UK Stocks Plunge, HSBC Worries

123jump.com Staff
02 Mar, 2009
New York City

London market averages fell 5% after HSBC announced the largest rights issue of

[R]1:00PM New York, 6:00PM London - HSBC pre-tax profit falls 62% to $9.3 billion. U.K. manufacturing index falls in February.[/R]

London market averages fell 5% after HSBC announced the largest rights issue of £12.5 billion for a British company.

Manufacturing index fell to a record low in February also unnerved investors.

Market Sentiment

In London trading FTSE 100 index fell 5.3% or 204.26 to 3,625.83.

Of the FTSE 100 index stocks, 4 rose, and 98 declined. Admiral Group led advancers in the index shares with a rise of 2.3% followed by Amlin Plc increasing 2.3%.

HSBC Profit Declines 62%

HSBC announced today that its pre-tax profit in the year ending December 31 fell 62% to $9.3 billion from a year ago. However net interest income in the period rose 13% to $42.6 billion.

Excluding goodwill impairments pre-tax profit rose to $19.9 billion.

Loan impairment charges and other credit risk provisions rose $7.7 billion from 2007 to $24.9 billion.

In North America a loss of $15.5 billion was reported including goodwill impairment charge of $10.6 billion in Personal Financial Services.

Pre-tax profit, however, increased 25% to $1.6 billion in China and soared 26% to $666 and 34% to $1.7 billion, correspondingly.

The lender declared an interim dividend of 10 cents in the fourth quarter, resulting in an annual dividend of 64 cents per ordinary share.

HSBC said it will write no further consumer finance business in the U.S. through the HFC and Beneficial brands and closing the majority of the network.

Separately the bank also elected to launch a 5 to 12 rights issue at 254 pence to £12.5 billion.

It is forecasted that the rights issue will add 150 basis points to capital ratios, strengthening the core equity tier 1 ratio to 8.5% and the tier 1 ratio to 9.8%.

U.K. Manufacturing Index Fell
Chartered Institute of Purchasing and Supply reported today that the country’s CIPS/Markit Purchasing Managers'' Index, declined to 34.7 in February from 35.8 a year earlier.

A reading below 50 reflects contraction.

Output fell to 31.4 from 35.4 in January, while the rate of contraction for new orders slowed but remained close to the record lows posted at the end of 2008.

New export orders declined sharply, with reduced demand from East Asia, the US and the Middle East.

In addition, employment activity registered another survey low, contracting for the eleventh consecutive month.

The CIPS said manufacturing body the EEF forecasted a loss of 140,000 manufacturing jobs this year.

Gainers & Losers

Admiral Group led advancers in the FTSE 100 index shares with a rise of 2.3% followed by increases in Amlin Plc of 2.3%, in Balfour Beatty of 1.9%, and RSA Insurance of 0.9%.

HSBC led decliners in the FTSE 100 index shares with a fall of 18.8% followed by losses in Lloyds Banking of 15.3%, in Xstrata Plc of 13.5%, British Land Co. 12.6%, and Old Mutual of 12.1%.

HSBC fell after the lender announced a record £12.5 billion. Other financial stocks fell. Standard Chartered 11.6% and Barclays slipped 6.1%.

Europe Markets Review

In London FTSE 100 Index closed lower 204.26 or 5.33% to 3,625.83, in Paris CAC 40 Index decreased 121.02 or 4.48% to close at 2,581.46 and in Frankfurt DAX index lower 133.67 or 3.48% to close at 3,710.07. In Zurich trading SMI decreased 252.40 or 5.38% to close at 4,438.27.