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Monday, March 02, 2009

HSBC to Raise $17.7B, Cut US Jobs as Profits Fall

By Kathryn Elizabeth Tuggle

FOXBusiness

HSBC Holdings (HBC) announced plans on Monday to cut its venture into U.S. Consumer lending, shutting down HSBC Finance Corporation and its Beneficial units.

Approximately 6,100 jobs in the U.S will be lost as a result, but the company issued a statement saying that its retail bank business in the U.S. will not be affected.

The decision comes as HSBC, a British-owned bank, attempts to raise $17.9 billion by issuing new shares to current shareholders in an attempt to recoup losses from a bleak fourth quarter and potentially make acquisitions. Profits for the fourth quarter were down 70% from the previous year, tanking from over $19 billion to under $6 billion.

HSBC will issue new shares to existing shareholders at 254 pence per share, a 47.5% discount to Friday’s closing price. During midday trading in London, HSBC shares were down 23%.

"The current global economic slowdown, combined with extreme volatility in financial markets, means that the financial system remains under stress," said HSBC Chairman Stephen Green in a conference call Monday. "We determined that HSBC should maintain its signature financial strength."

Losses incurred by HSBC include $15.5 billion for North America, due to a goodwill impairment charge of $10.6 billion in its Personal Financial Services unit. Excluding that loss, the company had pre-tax profits of $19.9 billion in 2008, a decline of 18% from 2007.

HSBC may consider purchasing assets in the U.S. if prices go down in the next two years, according to The Wall Street Journal, which cited sources familiar with the situation.

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