Woodford sells HSBC shares on 'fine inflation' fears

One of the UK's most high-profile fund managers, has said he has decided to sell his holding in HSBC, because he is worried about "fine inflation".

Neil Woodford said the size of fines in the banking sector seemed to be rising.

"Fines are increasingly being sized on a bank's ability to pay, rather than on the extent of the transgression," he said.

HSBC was fined £1.14bn by US authorities in 2012, for failing to prevent money laundering.

There have been a number of sizable settlements between banks and US regulators. Last month, Bank of America agreed to pay a record $16.7bn (£10bn) to US authorities for its role in selling toxic mortgages in the run-up to the financial crisis.

But Neil Woodford said he was particularly worried about potential fines that HSBC could face.

"I am worried that the ongoing investigation into the historic manipulation of Libor and foreign exchange markets could expose HSBC to significant financial penalties," he said in a blog on his company website.

"Not only are these potentially serious offences in the eyes of the regulator, but HSBC is very able to pay a substantial fine.

"A substantial fine could hamper HSBC's ability to grow its dividend," he added.

His fund - CF Woodford Equity Income - bought the holding in HSBC in June this year, and held it for just two months before selling it.

He also held shares in HSBC through the St James Place investment platform.

In total, both holdings were worth £159m, and represented about 0.1% of HSBC's market capitalisation.

HSBC made no comment in response.

Neil Woodford made his reputation with Invesco Perpetual, but left last year to launch his own investment fund.