HSBC is shelling out £10bn to take its Hong Kong subsidiary private, in a move it said was designed to take advantage of the financial hub’s role as a “super-connector” between China and global markets.
The deal will result in Hang Seng Bank’s shares being taken off the local stock exchange as London-headquartered HSBC doubles down on its Asian business and snaps up the 36.5% of shares it does not already own.
The deal is believed to be the largest bank acquisition in Hong Kong in more than a decade. It is a significant bet on Hong Kong and China, and comes amid ongoing criticism over Heng Seng’s exposure to China’s real estate downturn.
HSBC, which makes the majority of its profits in Hong Kong and China, has reportedly been pushing Hang Seng to get rid of bad debts linked to the property market.
Its chief executive, Georges Elhedery, who took over last year, said the deal represented a “significant investment into Hong Kong’s economy, underscoring our confidence in this market and commitment to its future as a leading global financial centre, and as a super-connector between international markets and mainland China”.
The news comes a year after Elhedery announced a company-wide shake-up that involved massive cost cuts, exiting certain markets, and dividing the bank’s operations into eastern and western markets. The move briefly sparked rumours of a HSBC break-up, which were later quashed.
HSBC said that it would not be launching any further share buybacks over the next three quarters in light of the £10bn deal, in order to build up its capital levels – referring to the financial cushion that ensures banks can absorb shocks and protect customers from potential losses. That detail appears to have disappointed shareholders, with HSBC’s London-listed shares falling 5% on Thursday.
AJ Bell investment director Russ Mould said: “Like a toddler who has been told they can’t have another biscuit, HSBC shareholders are stamping their feet on news they won’t be getting any share buybacks for the next few quarters.
after newsletter promotion
“The bank plans instead to put its cash towards buying out minority investors in Hong Kong lender Hang Seng Bank … In the context of a continuing pivot towards Asia, HSBC’s latest deal has logic. But along with the recent exit of chair Mark Tucker, the poor reception to it represents perhaps the biggest challenge Elhedery has faced at HSBC to date.”
