Having taken the stake in HSBC last year, the first time since 2002 he has owned bank shares, Woodford explained in his investment blog on the Woodford Investment Management website, he is worried that the ongoing Libor investigation as well as the one into the foreign exchange markets, could expose the bank to “significant financial penalties”.
“Not only are these potentially serious offences in the eyes of the regulator, but HSBC is very able to pay a substantial fine,” he says, adding: “the size of any potential fine is unquantifiable, so this represents an unquantifiable risk.”
While Woodford maintains that HSBC remains a well-run company and is quick to add that he does not believe the stock to be a bad investment, he says, in light of this growing risk, the shares are now trading broadly at fair value in his estimation.
“By contrast, there are plenty of stocks I can invest in which look significantly below fair value – AstraZeneca, BAe Systems, Drax, Legal & General to name a few of the positions that have been recently increased – and I believe the long-term interests of my investors will be better served by focusing the portfolio towards them,” he says.
As of the end of July, the CF Woodford Equity Fund, HSBC accounted for 2.68% of the fund.
