HSBC is spending $13.6 billion to buy the remaining 37% stake in Hang Seng Bank, taking full ownership

The Hongkong and Shanghai Banking Corporation, better known as HSBC, has announced that it will purchase the remaining 37% stake in Hang Seng Bank for $13.6 billion, taking full control of the lender. “This is an investment for growth, for the medium to long term in what is a leading local bank in Hong Kong,” HSBC CEO Georges Elhedery said after the ￰0￱ the past year, he shut down its investment banking operations in Europe and the United States, exited retail markets in France and Argentina, and restructured the group to focus on two core regions, the UK and Hong ￰1￱ 2024, the bank earned $9.1 billion in pre-tax profit from Hong Kong, meaning 28% of its total, compared with $6.6 billion from the ￰2￱ consolidates Hong Kong operations Analysts have described the takeover as a “long overdue simplification” of the bank’s structure in its most profitable ￰3￱ first bought a controlling stake in Hang Seng Bank in 1965 when a banking crisis hit Hong ￰4￱ cemented its position as a dominant local player, and this latest step is seen as an extension of that legacy.

S&P Global analysts said, “Hong Kong has long been HSBC Holdings’ most profitable home ￰5￱ view the proposed transaction as a strategic redeployment of the substantial excess capital it is generating.” HSBC plans to use its surplus capital to privatize Hang Seng completely, which will eliminate the ‘minority-interest deduction’ — an accounting adjustment that reduced HSBC’s capital buffer because it didn’t fully own the Hong Kong ￰6￱ said, “The ability to scale investments across both brands across the international network will be enhanced through this ￰7￱ it is more value generative for our shareholders than a share buyback.” However, not everyone was impressed.

HSBC’s shares dropped more than 5% at the end of the week, hit by news that it will pause share buybacks until ￰8￱ crisis adds risk to Hang Seng exposure Behind the financials lies a ￰9￱ Seng Bank has “close to 4 million customers,” nearly all in Hong Kong, and is heavily tied to the local ￰10￱ core business is retail banking and lending to small and mid-sized firms, but it’s also exposed to Hong Kong’s property developers, many of whom are struggling as the city’s real estate market deteriorates. China’s property bubble burst in 2021, damaging some of the largest developers in Asia and dragging Hong Kong’s market along with it after the anti-National Security Law protests and Covid-era ￰11￱ year, Hang Seng’s pre-tax profits fell 28% to HK$8.1 billion, and its non-performing loan ratio hit 6.7%, which is the highest since ￰12￱ damage is visible in HSBC’s group ￰13￱ June, 73% of its Hong Kong commercial real estate loans were listed as impaired or ￰14￱ to the Financial Times, Eddie Yue, chief executive of the Hong Kong Monetary Authority, responded that the city’s “banking system is well-capitalized and financially strong enough to withstand market volatilities.” Still, HSBC replaced Hang Seng’s top management, appointing Luanne Lim, a veteran of the group, as its new ￰15￱ like Michael Makdad from Morningstar said, “The crisis is HSBC’s responsibility; they need to take responsibility for ￰16￱ it were a choice between spinning off Hang Seng or taking 100 percent control, then that is what matches their strategy.” Industry veterans say the move was years in the making.

“This has been a long-term goal for HSBC and now it is more politically possible,” said one former financial executive. “Now it’s an easier time to gain ￰17￱ gets you the deposit base, and in dealing with the property market, it allows you to manage without minority friction.” Sign up to Bybit and start trading with $30,050 in welcome gifts