HSBC Holdings plans to issue a total of US$1.5 billion in perpetual bonds, the third round of fundraising since June, in anticipation of rising demand for loans.
The subordinated contingent convertible securities will be issued on Thursday and carry an interest rate of 6.95 per cent a year, according to a filing to the Hong Kong stock exchange on Tuesday.
"The company intends to use the net proceeds from the sale of the securities for general corporate purposes and to maintain or further strengthen its capital base pursuant to requirements under the capital instruments regulations," HSBC said.
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HSBC raised US$2.5 billion in September via the same instrument at a similar interest rate and another S$1.5 billion (US$1.12 billion) in June at 5.25 per cent a year.
HSBC CEO Georges Elhedery said last week that the bank plans to redeploy US$1.5 billion from "low-return" markets to Hong Kong and other parts of Asia. Photo: Dickson Lee alt=HSBC CEO Georges Elhedery said last week that the bank plans to redeploy US$1.5 billion from "low-return" markets to Hong Kong and other parts of Asia. Photo: Dickson Lee>
"HSBC is preparing for rising demand for loans this year," said Kenny Tang Sing-hing, chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators. "The HSBC bonds will be popular with investors as the pricing is attractive and the securities can also be converted into shares."
The US Federal Reserve and the Hong Kong Monetary Authority are widely expected to cut interest rates by half a percentage point this year after lowering rates by a full point last year, Tang said, adding that a lower cost of funding would boost the economy and encourage companies to borrow more.
HSBC plans to redeploy US$1.5 billion from "low-return" markets to Hong Kong and other parts of Asia, CEO Georges Elhedery said last Wednesday after unveiling a 2 per cent net profit growth for 2024.
The 160-year-old lender also unveiled a US$2 billion share buy-back programme, matching the amount announced a year earlier. HSBC spent US$9 billion in 2024 on share buy-backs.
"The latest fundraising comes at an opportune time," said Kenny Ng, a strategist at Everbright Securities International. "The bank's 2024 results were good and the broader stock market has risen strongly over the past month."
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The fundraising could support HSBC's share buy-back plans and enhance the stock's performance, he added.
The conversion price for HSBC's latest bonds is fixed at US$3.4147. Assuming full conversion of the bonds at the current fixed price, they will represent 439 million ordinary shares, or 2.41 per cent of the enlarged issued share capital.
The securities will be traded on the Global Exchange Market of the Irish Stock Exchange within 30 days of the issue date and will be issued in denominations of US$200,000, and multiples of US$1,000 thereafter, according to the filing.
HSBC shares rose 1.5 per cent to HK$87.10 in the morning session. The lender's share price has gained 15 per cent this year, while the Hang Seng Index has jumped 18 per cent during the same period.
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