HSBC said this morning that shareholders had snapped up almost all of the £12.5bn of new stock on offer – a real vote of confidence in the bank’s prospects for the current market turmoil. The success of the rights issue means that HSBC now looks to be sitting pretty – it has a healthy cash buffer, but hasn’t had to give up any of its prized independence. Despite its recent profits slump, the market clearly thinks HSBC remains a much safer bet than its rivals – although admittedly that’s not saying much at the moment.
HSBC said that shareholders had bought almost all of the new shares (the rest have since been sold on the open market by the underwriters), boosting its coffers by £12.5bn and raising its all-important tier one capital ratio to 9.5%. And whereas UK rivals Lloyds and RBS have been forced to turn to the Government for extra funds (with all the attached strings this implies), while Barclays had to sell a bigger stake to Middle Eastern investors, HSBC has managed this without really altering its shareholder base. That’s going to make its life a lot easier in the coming months and years.
HSBC’s share price almost plummeted below 300p at the start of March, after the bank said profits had halved in the last year (thanks largely to a $15bn loss incurred by its ill-fated US mortgage lending business). But the mere prospect of the rights issue has helped the stock bounce back to its current level of about 450p (admittedly it was worth twice as much this time last year, but at least it’s heading in the right direction). This had the added advantage of making the newly-issued shares, which were priced at 254p, look pretty cheap; by contrast, the shares sold by the underwriters this morning apparently changed hands at 448p.
Given the woes of its rivals, it’s perhaps no surprise that investors are treating HSBC as a (relatively) safe haven. But in these turbulent times, getting 97% support is still a pretty impressive result. Remember that last month a Government auction of gilts only attracted 93% support – and these bonds are fully backed by the entire financial might of the UK. So you might even argue that the market sees HSBC as a safer bet than the Bank of England...