Shares in HSBC tumbled by 18.78 per cent today as City sentiment continued to deteriorate towards a record £12.5 billion cash call by the banking giant.

HSBC stock lost 92.2p to 398.75p after it released details of the rights issue to strengthen its balance sheet following a 62 per cent fall in profits in 2008 and a steep cut to its full-year dividend.

HSBC said it intends to raise the money through a rights issue where investors will be offered five shares for every 12 they own at 254p each — a deep 48.2 per cent discount to Friday's closing share price of 491p.

The company said that the rights issue will help its "ability to deal with the impact of an uncertain economic environment and to respond to unforeseen events".

The rights issue is the largest in the UK, beating last year's £12 billion cash call from Royal Bank of Scotland, the battered bank that is 70 per cent owned by the UK taxpayer. HSBC shareholders will vote on the rights issue proposal on March 19.

HSBC also outlined plans to close its network of US personal finance and mortgage businesses with the loss of 6,100 jobs.

Over 2008, pre-tax profits at HSBC tumbled 62 per cent to $9.3 billion (£6.5 billion) last year after loan impairment charges swelled by $7.6 billion to $24.9 billion, largely as a consequence of its US business.

HSBC said that it was writing off $10.6 billion from its American unit and shutting its HFC and Beneficial brands, which wrote mortgage business including sub-prime home loans.

The bank said that 6,100 jobs would go as the 900 branches across the US stopped writing consumer business.

HSBC bought Household, the US mortgage and finance company, for £10 billion six years ago.

Stephen Green, group chairman of HSBC, said: "We have a reputation for telling it as it is. With the benefit of hindsight, this is an acquisition we wish we had not undertaken."

Despite Mr Green's candour, HSBC faces criticism from activist shareholders who do not want to foot the bill for failures in the American mortgage business. Knight Vinke, the investment group, told The Times yesterday that safeguards were needed to ensure that new money raised by the rights issue was not used to bail out the US sub-prime division.

Three of HSBC's most senior directors said today that they would not ask for a performance bonus amid continuing public anger over banker pay. Mike Geoghegan, the chief executive, Stuart Gulliver, the head of global banking, and Douglas Flint, the finance director, will receive no bonus and none of the bank's executive directors will receive a cash bonus.

Commenting on the cash call, Mr Green said: "We are determined that HSBC should maintain its signature financial strength which is supported by a conservative balance sheet characterised by an advances to deposits ratio of 83.6 per cent.

"We remain confident that HSBC is well-placed in today's environment and that our strength leads to opportunity. Our strategy has served us well and positions HSBC for long-term growth with attractive returns."

However, the bank's dividend will be reduced by 29 per cent on a dollar basis and 15 per cent on a sterling basis to $0.64.

HSBC is one of only two leading UK banks, alongside Barclays, not to have sought financial help from the British Government.

The cash call has been underwritten by Goldman Sachs, JP Morgan and "others", and will increase HSBC's tier one capital ratio — a key measure of a bank's financial strength — from 8.5 per cent to 9.8 per cent.

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