HSBC, Asian Banks Slump as RBS Loss Stoke Concerns

Jan. 20 (Bloomberg) -- HSBC Holdings Plc led banking shares lower in Asia after Royal Bank of Scotland Group Plc flagged the biggest loss in British history, fueling concerns among investors that the industry crisis is deepening.

HSBC, Europe’s largest bank, lost as much as 8.8 percent and traded at HK$58.10 in Hong Kong at 11:22 a.m., the lowest since October 1998. An index tracking 84 Japanese lenders fell 3 percent in Tokyo. Banks in Australia and Korea also declined.

RBS tumbled 67 percent in London yesterday after saying it may post a full-year loss of as much as 28 billion pounds ($40 billion). The U.K. government is stepping up an industry bailout, less than a week after Bank of America Corp. received a $138 billion rescue and Citigroup Inc. announced plans to split in two.

“The RBS forecast has hit already fragile sentiment,” said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $85 billion. “It brings back all the doubts about more writedowns.”

Mizuho Financial Group Inc., Japan’s second-largest bank, fell 5.8 percent at the 11 a.m. break in Tokyo. National Australia Bank Ltd., the country’s biggest by assets, slipped 6 percent at 2:23 p.m. in Sydney. KB Financial Group Inc., which controls South Korea’s biggest bank, dropped 4.8 percent in Seoul, the lowest since Jan. 2. Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, slid 5.5 percent in Hong Kong.

‘Jitters Remain’

The decision by U.K. Prime Minister Gordon Brown to start a second-round, 100 billion-pound bailout shifted focus toward the problems still lingering in the banking system. As RBS investors braced for a full nationalization of the Edinburgh-based bank, Brown said yesterday he is “angry” banks are rationing credit.

“The financial crisis is not over yet and market jitters remain as banks’ asset quality worsens in slowing economies,” said Kim Young Il, head of equities at Korea Investment Trust Management Co. in Seoul, which manages the equivalent of $6.2 billion. “The attention is now on whether this signals a second round of financial crisis.”

London-based HSBC yesterday said it’s one of the world’s most “strongly capitalized” lenders and it “cannot envisage circumstances” where it would need government support. The statement came after shareholder Knight Vinke Asset Management LLC joined CSLA Asia-Pacific Markets, Morgan Stanley and Goldman Sachs Group Inc. in saying HSBC may need to sell stock to help plug a widening capital shortfall.

Goldman Sachs analyst Roy Ramos predicts HSBC’s Hong Kong shares will fall to HK$49. That’s below the price just before Aug. 14, 1998, when the Hong Kong government bought stock in HSBC and other companies on the benchmark Hang Seng Index to fend off an attack on the local currency.

Japan Injection Plan

Japan’s government said in December it plans to inject as much as 12 trillion yen ($133 billion) into the nation’s banks to boost their finances and stimulate lending to companies. Sapporo Hokuyo Holdings Inc., a Japanese bank holding company based in the north of the country, said it is considering applying for public funds yesterday to bolster capital.

Japanese banks including Mitsubishi UFJ Financial Group Inc. face larger potential losses on domestic shareholdings than from toxic U.S. mortgage securities, said analyst Kristine Li.

“Relative to RBS, the foreign exposure of Japan’s largest banks is not so deadly,” said Li, a Tokyo-based analyst at KBC Securities in Tokyo. “For Japanese banks the big, big issue is the equity market. That’s the big killer.”

Mitsubishi UFJ, Japan’s largest bank, said this month it will book 288 billion yen in charges on stock market investments in the quarter that ended Dec. 31, threatening to cause the lender’s first loss.