HSBC today..

billy78

Hi all,
Just wondering whether someone could explain to my financially uneducated brain why HSBC bucked the trend today, when, all other major banks share price dropped quite a bit HSBC actually rose - although not by a great amount.

Having gained (inherited)stock in both Barclays and Lloyds, am I correct in saying that they both may be mulling over the possibility of rights issues? Is this likely?
I assume a HSBC rights issue is unlikely??
If you are a long term investor, should a rights issue really concern you if you don't intend selling all/some shares for a decade or two?

Cheers, Bill.

Milarky

They are quite a small mortgage player aren't they (so less exposure)? Recall that they launched a short (2yr) 'rate matching' promotion recently to actually gain more borrowers - and these would be at the 'quality end' for the most part (lower LTV?)

Aegis

Milarky wrote: »

They are quite a small mortgage player aren't they (so less exposure)?

I might be remembering my figures wrong, but I do seem to recall a 3% figure for market share of mortgage business in the UK.

Recall that they launched a short (2yr) 'rate matching' promotion recently to actually gain more borrowers - and these would be at the 'quality end' for the most part (lower LTV?)

Standard HSBC mortgages are 80% LTV for interest only and 90% for capital repayment, so they're fairly well protected against falling prices. In addition, all mortgage applications must be accompanied by an evidenced affordability study, so they know the person can afford the mortgage unless circumstances drastically change.

gt94sss2

billy78 wrote: »

Just wondering whether someone could explain to my financially uneducated brain why HSBC bucked the trend today, when, all other major banks share price dropped quite a bit HSBC actually rose - although not by a great amount.

HSBC is the largest bank in the world, as well as the largest company (depending on how you measure it)

As part of this, it has always maintained much stronger 'capital ratios' (i.e. money in reserve) than most other banks in America and UK/Europe as well as more 'conservative' lending policies than them. This is also partly due to the fact that in some parts of the world it almost acts as the Bank of England as the lender of last resort does in the UK.

Some analysts used to condemn them for this and say they should be more aggressive in expanding or paying dividends but come the credit crunch suddenly HSBC's strategy is great!

It has operations in over 80 countries and is also the largest bank in Hong Kong and the largest international bank in China - as well as having operations in India, Vietnam, Brazil and other fast growing countries which have not been hard hit by the credit crunch.

In addition, given that Asians love to save, it still has lots of funds to expand organically or takeover other banks who are in trouble (something it is historically good at)

Having gained (inherited)stock in both Barclays and Lloyds, am I correct in saying that they both may be mulling over the possibility of rights issues? Is this likely?

Its possible - probably more so in Barclays case than Lloyds..

I assume a HSBC rights issue is unlikely??

Yes - HSBC are so diverse that even with their American profits going to virtually zero last year and having large writeoffs there (previously 25/30% of profits), their overall profits are still increasing...

Regards
Sunil

Mr_Mumble

As the adverts say: HSBC is the world's local bank!

The far-east now accounts for more than half of HSBC Holdings' profit. IIRC, UK retail only amounts to 7% of HSBC's business. Comparatively Lloyds TSB does 97% of its business in the UK while Barclays, despite possibly being the largest asset manager in the world, still relies on Britain for more than half its profit.

So, HSBC share price movements differ from UK-centric banks. A better correlation is to Standard Chartered (another big UK bank that does most of its business in the Asia-Pacific area) and Santander (owner of Abbey).

Rights issues are always a concern - a company is asking you for more money just to maintain your existing stake. Historically companies usually do well after a rights issue. But, this could be down to the fact that most rights issues happen at a poor time in the economic cycle.

10-20 years down the line? Que sera sera! Banking shares are highly cyclical and closely correlated to systemic events in the economy - ergo bank share prices will react far more to general economic conditions than to any operational change by managers.

edit: darn, Sunil beat me!

Jonbvn

gt94sss2 wrote: »

HSBC is the largest bank in the world, as well as the largest company (depending on how you measure it)

Sorry to be pedantic but both statements are untrue.

HSBC is the world's 4th biggest bank based on total assets. (How else would you measure the size of a bank?)
http://www.gfmag.com/2004/Oct/c_ci/fe_art01.php

HSBC is far from being the world's largest company by any measure. From this list it is in 22nd place.

The above notwithstanding, HSBC is still a huge company, and if they started to have NR/B&B issues, I would suggest we all start digging our bunkers!

Aegis

Jonbvn wrote: »

Sorry to be pedantic but both statements are untrue.

HSBC is the world's 4th biggest bank based on total assets. (How else would you measure the size of a bank?)
http://www.gfmag.com/2004/Oct/c_ci/fe_art01.php

That's from 2004.

HSBC is far from being the world's largest company by any measure. From this list it is in 22nd place.

That's from some time last year.


This list is bang up to date, and it shows HSBC as the world's largest bank AND company by composite score, including asset value (which would put HSBC in 4th place on its own):

http://www.forbes.com/lists/2008/18/biz_2000global08_The-Global-2000_Rank.html

I had this link passed to me as part of a company circular last month, so it's fairly recent.

m00

Aegis wrote: »

That's from 2004.

That's from some time last year.


This list is bang up to date, and it shows HSBC as the world's largest bank AND company by composite score, including asset value (which would put HSBC in 4th place on its own):

http://www.forbes.com/lists/2008/18/biz_2000global08_The-Global-2000_Rank.html

I had this link passed to me as part of a company circular last month, so it's fairly recent.

Heh that list puts RBS at 10..........