HSBC, et. al. have been offered a buy out from the government

Paying subscribers who took a position against HSBC based on my research should know that I believe that this company was much too richly valued given the risk in its major revenue and profit centers and the minimal writedowns taken thus far. In addition… Bloomberg: HSBC, Royal Bank, Barclays in Financing Double Whammy as Debt, Rates Rise

HSBC Holdings Plc, Royal Bank of Scotland Group Plc and the biggest U.K. banks face the most debt coming due in at least 10 years as the credit market seizure raises borrowing costs to the highest on record.

The six largest British banks have 54 billion pounds ($95 billion) of debt to refinance by April, triple the amount of the year-ago period, according to data compiled by Bloomberg. HSBC, the U.K.’s biggest bank, and RBS each have about 11.5 billion pounds of debt due, while Barclays Plc has 15.9 billion pounds maturing, the data show.

Financing costs are soaring as banks hoard cash after the credit crunch triggered by the U.S. subprime mortgage crisis a year ago. The three-month London interbank offered rate in dollars rose to 4.32 percent from 2.64 percent in March, while the equivalent rate for euros increased to a record 5.38 percent, from 4.74 percent six months ago.

“The banks have no idea how they are going to manage rolling over their debt,” said Kornelius Purps, a Munich-based bond strategist at UniCredit SpA. “The central banks will have to intervene.”

From the WSJ :

The U.K. government unveiled plans to partially nationalize major banks, with taxpayers taking a share stake in a bid to restore stability to the industry. The Treasury said eight banks have signed up for the so-called recapitalization plan, which offers up to 50 billion pounds ($87.5 billion) in the form of preference shares. The Treasury said the eight banks are Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered. The Treasury also said the Bank of England will make “at least” 200 billion pounds in funds available to the banks through its Special Liquidity Scheme.

The Butterfly Effect offers a macro overview of HSBC’s market’s deterioration, and the forensic analysis explicitly outlines it. It was populary believed that they could rely on China and India for revenue growth in the capital markets and lending…

Oct. 8, 2008

Deepening fears over the global financial crisis sent Asian markets plunging with Japan’s Nikkei dropping 9.4% to close at 9203.32, its biggest one-day percentage drop since 1987. Australia closed down 5%, South Korea ended 5.8% lower and Hong Kong was down about 7% in late trading. Indonesia’s stock market was halted for only the second time in its history after shares fell more than 10%.

In currencies, the dollar briefly fell below the 100-yen mark, while other regional currencies, including the Korean won and Australian dollar fell to multiyear lows against the greenback.

Japan’s Nikkei 225 Stock Average plummeted 9.4% to close at a five-year low on deepening fears over the global financial crisis. The benchmark index on Wednesday nose-dived 952.58 points to 9203.32, the lowest finish since June 2003. The Nikkei has lost 24% in the last two weeks.

The massive selloff in Tokyo follows a plunge on Wall Street overnight, when the Dow Jones industrial average lost more than 5% despite steps by the Federal Reserve to reinvigorate dormant credit markets.

The dollar also briefly fell below ¥100 yen as the plunge in Japanese stock prices accelerated selling of major currencies against the yen in a stampede of risk-aversion.

Falls accelerated as the day progressed with the stock market in Australia ending down 5% while South Korea lost 5.8%, closing at a two-year low. India fell 5.7% and Hong Kong was off 7% at an intraday low of 15621.59 and the Shanghai Composite traded down 4%.

Trading in Indonesia’s stock market was suspended after the main index skidded 10.4% — the second time this week it has fallen by more than 10%.

For more on Asian markets, see: http://online.wsj.com/article/SB122342399172013397.html?mod=djemalertMARKET


Originally published at Boom Bust Blog on Oct 8, 2008 and reproduced here with the author’s permission.

2 Responses to "HSBC, et. al. have been offered a buy out from the government"

  1. Tony Robertson   October 11, 2008 at 9:57 am

    The liquidity issue for many of the smaller banks would be resolved if the people were given the opportunity to buy their own debt back (or a proportion of it) at a big discount rather than allowing the situation to get worse and this debt passing to a third party for a even smaller fraction of its worth. I believe Barack Obama said something similar and I for one would beg and borrow from family to achieve this. Otherwise we have a totally inequitable situation where the larger institutions simply benefit from the buying heavily discounted debt from companies that have been massively supported by taxpayer’s and shareholders money without any recompense. In fact I charge the government with acting totally irresponsibly over this issue and wonder whether allowing the larger institutions to make such gains is ethical or in fact legal.

  2. Rob   October 11, 2008 at 11:51 am

    The U.K. government unveiled plans to partially nationalize major banks, with taxpayers taking a share stake in a bid to restore stability to the industry. The Treasury said eight banks have signed up for the so-called recapitalization plan, which offers up to 50 billion pounds ($87.5 billion) in the form of preference shares.