HSBC raises £12bn, but where did the past money go?
Britain’s banks have raised more than £100bn of new equity in the past year – yet their combined stockmarket worth is less than £100bn. They’ve destroyed all the value they had, plus much of the money meant to save them.
HSBC is the latest (though not necessarily the last) to raise new capital. Yet within minutes of announcing its well-flagged £12bn rights issue, the stockmarket wiped half that much the whole £12bn off its value.
But HSBC is by far Britain’s strongest bank, worth more than all the others added together. Take it out of the equation and UK banks that raised £97bn in the past year are now worth just £40bn. Where did it all go?
True, just because the stockmarket gives a bank low value does not mean the institution is worth that little. But if you ask shareholders to subscribe a pound for a share they should expect it to still be worth a pound shortly afterward.
It is because HBoS and RBS shareholders had no confidence in their pound retaining its value that they shunned last year’s capital raisings, leaving the taxpayer to buy shares that are no longer worth what they cost.
Before the credit crunch the big banks (those already mentioned plus Lloyds and Standard Chartered) were worth £300bn. Despite injecting an extra £100bn they are now worth less than £100bn. All that original value has gone.
Royal Bank of Scotland alone was worth more than £60bn at its peak but despite nearly as much again being injected - £12bn from its own shareholders, the rest from the UK government – it is worth less than £10bn. HBoS and Lloyds were valued at almost £70bn combined; today, after receiving another £22bn they too are valued at under £10bn.
HSBC could use its new capital to bid for one Lloyds or RBS and get them off the government’s balance sheet. And if the competition regulators don’t like HSBC owning one of those rivals, why did we allow HBoS, Lloyds and RBS to be owned by the same organization that already owns Northern Rock and Bradford & Bingley?
Never has so much capital disappeared at such a rate. Yet these remain the bankers who are allowed to decide whether small businesses are fit to have their overdrafts rolled over?
