Ge Long Hui·2025-10-10 20:51Core Viewpoint - HSBC announced a plan to acquire 680 million shares of Hang Seng Bank at HKD 155 per share, totaling HKD 106 billion (approximately USD 13.6 billion), increasing its ownership from 63% to 100% [1] Group 1: Acquisition Details - The acquisition price represents a 30% premium over the previous day's closing price of HKD 119, corresponding to a price-to-book (P/B) ratio of 1.8x [1] - The acquisition is subject to approval from 75% of Hang Seng's minority shareholders and less than 10% opposition [1] - HSBC aims to complete the privatization of Hang Seng by mid-2026 if the process goes smoothly [1] Group 2: Strategic Rationale - The purpose of the acquisition is to enhance synergy, simplify operations, and reduce costs, while maintaining Hang Seng's brand and independent legal status [1] - HSBC's CEO expressed confidence in the Hong Kong market and Hang Seng's operational capabilities, indicating that the acquisition will strengthen collaboration and capture growth opportunities [1] - Post-acquisition, Hang Seng's customers will have access to a broader range of HSBC products and services, enhancing competitiveness and digital service capabilities [1] Group 3: Financial Impact - The acquisition is expected to reduce HSBC's core Tier 1 capital ratio by approximately 165 basis points, but the removal of minority shareholder equity deductions will increase it by about 40 basis points, resulting in a net impact of 125 basis points [3] - HSBC's ordinary share EPS is projected to increase as the profits attributable to Hang Seng's minority shareholders will no longer be deducted, leading to an increase in dividend per share (DPS) and a slight rise in dividend yield [2][3] - The acquisition will lead to a decrease in cash and net assets by USD 13.6 billion, while ordinary shareholders' equity will increase by USD 7.3 billion [3] Group 4: Market Reaction and Valuation - Following the announcement, HSBC's stock price dropped by 6%, reflecting the market's concern over the short-term impact on dividends and buyback rates [4] - The acquisition is expected to lower the estimated return on equity (ROE) and buyback return rate, with the 2026 estimated return dropping from 9.4% to 7.5% [2][4] - The estimated buyback amount for 2026 is revised down from USD 10 billion to USD 5 billion, resulting in a decrease in buyback return rate from 4.1% to 2.0% [3][4]