Analysis of the Impact of Hang Seng Bank's Privatization and Delisting on HSBC Holdings' Financial Metrics

Based on my analysis, the following is a detailed report on the impact of Hang Seng Bank’s privatization and delisting on HSBC Holdings’ financial metrics:

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HSBC Holdings officially announced the privatization of Hang Seng Bank (stock code: 0011.HK) on October 9, 2025, making this one of the largest bank privatization transactions in Hong Kong’s financial history [1][2].

Item	Details
Privatization Method	Scheme of Arrangement under the Hong Kong Companies Ordinance
Offer Price per Share	HK$155 (net of any future dividends declared or paid)
Relative Premium	Approximately 33% premium over the 30-trading-day average closing price of HK$116.49 prior to the announcement
Outstanding Shares to Be Acquired	Approximately 276.3 million shares
Total Transaction Consideration	Approximately HK$42.8265 billion
Financing Method	Funded by HSBC Asia Pacific using internal HSBC Group resources
Shareholder Approval Rate	97.30% favorable votes at the general meeting, 85.75% favorable votes at the court meeting

• Founded in 1933, with a history of nearly 93 years
• Acquired by HSBC Holdings in 1965
• Listed on the Hong Kong Stock Exchange for over 53 years, with its listing status formally terminated in January 2025 [1]

Market analyses suggest that HSBC Holdings’ decision to privatize Hang Seng Bank was primarily driven by the following operational pressures:

Financial Metric	H1 2025	H1 2024	Change
Non-Performing Loan Ratio	6.69%	5.32%	+1.37 percentage points
Total Impaired Loans	HK$55 billion	-	-

The significant rise in Hang Seng Bank’s non-performing loan ratio reflects substantial asset quality pressure in its real estate and commercial lending segments [1][2].

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• Increase in Asset Size:
  The acquisition of Hang Seng Bank will directly increase the consolidated asset size of HSBC Holdings
• Goodwill Recognition:
  The difference between the acquisition price of HK$155 per share and the fair value of Hang Seng Bank’s identifiable net assets will be recognized as goodwill
• Incorporation of Asset Quality:
  Hang Seng Bank’s HK$55 billion in impaired loans will be incorporated into the HSBC Group’s asset quality metrics

• Cash Outflow:
  The payment of the approximately HK$42.8 billion consideration will consume an equivalent amount of cash and cash equivalents
• Reduction in Minority Interest:
  Upon completion of privatization, Hang Seng Bank will become a wholly-owned subsidiary of HSBC, and minority interest will be eliminated
• Impact on Capital Adequacy:
  Acquisition expenditure may put short-term pressure on the Common Equity Tier 1 (CET1) capital adequacy ratio

• Integration Costs:
  One-time expenses will be incurred for system integration, personnel adjustments, and brand restructuring following privatization
• Transitional Efficiency Loss:
  Business operational efficiency may decline during the integration period
• Increase in Loan Loss Provisions:
  Additional provisions need to be set aside for Hang Seng Bank’s impaired loans

• Synergies:
  Cost synergies can be achieved through shared technology platforms, back-office services, and customer resources
• Business Integration and Optimization:
  Eliminate duplicate business lines and optimize resource allocation in the Hong Kong market
• Improved Capital Efficiency:
  Full ownership enables more flexible allocation of Hang Seng Bank’s capital and liquidity

Assuming HSBC Holdings completes the acquisition for HK$42.8 billion, based on its approximately US$180 billion in Tier 1 capital as of the end of 2024:

Metric	Estimated Impact
Reduction in CET1 Capital	Approximately US$5.5 billion (based on an exchange rate of US$1 = HK$7.8)
Short-Term Impact on CET1 Ratio	Decrease of approximately 30-50 basis points
Recovery Time	Expected to recover within 6-12 months through retained earnings

• Cash Consumption:
  The payment of the privatization consideration will significantly reduce the liquid assets of HSBC Asia Pacific
• Liquidity Coverage Ratio (LCR):
  May face short-term pressure, requiring adjustments to asset structure
• Financing Needs:
  If internal resources are insufficient, market financing may be required to supplement liquidity

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Based on market data analysis from 2024 to early 2026 [0]:

Period	HSBC Holdings (HSBC)	Hang Seng Bank (0011.HK)
Total Return from Early 2024 to Early 2026	+99.88%	+74.58%
2024 Annual Return	+23.28%	+7.97%
2025 Annual Return	+61.61%	+62.35%
Annualized Volatility	24.40%	30.61%
Sharpe Ratio (Rf=4%)	2.65	1.58

• HSBC Holdings significantly outperformed Hang Seng Bank in 2024 (+23.28% vs +7.97%)
• The two stocks are highly correlated (correlation coefficient 0.8768), reflecting the linkage effect of being part of the HSBC Group
• HSBC Holdings has significantly better risk-adjusted returns

According to event study analysis [0]:

• 20 days prior to the event: HSBC +2.65%, Hang Seng Bank -1.89%
• 20 days after the event: HSBC +10.59%, Hang Seng Bank +8.08%
• The market reacted positively to the privatization news, with HSBC recording significant excess returns

• 20 days prior to the event: HSBC +5.79%, Hang Seng Bank +3.80%
• 20 days after the event: HSBC +15.30%, Hang Seng Bank +11.85%
• Following the completion of privatization, HSBC Holdings achieved even greater excess returns

Monthly performance of HSBC Holdings during the privatization period shows [0]:

Month	Return	Notes
January 2025	+6.00%	Month of privatization proposal announcement
February 2025	+14.27%	Privatization advancement period
October 2025	-1.28%	Official announcement of privatization
December 2025	+10.55%	Expectation of privatization completion

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Financial Metric	Short-Term Impact	Medium-to-Long-Term Impact	Assessment
Total Assets	↑ Increase by approximately US$80 billion to US$100 billion	↑ Sustained growth	Positive
Return on Equity (ROE)	↓ Short-term pressure	↑ Synergies take effect	Neutral to Positive
Capital Adequacy Ratio (CET1)	↓ Decrease of 30-50 bps	→ Gradual recovery	Short-term pressure
Non-Performing Loan Ratio	↑ Incorporation of higher non-performing ratio	↓ Risk resolution	Short-term Negative
Net Profit	↓ Integration costs	↑ Synergies	Negative initially, then positive
Liquidity Coverage Ratio	↓ Short-term decline	→ Return to normal	Short-term pressure
Earnings Per Share (EPS)	↓ Increase in share count	↑ Profitability improvement	Negative initially, then positive

1. Risk Management
   : Eliminate the drag of Hang Seng Bank’s asset quality issues on the listed company’s performance through privatization
2. Resource Integration
   : Unify the Hong Kong business platform to improve operational efficiency
3. Brand Unification
   : Strengthen the overall image of the HSBC brand in the Asia-Pacific region
4. Capital Flexibility
   : Full ownership enables more flexible capital allocation and business restructuring

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• Following the completion of privatization, HSBC will gain full access to Hang Seng Bank’s customer resources and market share
• Long-term synergies are expected to enhance overall profitability
• Eliminate compliance costs associated with listed company information disclosure obligations

• Integration processes may result in higher-than-expected costs
• Hang Seng Bank’s asset quality issues may be more severe than anticipated
• The competitive landscape of Hong Kong’s local banking industry may change
• Regulatory approval uncertainties (e.g., antitrust reviews)

It is recommended that investors focus on the following metrics in the coming quarters:

• Disclosure of integration costs in HSBC Holdings’ quarterly reports
• Changes in capital adequacy ratios
• Revenue contribution from Hong Kong regional operations
• Changes in non-performing loan ratios and provision coverage ratios

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Hang Seng Bank’s privatization and delisting has

impacts on HSBC Holdings’ financial metrics:

1. Short Term
   : Capital adequacy ratio, liquidity, and profitability metrics face certain pressure. Integration costs and provisions for impaired loans will have a negative impact on profits.
2. Medium to Long Term
   : As synergies materialize and resource integration is completed, HSBC Holdings is expected to gain stronger competitive advantages in the Hong Kong market, with profitability expected to improve.
3. Strategic Value
   : This privatization is a key initiative for the HSBC Group to optimize its Asia-Pacific business layout and strengthen risk management. Its long-term strategic value outweighs short-term financial costs.

Market data shows that investors have generally adopted a positive attitude towards the privatization transaction, and HSBC Holdings achieved significant relative returns during the event period [0].

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[1] Futu News - “93-year-old Hang Seng Bank ‘Bids Farewell’ to the Hong Kong Stock Market” (https://news.futunn.com/en/post/67131275/hengsheng-bank-at-93-years-old-says-farewell-to-the)

[2] Futu NiuNiu - “93-year-old Hang Seng Bank Says Goodbye to HKEX” (https://web.lbkrs.com/news/271959355)

[3] HSBC News & Media Releases - “HSBC proposes to privatise Hang Seng Bank by scheme of arrangement” (https://www.hsbc.com/news-and-views/news/media-releases)

[0] Jinling AI Financial Database - Historical price data and technical analysis of HSBC Holdings (HSBC) and Hang Seng Bank (0011.HK)