HSBC shares fall and asks shareholders for the biggest cash injection in history

HSBC has turned to its shareholders for £12.5 billion to strengthen its balance sheet after announcing a 62 percent fall in profits during the last year, as well as a huge cut to the dividend.

The bank has outlined plans to close its network of US personal finance and mortgage businesses which resulted in a 46p loss in shares in early trading.

A statement from the third largest bank in the world has revealed that the executive directors would not be taking cash bonuses for last year as there has been so much bad publicity regarding the culture of banking.

The cash injection is said to be raised through a rights issue where investors will be offered five shares for every 12 they own and will be sold at a 48.2 per cent discount on Friday’s closing price.

The right issue will be used to help as a buffer in dealing with the impact of the current economic crisis and allow the bank some room to manoeuvre.

Chairman Stephen Green has said that the current situation has been achieved by a change in the culture of decision making with the onus being firmly on whether something is legal or complies with the rules, rather than whether it is actually the right thing to do, which was always unsustainable as a practice.

Despite this frank admission, HSBC still faces criticism from activist shareholders who are angry at the shortcomings of the American mortgage business and that many shareholders want to make sure that the money that is raised will not simply be used to bailout the US division.

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