HSBC is in talks with investors to sell stakes in Karnataka Bank and Federal Bank to free up capital to meet the stringent Basel III norms.
The British bank owns 4.98% in Federal Bank and 4.46% in Karnataka Bank.
It intends to raise Rs 425 to Rs 450 crore from the sale.
A few weeks ago, the bank exited its investments completely in Axis Bank and YES Bank, where it held 5% each.
The sale comes at a time of immense stress for the bank globally and rising stress in the domestic banking industry due to rising non performing loans and restructured assets.
Global banks are finding that it makes sense to sell off their stakes in high-performing local banks as overseas cash and capital requirements become urgent.
But HSBC may find it tough to secure a good price and may be forced to do it a discount like in the case of Axis and YES Bank. "The bank is in talks to exit its investment in Karnataka and Federal Bank. However, pricing will be the key as the equity markets are currently reeling," said a banker in the know of the development.
The sale of Axis Bank and YES Bank shares helped the bank raise Rs 2,400 crore but the deals were done at a discount of 3-5% to the market prices. But the bank booked gains of over 10 times in Axis in nine years and about 2.4 times in four years on YES Bank.
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