The lender plans to refrain from share buybacks in the coming three quarters as it seeks to restore its capital ratio to its operating range
[HONG KONG] HSBC Holdings plans to take Hang Seng Bank private in a deal that values the lender at US$37 billion, ramping up its exposure to Hong Kong as the financial hub attempts to bounce back from years of economic turbulence.
The price was set at HK$155 a share in cash, a premium of about 30 per cent over the last closing price, HSBC said in a statement on Thursday (Oct 9). The publicly listed shares would be canceled under the proposal.
“Through this significant investment it demonstrates our commitment to the economy of Hong Kong,” said chief executive officer Georges Elhedery.
HSBC, based in London, currently owns about 63 per cent of Hang Seng Bank and will spend about US$14 billion buying up the shares it does not already hold. The lender plans to refrain from share buybacks in the coming three quarters as it seeks to restore its capital ratio to its operating range.
Hang Seng Bank shares rose 26 per cent, while HSBC’s shares fell 6 per cent in early trading in Hong Kong, even as Elhedery said the purchase “delivers greater shareholder value than buybacks.”
The buyout would represent a major bet on Hong Kong at a time when the city is seeing a resurgence in stock listings and dealmaking, much of it driven by firms based in mainland China.
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President Xi Jinping has sought to tap Hong Kong’s financial industry to fuel his industrial priorities, with companies spanning electric vehicles and artificial intelligence using the city to raise funding for global expansion.
The deal comes as Elhedery has undertaken the biggest overhaul of the bank in at least a decade, reorganizing HSBC into four new divisions and exiting some businesses his predecessors once considered key to the lender’s future. HSBC has also over the past years pivoted to Asia, closing and selling off businesses across Europe and North America.
At the same time, the Hong Kong banking sector is battling stress from the worst real estate slump since the Asian financial crisis in the late 1990s. There have even been discussions in the sector of creating a “bad bank” to take over the soured loans, which Fitch Ratings estimates at about US$25 billion, based on Hong Kong Monetary Authority data.
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HSBC has been pushing Hang Seng to offload its pile of bad commercial real estate debt. Its credit-impaired loans to the sector rose to HK$25 billion (S$4.2 billion) as of June 2025, an 85 per cent jump from a year earlier.
The deal has “nothing to do” with the bad debt situation, and it’s “very much” an investment for growth, Elhedery said.
The transaction will allow Hang Seng to offer its customers a wider range of products and give them better access to HSBC’s international network, according to Elhedery. Hang Seng Bank will retain its own governance and board.
Asked about the potential for job cuts, he said: “Our plan is to continue to invest in people in Hong Kong.”
The Hong Kong Monetary Authority said in a statement that it has been in communication with HSBC and Hang Seng Bank regarding the relevant regulatory approvals, noting that HSBC plans to invest significantly in Hong Kong and that the two banks will continue to operate separately.
“Parent-subsidiary double listings are inherently problematic in terms of governance and in this sense it’s a positive and long-overdue move,” said Morningstar analyst Michael Makdad.
With the premium HSBC is offering, it’s a better deal for minority shareholders than they would get in the near term, given the “overhang” of property exposure, he said. BLOOMBERG
