HSBC sets an example for US banks

HSBC (HBC) will take billions of dollars of losses but it will probably raise enough money to stay viable. That may be a template for what healthier US banks like JP Morgan Chase (JPM) should do.

According to the Times of London, the bank will take a £7 billion goodwill write-off in addition to a £17 billion provision against rising bad loans. But, "The provisions will be announced tomorrow alongside a heavily discounted £12 billion rights issue -- the biggest ever held in Britain -- and a dividend cut."

The move is one that Citigroup (C) was not able to make, although the government has told the firm that it will have to bring in private capital as part of a process that will leave the US with a stake of as much as 36% of the bank's equity. Citi was simply viewed as too weak and too risky to be a reasonable investment for any entity other than the federal government.

For JPM, which would clearly like to avoid taking more government capital, the HSBC news shows that there is private capital available for firms which are likely to have reasonable earnings as the second half of the year comes around. Up until now, there had been real doubt that anyone other than sovereign treasuries would give banks a dime.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Read Full Story
  • DJI28195.42-410.89-1.44%
  • NIKKEI 22523596.49-74.64-0.32%
    Hang Seng24545.172.910.01%
  • USD (PER EUR)1.18-0.0001-0.01%
    USD (PER CHF)1.100.00020.02%
    JPY (PER USD)105.520.09000.09%
    GBP (PER USD)1.290.00040.03%

From Our Partners