top subprime lender when it bought Household International in the United States in 2003. According to Knight Vinke, a small asset manager in Monaco that owns less than 1 percent of the bank’s shares, the parent group has injected $60 billion into HSBC Finance — including the purchase price of $15 billion — in a so far fruitless bid to turn around this flagging business. According to its research, the money would be better deployed in faster-growing emerging markets.
A spokesman for HSBC disputed the figure, saying the total amount was about $20 billion.
Knight Vinke argues that HSBC should leave this business and focus on its core area of expertise in Asia.
“There are steps to be taken, but if all else fails, you may have to walk away from it,” said Glen Suarez, an executive at Knight Vinke.
“We see HSBC’s comparative advantage being in developing its business in Asia,” he said. “We have always felt that subprime and Household International was a problem.”
In a report produced this year, Knight Vinke said that HSBC had been overly optimistic in assessing the risk of its subprime exposure and that if the bank were to take a write-down reflecting the full reality of its potential losses, it could total as much as $30 billion — a number that would require the company to raise cash. (My comment: CAUTION!!)
HSBC declined to address Knight Vinke’s assertions publicly, saying the firm’s small investment position undermined its credibility.
Still, bank executives and board members have met with Knight Vinke as it pressed its position.
HSBC’s position is that its subprime loans, while substantial, are different from those of most other banks because they are not bundled into complex — and at this point nearly worthless — securities like those that forced Merrill Lynch, Citigroup and others to take large losses. As a result, management argues, HSBC is not obliged to write down these assets as long as they produce a cash flow.
The bank has also said that it is a global institution, with a need to be in markets from Shanghai to St. Louis, and that it considers the United States housing market to be a crucial part of its strategy. It also said that writing off its investment in HSBC Finance would do lasting damage to its reputation.
As its rivals took their lumps, HSBC maintained a healthy cushion against losses of about 8 percent, a conservative position compared with the greater leverage of other banks. But now that troubled institutions like Barclays, the Royal Bank of Scotland and Citigroup have raised large sums of equity to bolster their balance sheets and enjoy the explicit or implicit support of national governments, HSBC no longer looks so secure.
What is more, the advancing slowdown in HSBC’s core emerging markets franchise is putting additional pressure on its earnings.
HSBC has said that its capital position was strong, but declined to comment on the recent reports predicting that it would seek a capital increase, which would dilute the value of existing shares. It has been careful to leave open the possibility of raising new funds in conjunction with a deal, or a major investment in a business.
For all the new questions, Julian Chillingworth, chief investment officer at Rathbones in London, said HSBC remained a refreshing contrast to an industry that seemed to lose its head in the housing bubble.
“It may well be that they have to raise capital, but there’s a much better chance for them to get support,” he said. “They didn’t commit the sins of others of relying on the wholesale markets, and they’ve been quite prudent.”
HSBC executives are by and large an austere, conservative lot, compared with their more expansive counterparts. Their attitude toward the banking excesses has been one of polite disdain as they turned down opportunity after opportunity to buy into the American investment banking market.
It is an approach that conveys a degree of rectitude not often seen in bankers these days. The self-denying tone flowed from the top, conveyed by the bank’s former chairman, John Bond.
His successor, Stephen Green, spare and unobtrusive, carries on this tradition, serving as an ordained priest in the Church of England.
He is also the author of a book titled “Serving God? Serving Mammon?” that wrestles with the idea of being a man of faith in the City of London.
Still, the bank has not been immune to temptation — witness the $1 billion it is likely to have lost from extending loans to funds that invested with Mr. Madoff’s firm.
There are signs, too, that the bank may be on the verge of some major decisions — particularly with regard to its troubled American business.
John Thornton, the former president of Goldman Sachs and a man known for his aggressive strategic thinking, joined the group board this month. He will also serve as nonexecutive chairman of HSBC North America — a position that will require him to work two days each week and will pay him $1.5 million a year.
It is not clear what, if any decision will be taken. Even with its recent troubles, the firm’s position is strong enough to support a midsize deal, especially for a bank with a strong position in the American Hispanic market, an area that has long been of interest for HSBC.
And analysts say that even HSBC cannot stay above the troubles around it.
“I’m surprised the shares have done so well in relative terms,” said Daniel Tabbush, an analyst at Crédit Lyonnais Securities, who wrote one of the reports that precipitated the stock sell-off.
“Now, we’re looking at the exposure to commercial U.K. real estate, the unsecured loan book, credit cards. Many banks around the world said they don’t have to raise capital, and then they do.”

More Articles in Business » A version of this article appeared in print on December 23, 2008, on page B1 of the New York edition.

http://www.nytimes.com/2008/12/23/business/worldbusiness/23hsbc.html?ref=business