HSBC to acquire full control of Hang Seng Bank in £10.7bn pound deal

HSBC has moved to consolidate its position in Asia by announcing a £10.7 billion-pound acquisition of the remaining 36 per cent of Hang Seng Bank that it does not already own. The FTSE 100 lender has put forward a cash offer of HK$155 per share, representing a 30 per cent premium to Hang Seng’s closing price on Wednesday. This places the value of the minority stake at approximately HK$106.1 billion, or about £10.7 billion.

Investors reacted sharply to the announcement, with HSBC shares falling 5.4 per cent to close at £10.08½ in London. The bank is suspending share buybacks for at least three quarters in order to maintain capital buffers within the target range set by its board while funding the purchase.

Hang Seng has recently felt the pressure from exposure to the struggling property markets in Hong Kong and mainland China. Its impaired loans surged to 6.7 per cent of gross loans as of June 2025, a significant increase from 2.8 per cent at the end of 2023. Analysts estimate that Hang Seng comprises about half of HSBC’s overall exposure to Hong Kong’s commercial property market, estimated at $32 billion.

HSBC’s chief executive, Georges Elhedery, described the issue of non-performing loans as a short-term headwind. He emphasised that gaining full control of Hang Seng would enable HSBC to more rapidly manage these loans and gain flexibility to implement any necessary restructuring. Elhedery referred to the acquisition as both capital generative and accretive, stressing it as a superior use of the bank’s capital compared with buybacks. Details on possible synergies will be announced in the second half of 2026.

Analysts see various motivations underlying the deal. While some view it as a financially driven move in support of ongoing restructuring, others interpret the acquisition as having a political dimension, owing to the largely Hong Kong and Chinese retail ownership of the minority stake. Critics note that while the price premium appears high relative to Hang Seng’s recent returns, the move offers HSBC greater operational autonomy in its single largest market.

HSBC has already begun overhauling Hang Seng by appointing Luanne Lim, formerly the chief executive of HSBC Hong Kong, to lead the subsidiary. The deal marks a further pivot towards Asia for the banking group, which has come under pressure to unlock more value from its regional assets, amid calls from significant shareholders to consider spinning off its Asian operation.

The acquisition arrives as leadership changes unfold at HSBC, with Sir Mark Tucker stepping down as chairman in September. Brendan Nelson is serving as interim chairman while a successor is sought. According to Elhedery, Tucker played a significant role in the talks leading up to this historic buyout.

Market reaction remains mixed, with analysts at UBS recognising strategic value but highlighting execution risks. HSBC will maintain Hang Seng as a separate brand and intends to maintain dividend payouts. The banking giant considers the Hong Kong market vital to long-term growth, signposting its commitment to remain a dominant regional player.