HSBC Holdings (HSBC) said Tuesday it expects its stake in Bank of Communications to decline to about 16% from 19.03% due to the Chinese bank's plan to sell shares to raise up to 120 billion renminbi ($16.45 billion).

The UK-based lender said it expects the stake reduction to result in a pre-tax loss of $1.20 billion to $1.60 billion to be recognized in the income statement, subject to the timing of execution, foreign exchange and other factors.

HSBC also said that the loss is expected to have "no material impact" on its capital ratios or distribution capacity.

HSBC shares were nearly 3% higher in recent trading.

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