HSBC has launched a £12.5 billion ($17.7 billion) rights issue to shore up its balance sheet after annual profit more than halved and as bad debts soared in the United States.
Europe's biggest bank will offer 5.1 billion shares at 254 pence each, making it Britain's largest-ever rights issue. The issue price is at a 48 per cent discount to Friday's close of 491.25 pence.
Several investors told Reuters last week they would support a rights issue, and wanted management to act quickly to remove uncertainty hanging over its share price.
The bank also said today that pretax profit last year fell 62 per cent to $9.3 billion from $24.2 billion a year earlier after it was hit by a goodwill impairment charge of $10.6 billion in the United States.
Excluding the charge pretax profit fell 18 per cent to $19.9 billion which was slightly ahead of the $19 billion expected by analysts.
HSBC's London-listed shares were down 10.5 per cent at 439 pence by 9.55am.
The bank also cut its dividend for the full year by 29 per cent to 64 cents per share and said it would close its troubled US consumer loans business, HFC.
HSBC's losses in North America last year amounted to $15.5 billion, including the $10.6 billion goodwill impairment charge. That stems from its troubled acquisition of Household, the US consumer lending business bought six years ago for $14
billion.
"With the benefit of hindsight, this is an acquisition we wish we had not undertaken," chairman Stephen Green said in a statement.
The bank said it would close the majority of its HFC and Beneficial-branded US branch network, resulting in the loss of 6,100 jobs and that, with the exception of credit cards, the US divisions would write no further consumer finance business.
Group-wide the bank said that losses on bad loans jumped 44 per cent versus 2007 to $24.9 billion. The rights issue is being underwritten by Goldman Sachs, JPM Cazenove and HSBC.
The bank's Hong Kong-listed shares were suspended today. Its London shares closed on Friday at 491.25 pence, valuing the bank at $85 billion, ranking it just ahead of JP Morgan Chase as the biggest bank outside China.
HSBC has traditionally been one of the best-capitalised banks in the world and has not raised capital while others scrambled for cash as the credit crisis deepened.
Finance director Douglas Flint said the bank may want to finance acquisitions as weaker rivals retreat from international markets, especially those that have had to take state help.
Reuters