NEW YORK (Reuters) – HSBC Holdings Plc (HBC.N) (HSBA.L), Europe's biggest bank, may have to raise as much as $30 billion in capital and halve its dividend as earnings are likely to deteriorate more than expected, Morgan Stanley analysts said on Tuesday.
HSBC earnings are likely to fall more "sharply" this year with no recovery until 2011 at the earliest, the analysts, including Anil Agarwal and Michael Helsby, wrote in a note.
"Profits will be hit by falling and flattening yield curves, combined with the cyclical impacts of a global recession and FX, and this should impair HSBC's dollar cash flow," the analysts wrote.
Morgan Stanley analysts added that their detailed study of HSBC's capital and asset quality position "reinforces our belief that it will have to halve the dividend and raise major capital in 2009."
The analysts have an "underweight" rating on the stock. Morgan Stanley slashed its 2008 earnings estimates for HSBC to 90 cents a share from $1.08 per share, its 2009 estimate to 55 cents from 90 cents and its 2010 estimate to 50 cents from 73 cents.
(Reporting by Jennifer Ablan; Editing by Dan Grebler)