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HSBC plans to acquire the remaining 36.5% of Hang Seng Bank for USD 13.6 billion, valuing it at USD 37 billion. Hang Seng shares jumped 26%, while HSBC shares fell 6%. CEO Georges Elhedery stated the deal is strategic, not a bailout, and will allow the bank to streamline operations, align products, and strengthen shareholder value. Rising bad loans due to Hong Kong's property market were a factor, and HSBC will pause buybacks to maintain capital and CET1 ratio. Analysts see potential operational efficiencies and governance benefits.
HSBC has announced plans to acquire the remaining 36.5% of Hang Seng Bank shares in Hong Kong for HKD 106.1 billion (USD 13.6 billion), offering a 30% premium over the prior closing price. The total valuation of Hang Seng stands at USD 37 billion, with HSBC proposing HKD 155 per share for minority shareholders. The acquisition comes as Hang Seng faces rising loan impairments due to weakness in Hong Kong's property market, and HSBC will pause its share buybacks for three quarters to support capital needs. Advertisement
Following the announcement, Hang Seng shares surged 26%, while HSBC shares fell around 6% in London and Hong Kong. Analysts noted that while the strategic rationale is strong, investors may question the timing and price of the deal.
HSBC CEO Georges Elhedery emphasized that the acquisition is not intended as a bailout but reflects the bank's financial capacity to pursue growth opportunities. He said the move allows HSBC to streamline operations, align products and international networks, and create more shareholder value than using the funds for buybacks. Elhedery added that Hong Kong, the UK, transaction banking, and wealth management remain priority growth areas.
The CEO highlighted that the bank's global restructuring, initiated last year, has already involved divestments in Europe, North America, and parts of Asia-Pacific, leaving Hong Kong as a standalone key division. He noted that fully owning Hang Seng will help integrate operations, improve efficiency, and strengthen long-term returns.
Financial analysts described the acquisition as the largest in Hong Kong in over a decade and highlighted potential cost synergies. Morningstar's Michael Makdad noted that parent-subsidiary double listings often present governance challenges, which this move could address.
Hang Seng's rising non-performing loans have been a concern, with impaired loans reaching 6.7% of gross loans in June 2025, up from 2.8% at the end of 2023. The bank's exposure to the Hong Kong and mainland China property markets has driven this increase, while debt-laden developers face rising financial pressures with bond maturities set to surge next year. HSBC had already implemented tighter risk management measures at Hang Seng starting in early 2024, anticipating potential challenges in bad loans.
The acquisition is expected to reduce HSBC's common equity tier 1 (CET1) ratio by around 125 basis points from 14.6% in June. However, the bank expects to restore the ratio to the target operating range of 14.0% to 14.5% through organic capital generation and the temporary pause in share buybacks. HSBC confirmed the offer price is final and will not be revised.
Source Reuters
5th Jun, 2025
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