HSBC to raise $17.7 bn, cut jobs as '08 profits fall

LONDON: HSBC PLC, Europe's largest bank by market value, said Monday it will raise $17.7 billion in new capital thorugh a share issue and cut 6,100 jobs in the US after reporting a 70 per cent drop in profits in 2008.

Net profit fell to $5.7 billion last year from $19.1 billion a year earlier as the company wrote down the value of assets, particularly in the US.

Net interest income rose to $42.6 billion from $37.8 billion in 2007.

HSBC said it will scale back its consumer lending operations in the US, shutting down its HFC and Beneficial brands, causing a loss of 6,100 jobs. But the company said its retail bank branch business in the US will not be affected by this decision.

HSBC's Tier 1 capital ratio, a key indicator of a bank's financial strength, fell to 8.3 per cent in 2008 from 9.3 per cent a year earlier, but it said the share issue would boost that to 9.8 per cent.

"This capital raising will enhance our ability to deal with the impact of an uncertain economic environment and to respond to unforeseen events," said Chief Executive Stephen Green in the earnings report.

The $17.7 billion will be raised in a rights issue and is meant to shore up the company's capital position without resorting to government handouts.

The company, which unlike rivals Royal Bank of Scotland PLC and Lloyds Banking Group PLC has avoided taking government bailout funds, cut its dividend to $0.64 per share, a 29 per cent decrease from 2007.

The market was not encouraged by HSBC's earnings report, sending the shares down 9 per cent in early morning trading Monday on the London Stock Exchange.