HSBC Holdings Plc proposed taking its troubled Hong Kong subsidiary Hang Seng Bank Ltd. private in a deal representing a major bet on the Chinese financial hub. The British lender’s shares plunged.
London-based HSBC, which owns about 63 per cent of Hang Seng, will spend about $14 billion buying the shares it doesn’t already hold. The HK$155 offer price, which values the unit at $37 billion, represents a 30 per cent premium to Hang Seng’s closing share price on Wednesday.
To keep its capital ratio within range, HSBC said it will refrain from buybacks for the next three quarters.
Chief Executive Officer Georges Elhedery said the purchase “delivers greater shareholder value than buybacks.” But investor concern that HSBC may be overpaying sent its shares tumbling as much as 7 per cent in early London trading, the biggest intraday loss in six months, following a 6.1 per cent slide in Hong Kong. Hang Seng Bank shares surged 26 per cent to HK$149.40.
The buyout comes at a time when Hong Kong is seeing a resurgence in stock listings and dealmaking, much of it driven by firms based in mainland China. At the same time, the city’s 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 $25 billion.
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 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.
Cusson Leung, chief investment officer at KGI Asia Ltd., said that the UK banking giant may be spending too much to buy the rest of Hang Seng.
“HSBC is trading at a lower price to book than Hang Seng, so it looks to me that at a 30 per cent premium, it’s paying up quite a lot,” Leung said.
HSBC’s price-to-book ratio is about 1.34, while Hang Seng’s is 1.78, according to data compiled by Bloomberg.
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.
HSBC improved its offer three times during discussions with Hang Seng, according to an exchange filing. Bank of America Corp. and Goldman Sachs Group Inc. advised HSBC, while Morgan Stanley advised Hang Seng.
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.
Asked about the potential for job cuts, Elhedery told reporters in a call that the plan is “to continue to invest in people in Hong Kong” and there could be “natural attrition” as well as redeployment of staff over time.
Hang Seng, founded in 1933, will continue to operate under its own license, governance and brand.
HSBC also recently reshuffled leadership at Hang Seng, naming its head of Hong Kong, Luanne Lim, as CEO. She replaced Diana Cesar who was named vice chairman for Hong Kong at HSBC’s Asian unit.
The HKMA said in a statement that it has been in communication with HSBC and Hang Seng Bank regarding 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 Michael Makdad, an analyst at Morningstar. 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.
