HSBC falls to 10-year low after report it needs cash

Hong Kong: HSBC Holdings Plc fell to its lowest in 10 years in Hong Kong trading after Morgan Stanley analysts predicted declining earnings may force the bank to raise as much as $30 billion (Dh110 billion) and cut its dividend in half.

Europe's largest bank by market value dropped 5.8 per cent to HK$65.95 at the midday trading break in Hong Kong, headed for its lowest since February 1999.

The shares declined 4.1 per cent on the local bourse yesterday and closed down 8 per cent in London. The benchmark Hang Seng Index fell 5.4 per cent.

HSBC's profit is likely to fall 'sharply' this year and won't recover until 2011 at the earliest, Morgan Stanley analysts including Michael Helsby and Anil Agarwal said in a note dated January 13.

In a separate matter, HSBC and UBS AG may also be liable for as much as $3.2 billion in losses linked to Bernard Madoff in a dispute over their duties as financial custodians of funds in Luxembourg and Ireland.

"Investors are clearly still concerned about what's been said in the Morgan Stanley report," said Lee Yuk-kei, a Hong Kong-based analyst at Core-Pacific Yamaichi International. "They may also be reacting to the Deutsche Bank news."

Deutsche Bank AG, Germany's biggest, reported a record loss yesterday of about 4.8 billion euros (Dh23.12billion) in the fourth quarter after the worst financial crisis since the Great Depression.