HSBC secured a timely boost to its finances after strong support from shareholders for a £12.9?billion rights issue, at a time when some rivals are having to seek government support.
The bank sold 96.6 per cent of shares after launching the third biggest rights issue ever and the remaining stock was snapped up in minutes yesterday morning.
Directors will use the funds to weather losses in its troubled US business and restore a capital advantage over rivals hit by the global financial crisis.
HSBC’s success is expected to eclipse Royal Bank of Scotland, which will announce this week it is 70 per cent government-owned after investors shunned a share placing.
Fellow rival Lloyds Banking Group is hoping that enough shareholders will join in a similar offer to keep the Government’s stake below 50 per cent.
The investment boosted the bank’s share price in early trading by 5.1 per cent, to 456.5p, and will boost its coffers by a total of £12.5?billion after fees and expenses of £400?million.
The rights issue will boost HSBC’s position as it looks to grab profitable business from banks struggling in an unprecedented financial climate.
Finance sector expert Alex Tang, research director at Core Pacific-Yamaichi International, called the response to HSBC’s cash call “excellent”.
He added: “The markedly improved global investor sentiment post-G20 and the slew of strong US data in recent days have helped HSBC to a great extent.”
HSBC’s shares on the Hong Kong stock exchange closed up 5.3 per cent, at 52.05 Hong Kong dollars, which is its highest level since it announced the cash call on March 2.
The bank, which employs around 60,000 UK workers, has seen its stock value soar 70 per cent from the 14-year lows of HK$30.55 hit four weeks ago.
The value of its shares on the London Stock Exchange has dipped 41.2 per cent in a year.
However, that is dwarfed by Royal Bank of Scotland, which has seen its share price fall 90 per cent, and Lloyds, which has seen an 82.9 per cent fall. Barclays, which has sought to shun Government investment, has seen share prices dip 64 per cent.
Analyst Alex Potter, of Collins Stewart in London, said: “It was clear from the start of the process there was a lot of interest both institutionally and from the retail investors in Hong Kong.”
Mr Potter said HSBC will face more problems from its troubled US arm and conditions are likely to worsen in Asia, but the price could mark “a very good entry point” for long-term investors.
Analysts believe that HSBC will have more firepower for takeovers after the rights issue.
It has been linked recently with a bid for Royal Bank of Scotland’s Asian assets and Mr Potter believes the issue will help the bank continue to take market share from rivals who have retreated.