HSBC snubs Government bailout scheme

HSBC has turned down the chance to tap the Government's offer of emergency funding as several high street banks begin to strike a more defiant note about the state of their finances.

The UK's largest banking group, which also shunned the Government's first bailout plan in October, said today that it had not asked for any money.

It said: "HSBC has not sought capital support from the UK Government and cannot envisage circumstances where such action would be necessary.

"HSBC has long been one of the world's most strongly capitalised banks and is committed to maintaining this position," it said, adding that it would be publishing its annual results as scheduled in early March.

The stance means that HSBC joins Barclays in employing every effort to ensure that it does not cede any shareholding or management control to the Government.

Today, the Treasury launched its second bailout drive for UK lenders. The Treasury said that it would provide backstop insurance against bank losses. In exchange it is demanding that banks step up their lending to both consumers and business customers.

Gordon Brown has also indicated that he would like to see a crackdown on banks' bonus culture. This is likely to be easier to introduce in institutions that are partially state-owned.

The Times reported today that Barclays was heading for a run-in with the Treasury as a result of its unwillingness to draw on emergency state funds.

At the same time, both Barclays and HSBC said that they welcomed today's specific measures by the Treasury to try to free up lending.

John Varley, Barclays' chief executive, said that the bank would need to study the detail.

HSBC said: "HSBC will continue to work constructively with the authorities to ensure that these initiatives are taken forward in a way that is beneficial for the economy."

HSBC pointed out that it had commited to lend £15 billion in mortgages this year.

Shares in Barclays, which lost a quarter of their value in the last hour of trading on Friday, rebounded up to 17 per cent this morning as the country's number-three bank said that it could not explain the sudden drop.

Barclays said that its pre-tax profits for last year would be "well ahead" of the £5.3 billion forecast by analysts. Shares were last trading, up 5.7p at 103.7p, some 5.8 per cent higher on the day.

HSBC dropped 1.8 per cent, down 9.75p at 526p.

HSBC is under pressure from some of its activist shareholders to walk away from Household, the US sub-prime lender that it bought for $14 billion in 2002.

Knight Vinke, which is thought to hold less than 1 per cent of HSBC, said last night that ditching Household would save the bank about $35 billion.

Speculation has been mounting in recent weeks that HSBC might need to turn to its shareholders for additional funds.

Analysts at Goldman Sachs and Morgan Stanley have suggested that HSBC might have to raise up to $20 billion.

[Source: The Times, London, UK, 19Jan09]

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