HSBC Raises $18.5 Billion in Massive Rights Issue

By SARA SCHAEFER MUñOZ LONDON -- HSBC Holdings PLC said Sunday that it had successfully raised £12.5 billion ($18.5 billion) in capital through a share issue, with the bank's current investors taking up 96.6% of the new shares that were offered. The so-called rights issue, a process by which a company sells shares at a discount to existing investors, was the largest ever in the U.K. HSBC was seeking more capital to ride out the financial downturn and bolster its war chest for possible acquisitions, the bank has said. HSBC is one of the few global institutions that hasn't sought government aid during the financial crisis. The rights issue is a sign that the survivors of the financial crisis may angle, over the next 12 to 24 months, to raise capital to buy discounted assets from weakened competitors. "This underlines our determination that HSBC should maintain its signature financial strength which has served us so well over HSBC's long history," HSBC Chairman Stephen Green said in a statement issued Sunday. The bank announced the rights issue last month. The new capital will raise the bank's core Tier 1 capital ratio -- a key measure of a bank's financial health -- to 8.5%. A ratio of 6% is considered healthy. Investors subscribed to the rights issue at a 40% discount to the shares' closing price of 434.50 pence on the London Stock Exchange Friday. HSBC said last month that its net profit decreased 70% in 2008, to $5.72 billion, because of souring consumer loans in the U.S., write-downs on trading assets and a slowdown in Asia. Last month, it announced plans to trim its dividend and curtail its U.S. consumer-lending operation, which has saddled it with billions of dollars in bad loans. Write to Sara Schaefer Muñoz at sara.schaefer@wsj.com