Page last updated at 17:41 GMT, Saturday, 28 February 2009

HSBC to announce 12bn share sale

HSBC logo
HSBC has traditionally been one of the best capitalised banks in the market

Europe's biggest bank, HSBC, is set to announce a plan to raise more than 12bn through a new rights issue.

The move is likely to be unveiled on Monday when the bank releases its financial results for 2008.

Sources told the BBC that the bank would ask its investors and shareholders to buy more shares in a bid to strengthen its position.

HSBC, which analysts expect to announce a 22% fall in full-year profits on Monday, declined to comment.

BBC correspondent Emma Simpson said the move could set a new record for a rights issue by a bank and would allow HSBC to buy cheap assets from its rivals.

She said HSBC was among the best capitalised banks in the world and had so far coped well in the downturn.

As far as the bank was concerned, sources said the share sale was being done from a position of strength and was designed to give the bank a bigger financial cushion to cope with any prolonged downturn, she added.

Sub-prime mortgages

In half-year results released last August, HSBC announced a 28% fall in its profits, warning that conditions in the financial markets were the toughest for "several decades".

Although HSBC has profitable operations in Europe and the Middle East, it has been hit by escalating losses in the US, because of its exposure to the sub-prime mortgage market.

Like its rival Barclays, HSBC turned down the chance to take part in the government's first banking bailout last October.

At the time it said: "HSBC has not sought capital support from the UK government and cannot envisage circumstances where such action would be necessary."

Last April, Royal Bank of Scotland asked its shareholders for 12bn in an attempt to shore up its financial position.

However, this week it announced the biggest annual loss in UK corporate history and will now receive an additional 13bn from the taxpayer to shore up its balance sheet.

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