HSBC reinforces its Asia focus with a proposed move to buy all of Hang Seng in which it already owns 63 per cent. Shareholders sold the bank's stocks amidst a temporary halt to share buybacks.

Hong Kong/UK-listed HSBC’s shares fell yesterday in the wake of its plans to increase its focus on Asia. In a statement, the lender said it was buying out minority owners of Hong Kong’s Hang Seng Bank to make it a wholly-owned subsidiary. The plan will cost $14 billion.

HSBC said the move was to streamline operations; it gave no details at this stage as to potential cost cuts from any duplication of jobs and functions.

Prior to the announcement, HSBC owned 63 per cent of Hang Seng, which was first established in 1933. 

HSBC’s shares fell 6.6 per cent at one stage after the announcement before paring their losses slightly. Since the start of 2025, shares have risen 28 per cent. The bank said it will halt its own share buy-backs to preserve capital for the next three quarters whilst it digested the Hang Seng deal.
 
“One of HSBC's strategic priorities is to grow in Hong Kong. HSBC believes it is best positioned to do so by strengthening the Hong Kong banking presence of both HSBC Asia-Pacific and Hang Seng Bank, focusing on their relative strengths and competitive advantages, but continuing to allow all customers to choose where to bank,” HSBC said.

“HSBC intends to continue to invest in people and technology across both HSBC Asia-Pacific and Hang Seng Bank as part of that. At the same time, HSBC also expects there to be an opportunity to create greater alignment across HSBC and Hang Seng Bank that may result in better operational leverage and efficiencies. The changes necessary to effect such alignment will be made over time,” it said. 

Such a move appears to be consistent with HSBC’s further pivot to its home ground of Asia, drawn by the rising affluence of the region. Regionally, the Asia-focused Hong Kong and Shanghai Banking Corporation accounted for $9.384 billion out of a total pre-tax profit in H1 2025, of $15,810 – the largest chunk of the result, with HSBC’s UK business in second place, at $3.618 billion. HSBC is scheduled to report third-quarter results on 28 October.

HSBC's international reach has been criticised at times. For example, in 2022, Ping An Insurance Group of China, aka Ping An, reiterated its call on HSBC to split its Asia and non-Asia business arms up to unlock value. The campaign to force HSBC, which is listed in Hong Kong and London, into such a radical change has so far been resisted by the lender’s managers, who say its global footprint is a strength, not a weakness. At the same time HSBC’s strong Asian heritage raises potential issues, for example, if Beijing were to clash with the UK on trade or other foreign policy matters.

Dilution worry
Steve Clayton, head of equity funds, Hargreaves Lansdown, the UK investment platform, noted that “gaining control of Hang Seng comes at a premium, with HSBC offering to pay almost 30 per cent above the previous market value of the listed minority shares in Hang Seng, prompting some investors to argue that the deal will be dilutive to the group’s returns.”

The proposed move is subject to certain conditions, such as sanction by the High Court of Hong Kong.

The strategy
“Combining its award-winning mobile app and strong digital capabilities with a vast network of over 250 service outlets in Hong Kong, Hang Seng offers a seamless omnichannel experience for customers to take care of their banking and financial needs anytime, anywhere,” HSBC said. 

Hang Seng’s wholly owned subsidiary, Hang Seng Bank (China), operates a network of outlets in major cities in mainland China.

“Hang Seng Bank has been rooted in Hong Kong for close to 100 years. HSBC intends to respect that legacy. Hang Seng Bank's heritage, brand and distinct culture is a competitive advantage,” HSBC said. “As such, post privatisation, Hang Seng Bank will retain its separate authorisation as a licensed bank under the Hong Kong Banking Ordinance with its own governance, brand, distinct customer proposition and a branch network.”

Premia and priority
HSBC said the proposed acquisition price is at a premium of about 33.1 per cent over the average closing price of HK$116.49 ($14.26) per Hang Seng Bank Share as quoted on the Hong Kong Stock Exchange over the last 30 trading days up to and including the last trading day. It is also at a 48.6 per cent premium to the level seen in the past 360 trading days.

HSBC said Hong Kong is a “strategic priority.”

“HSBC believes that the fundamentals of the Hong Kong economy are strong, and there are significant growth opportunities available over the medium term. It represents a compelling opportunity to deploy capital for growth for the HSBC Group. But it is also an increasingly competitive market that will require both HSBC Asia-Pacific and Hang Seng Bank to be better aligned and able to respond quickly to market and customer needs.

“By privatising Hang Seng Bank, HSBC can greatly simplify the structure of its Hong Kong operations, further align the economic incentives for HSBC to increase its investments in Hang Seng Bank, leveraging both brands whilst simplifying and streamlining decision-making processes to be more agile. It will also enable improved operational risk management and capital efficiency and deployment. 

“Furthermore, there is an opportunity for better alignment of Hang Seng Bank and HSBC's operations that may result in better operational leverage and efficiencies,” it added.