**HSBC Reduces Stake in Bank of Communications, Anticipates Loss**
HSBC announced on Tuesday that it will reduce its stake in the Bank of Communications (BOCOM) from 19.03% to approximately 16%. This decision comes as a result of BOCOM’s recent fundraising efforts through a private placement of shares, which is expected to lead to a pre-tax loss for HSBC of up to $1.6 billion.
In March, BOCOM and three other major state-owned banks in China revealed plans to collectively raise 520 billion yuan from investors, including the finance ministry, following Beijing’s commitment to support the economy. BOCOM specifically aimed to raise up to 120 billion yuan through the sale of shares.
Once the capital raising is finalized, HSBC anticipates its ownership stake in BOCOM will decrease by about three percentage points, resulting in a pre-tax loss estimated between $1.2 billion and $1.6 billion. This potential loss will be reflected in HSBC’s income statement, influenced by factors such as the timing of completion and foreign exchange fluctuations. The bank clarified that this loss “would not be deductible for tax purposes” since its shareholding in BOCOM is intended for long-term investment, and it will not significantly affect capital ratios or dividend distribution capabilities.
Last February, HSBC reported a substantial $3 billion charge related to its stake in BOCOM, marking the largest loss recorded by an overseas lender amid rising bad loans in China, exacerbated by a prolonged crisis in the property sector.
On the same day, HSBC, which generates a significant portion of its revenue and profits in Asia, reported a 25% decline in first-quarter profits and expressed concerns over increased business uncertainty due to U.S. President Donald Trump’s extensive global tariffs.
**FAQ**
**What impact will HSBC’s reduced stake in BOCOM have on its financials?**
HSBC expects to incur a pre-tax loss of up to $1.6 billion due to the reduction in its stake, but this loss will not significantly affect its capital ratios or dividend distribution capacity.
