Neil Woodford, one of the City’s top performing fund managers, has sold his entire stake in HSBC just 16 months after buying into the group.
Woodford sold his holding due to the rising number of fines HSBC faced, a trend he dubbed fine inflation. He bought the shares in May 2013.
HSBC was fined $1.9bn in 2012 by US authorities for failing to prevent money laundering but Woodford said the threat of future potential penalties had put him off the sector.
“In particular, I am worried that the ongoing investigation into the historic manipulation of Libor and foreign exchange markets could expose HSBC to significant financial penalties,” Woodford wrote in a blog post on his website.
“Not only are these potentially serious offences in the eyes of the regulator, but HSBC is very able to pay a substantial fine.”
Woodford famously avoided the banking sector before the financial crash and last held banking stock in 2002 before taking the plunge with a stake in HSBC last year.
“I have had several meetings with the management of the UK-listed banks during this time but have remained concerned about the quality of loan books, capital adequacy and high leverage ratios,” he added yesterday.
HSBC, led by chief executive Stuart Gulliver, saw shares nudge down 4.5p yesterday to finish to day at 647.5p.
Woodford runs Woodford Investment Management, which houses his flagship fund the CF Woodford Equity Income fund.