HSBC Holdings Announce Plans to Privatise Hang Seng Bank

Amid worsening real estate loans in Hong Kong, HSBC Holdings on Thursday said that along with the Hongkong and Shanghai Banking Corporation Limited, a wholly owned subsidiary of HSBC, has put forward a proposal to privatise Hang Seng Bank Limited.

If approved, the proposal would result in HSBC Asia Pacific acquiring all remaining shares of Hang Seng held by the minority shareholders and the withdrawal of listing of the Hang Seng shares from the Hong Kong Stock Exchange (HKX).

It may be recalled that Hang Seng Bank’s impaired real estate loans soared 85% from last year to $3.21 billion as of June this year, amid a slump in Hong Kong’s commercial property sector.

The proposal offers $19.92 for each share, representing a 33% premium over the undisturbed 30-days average closing price of $14.97 per share. This represents an attractive and significant premium to Hang Seng’s historical trading prices, and analyst consensus targets, and is more than Hang Seng’s highest share price in 3.5 years.

The valuation of Hang Seng implied by the plan is $37.27 billion. This offer is final and will not be increased further, underscoring HSBC’s confidence in the fairness and attractiveness of the offer, HSBC Holdings said in a bourse filing with HKX.

Through this proposal, HSBC is providing Hang Seng minority shareholders with an opportunity for immediate cash realisation, enabling them to realise the benefits from HSBC’s investment in Hang Seng without needing to wait for future dividends.

Capturing Growth Opportunities

The proposal is aligned with HSBC’s strategic priority to grow its business in Hong Kong while becoming simple and agile. Hong Kong is one of HSBC’s home markets and HSBC benefits from the proud heritage and brand strength of both HSBC Asia-Pacific and Hang Seng.

It also represents a significant investment into Hong Kong, which underlines HSBC’s confidence in the growth potential for both HSBC Asia-Pacific and Hang Seng. It will unlock opportunities for further investment and improvements in operational leverage.

Funding From HSBC’s Resources

HSBC Group will fund the Scheme Consideration with its own financial resources. The expected day one capital impact of the proposal is approximately 125 basis points which would arise following the approval of the relevant resolutions by the requisite majority at each of the Hang Seng Court Meeting and the Hang Seng General Meeting.

HSBC expects to restore its CET1 ratio to its target operating range of 14%-14.5% through a combination of organic capital generation and not initiating any further buybacks for three quarters following the date of this announcement.

A decision to recommence buybacks will be subject to HSBC’s normal buyback considerations and process on a quarterly basis. The share buyback announced on 31 July will continue in accordance with its terms. HSBC continues to target a dividend pay-out ratio for 2025 of 50% of earnings per ordinary share excluding material notable items and related impacts.

Exciting Opportunity

HSBC Group CEO Georges Elhedery said that their offer is an exciting opportunity to grow both Hang Seng and HSBC, and will preserve Hang Seng’s brand, heritage, distinct customer proposition and a branch network, while investing to unlock new strengths in products, services, and technology to deliver more choice and innovation for customers.

The offer also represents a significant investment into Hong Kong’s economy, underscoring HSBC’s 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.

“This proposal fully meets our criteria for value-accretive investments: it aligns with our strategy, enhances growth and scale, does not distract us from organic growth, and delivers greater shareholder value than buybacks. Together, HSBC and Hang Seng form a well-positioned platform with two iconic banking brands working side by side to deliver lasting value for customers, employees, and shareholders,” Elhedery added.