HSBC IS planning to raise more than £12 billion (€13.6 billion)through a share issue as the banking group seeks to shore up its capital reserves in order to cope with the global economic downturn.

The bank will today announce plans to scale back its subprime-hit US consumer finance operations as it launches a rights issue designed to re-establish its position as one of the world’s best-capitalised banks. The London-based company is also expected to write off much of the goodwill on its balance sheet associated with the US-based HSBC Finance Corporation, which it bought in 2003, although this charge does not affect its capital position.

The terms of the capital-raising initiative were being finalised yesterday, but some shareholders were briefed on Friday about the rights issue.

At more than £12 billion, the offering of deeply discounted new shares – which is being underwritten by Goldman Sachs and JPMorgan Cazenove – is expected to set a new UK record for a rights issue funded by private investors, eclipsing Royal Bank of Scotland’s £12 billion offering last April.

HSBC executives are likely to bill the offering as a positive move to give the bank a renewed competitive advantage over rivals, after the government-backed recapitalisations of lenders such as Royal Bank of Scotland and Citigroup.

They will also suggest that the extra capital gives the bank the firepower to pursue acquisitions amid the fallout from the financial crisis.

HSBC is seen as a leading candidate to buy the Asian assets of RBS, put up for sale last week. – (Financial Times service)