HSBC announces profits down 62% as it taps investors for £12.5bn

”HSBC

HSBC saw its shares plummet 20% today on the news of a 62% fall in pre-tax profits for 2008 of $9.3 billion (£6.5 billion) and a huge cut to its full-year dividend.

According to the bank, 2008 had been a very difficult year for the financial sector, and remains cautious for the 2009 year.

Meanwhile, the bank has confirmed its plans of a £12.5 billion rights issue – the largest ever held in Britain.

In a bid to strengthen its balance sheet, HSBC, which is Europe’s largest bank, said the funds will help the bank during the worst global recession in decades.

The bank said its operations in Asia, Europe and Latin America were all profitable but it has been hit by losses in the US sub-prime mortgage market.

In North America, the bank announced a loss of $15.5 billion and confirmed it will close the bulk of its consumer lending business in the US, with the loss of more than 6,000 jobs.

Chairman Stephen Green said that the board of HSBC have decided to waive its bonuses for 2008 in light of the rights issue and confirmed no rewards would be made for the 2009 year.

With regard to the rights issue, HSBC is offering just over 5 billion shares at £2.54 each – a heavily discounted price that is 48% lower than last Friday’s close of 491.25p.

Mr Green told the BBC that it will continue its focus on emerging markets and the funds will be used both to grow its existing businesses as well as to grow through targeted acquisitions.

HSBC shareholders are set to vote on the rights issue proposal on 19 March.

HSBC, alongside Barclays, has thus far declined financial assistance from the UK Government and said it could not envisage circumstances where it would require such help.

Royal Bank of Scotland (RBS) and Lloyds Banking Group have both received financial help from the Government, while RBS has also embarked on a similar strategy, tapping its shareholders for £12 billion via a rights issue almost a year ago.

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