2.0 Financing of HSBC

The following diagram is the statement for cash flows from financing activities.

Cash flows from financing activities	2012	2011	2010
Issue of ordinary share capital	594	96	180
Issue of other equity instruments	-	-	3718
Net sale(purchases) of own share for market-making and investment purpose	(25)	(225)	16
Net sale(purchases) of own shares to meet share awards and share option awards	--	(136)	11
On exercise of share options	--	-	2
Subordinated loan capital issued	37	7	4481
Subordinated loan capital repaid	(1754)	(3777)	(2475)
Net cash inflow(outflow) from change in stake in subsidiaries	(14)	104	(229)
Dividends paid to shareholders of the parent company	(5925)	(5014)	(3441)
Dividends paid to non-controlling interests	(572)	(568)	(595)
Dividends paid to holders of other equity instruments	(573)	(573)	(413)
Net cash generated from(used in) financing activities	(8232)	(10086)	1402

As is shown in the consolidated statement of financing cash flow for 2012 year, the primary sources of financing of HSBC can be summarized as follows:

 

Issue of ordinary share capital	12,952	14.77%
Issue of preferred share capital	4,696	5.35%
Issue of Subordinated loan capital	16,863	19.22%
Issue of debt securities	53,209	60.66%

 

2.1 Description of how the company is financed

Above data is accumulation form since its corporation.  HSBC, as a bank, has its different financing structure. The borrowing from other countries or persons will be classified into financing cash flow. However, as an ordinary business operation, deposits from customers don’t belong to financing activities, but a normal case.

A question may be raised that since banks have so many deposits and money from customers and other banks, why do they want to conduct financing activities? For instance, HSBC, except for the large amount of deposits, has absorbed money through channels like Issue of ordinary share capital, Issue of preferred share capital, Issue of Subordinated loan capital and Issue of debt securities. Through the above analysis, the financing activities from HSBC prefer more the issue of subordinated loan capital and debt securities to the issue of stock. Also looking at the cash flow statement of 2012, 2011 and 2010, conclusions can be arrived at that recent financing way is mainly the issue of ordinary share capital and the net cash flow is negative for paying out the dividends and interests of previous issued stock and securities.