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Monday, 19 January 2009
HSBC may need to issue rights
HSBC Holdings Plc, Europe’s largest bank, may need to sell shares in the U.K.’s biggest ever rights issue to shore up its capital position, said investment group and shareholder Knight Vinke Asset Management LLC.
Jan. 18 (Bloomberg) -- HSBC Holdings Plc, Europe’s largest bank, may need to sell shares in the U.K.’s biggest ever rights issue to shore up its capital position, said investment group and shareholder Knight Vinke Asset Management LLC.
London-based HSBC’s Household International unit, an investor in sub-prime loans, “has turned out to be an unmitigated disaster,” Knight Vinke said today in a statement published on its Web site. HSBC spokesman Patrick McGuinness declined to comment today when reached by telephone.
HSBC had its outlook cut to “negative” from “stable” at Fitch Ratings on Jan. 16. Its shares were downgraded to “sell” from “neutral” at Goldman Sachs Group Inc., citing the worsening U.S. economy and falling property prices. The shares closed last week at a 10-year low, having fallen 15 percent.
“We agree with Morgan Stanley and Goldman Sachs that HSBC has a substantial and worsening capital shortfall,” the Knight Vinke statement said. “There can be little doubt that HSBC will need substantial additional capital if Household is not restructured,” Eric Knight, chief executive officer of Knight Vinke, said in the statement.
David Trenchard, a Knight Vinke spokesman in London, declined to say how many HSBC shares the company owned.
Some of the statement was reported earlier by the Sunday Telegraph newspaper.
Cost of Capital
Banks should consider measuring their cost of capital without government guarantees, which might improve their performance for shareholders, said Viral Acharya and Julian Franks, professors of finance at the London Business School.
They should measure cost of capital based on “good times and bad times” to prevent underestimating the cost of equity as well as the profitability of loans, the professors said in a letter attached to the Knight Vinke statement. Acharya, who helps advise the Bank of England, and Franks had assessed questions put by Knight Vinke to HSBC at the bank’s annual general meeting in May.
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Jan. 18 (Bloomberg) -- HSBC Holdings Plc, Europe’s largest bank, may need to sell shares in the U.K.’s biggest ever rights issue to shore up its capital position, said investment group and shareholder Knight Vinke Asset Management LLC.
London-based HSBC’s Household International unit, an investor in sub-prime loans, “has turned out to be an unmitigated disaster,” Knight Vinke said today in a statement published on its Web site. HSBC spokesman Patrick McGuinness declined to comment today when reached by telephone.
HSBC had its outlook cut to “negative” from “stable” at Fitch Ratings on Jan. 16. Its shares were downgraded to “sell” from “neutral” at Goldman Sachs Group Inc., citing the worsening U.S. economy and falling property prices. The shares closed last week at a 10-year low, having fallen 15 percent.
“We agree with Morgan Stanley and Goldman Sachs that HSBC has a substantial and worsening capital shortfall,” the Knight Vinke statement said. “There can be little doubt that HSBC will need substantial additional capital if Household is not restructured,” Eric Knight, chief executive officer of Knight Vinke, said in the statement.
David Trenchard, a Knight Vinke spokesman in London, declined to say how many HSBC shares the company owned.
Some of the statement was reported earlier by the Sunday Telegraph newspaper.
Cost of Capital
Banks should consider measuring their cost of capital without government guarantees, which might improve their performance for shareholders, said Viral Acharya and Julian Franks, professors of finance at the London Business School.
They should measure cost of capital based on “good times and bad times” to prevent underestimating the cost of equity as well as the profitability of loans, the professors said in a letter attached to the Knight Vinke statement.
Acharya, who helps advise the Bank of England, and Franks had assessed questions put by Knight Vinke to HSBC at the bank’s annual general meeting in May.
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