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HSBC moves swiftly back into interbank loans market
08.10.08
The first immediate reaction to the Government's banking bailout came this morning as bank share prices shot back up and one of the main lenders moved aggressively into the interbank market, lending to rivals.
Bank of England Governor Mervyn King said: “A major recapitalisation of the UK banking system of at least £50 billion is a necessary condition for regenerating confidence in the financial system. This is a significant step forward.”
HSBC said it had gone into the interbank market yesterday and “lent £2 billion to other banks on three- and six-month terms”. A spokesman added: “We expect to be active in the interbank market again today.” HSBC also made it clear it does not expect to avail itself of any of the UK Government's offer to recapitalise banks. The spokesman said: “The Treasury lists HSBC Bank Plc, which is the right entity, but actually makes up only 25% of the group. We have agreed with Treasury that the UK bank's Tier One capital will be raised to the level specified, but we can do that from our own resources. HSBC has no current plans to utilise the recapitalisation scheme.”
HSBC shares, which were the only banking shares to rise during yesterday's wipe-out of the sector, today dropped 30¾p to 870¼p.
RBS shares led the risers, up 10p at 100p, but still way behind Monday's closing price of 148.1p. Lloyds TSB shares added 6¼p to 231¾p while its takeover target, HBOS,was 24p higher at 118p.
Chris Hossain of ODL Securities said: “Whilst the first move is not always the right move, the initial reaction of the market to the rescue package has been lukewarm. The financial stocks have seen cautious buying. Whilst the package has been welcomed, the response appears to be muted at present. One has to be concerned that we have not seen all of yesterday's losses recovered.”
HBOS said that it welcomed today's recapitalisation proposals, which it added would allow it to regain full access to wholesale funding markets. Barclays said that it was studying the proposals and that it was likely to take part in the scheme.
