Zhi Tong Cai Jing·2025-10-13 05:53Core Viewpoint - HSBC Holdings announced a cash acquisition of 680 million shares of Hang Seng Bank at HKD 155 per share, totaling HKD 106 billion (approximately USD 13.6 billion), increasing its stake from 63% to 100% [1] Group 1: Acquisition Details - The acquisition requires approval from 75% of Hang Seng's minority shareholders and less than 10% opposition to proceed, with completion expected by mid-2026 [1] - After the acquisition, HSBC's earnings per share (EPS) will increase as profits attributable to minority shareholders will no longer be deducted, leading to a higher dividend per share (DPS) [1] Group 2: Financial Impact - The estimated return on equity (ROE) for FY2026 is projected to decrease from 9.4% to 7.5%, and from 9.3% to 6.2% for Q4 2025 to Q3 2026 [1][2] - The dividend yield is expected to rise from 5.3% to 5.4% for FY2026, while the share buyback amount is forecasted to drop from USD 10 billion to USD 5 billion, reducing the buyback return rate from 4.1% to 2% [2] Group 3: Valuation and Market Reaction - The acquisition is anticipated to slightly increase dividends but reduce buybacks, negatively impacting the company's valuation by approximately 5% [2] - The price-to-book (P/B) ratio valuation indicates a net asset reduction of about 4%, assuming the P/B ratio remains at 1.6x [2] - Following the announcement, HSBC's stock price fell by 6%, suggesting that the market has already priced in the short-term impacts of the acquisition [2]