| CATEGORY: BROKER RECOMMENDATIONS SECTOR: BANKS |
Broker snap: HSBC dips on cash raising fears |
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Tue 16 Dec 2008
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LONDON (SHARECAST) - Asian stockbroker CLSA Asia-Pacific Markets has speculated that HSBC may need to raise around $14bn to cover the declining value of its US and UK loan books.
CLSA analyst Daniel Tabbush said in a broker note to clients that HSBC, which has thus far not followed the fund-raising example of its peers, may boost its finances through a placing or a rights issue.
As well as pressure brought on by the prospect of rising loan defaults in the UK and US, CLSA noted that HSBC’s finances will have been further stretched by its $1bn exposure to the collapse of the Madoff funds and its inability to sell its London HQ for an expected $2bn gain.
CLSA has cut its share price target for HSBC’s Hong Kong listed shares by 30% to HK$64.
UK stockbroker Collins Stewart is sceptical about HSBC's need to raise fresh capital, however.
"We estimate HSBC's core equity Tier 1 ratio to be 8.3% by end-2008. This compares very favourably with 7.0% for RBS, 7.3% for Barclays and 6.6% for Lloyds-HBoS. However, it is below the Hong Kong bank average (of 10%), Singapore banks (at 10.5%) though about the same as Korean banks (c.7%)," said Collins Stewart analyst Alex Potter.
"Trading at 1.5 times tangible book value, HSBC is not explicitly cheap but remains a relatively safe place to be, in our view," Potter concluded.
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