No Plans to Take Hang Seng Bank Private - HSBC

Source: The Standard

HSBC Holdings (0005) has no plans to privatize Hang Seng Bank (0011) despite urgings from an activist shareholder calling on the London-based banking giant to buy out its subsidiary's remaining 38 percent minority stake.

"Hang Seng is a core part of our business and we have no plans to change that position in any way," Sandy Flockhart, chief executive of Hongkong and Shanghai Banking Corp, the global group's Asian unit, told Bloomberg. Knight Vinke Asset Management, the US-based activist investor that holds a 0.3 percent stake in HSBC, openly suggested earlier this week that the lender - which owns 62 percent of Hang Seng Bank - should privatize the subsidiary to boost profits.

"The news certainly stimulated Hang Seng's share price to record highs this week," Kim Eng Securities analyst Ivan Li told The Standard on Friday. "It may be positive for the banking group as a whole, since it would reduce competition and redundancies."

Hang Seng Bank stock closed Friday at a record HK$131.90, up 2.57 percent, with 6.26 million shares changing hands on volume of HK$820.3 million. So far this year, the stock has soared 28.8 percent, compared to a modest 1.25 percent rise for HSBC shares.

However, market watchers differ on whether the impressive jump in Hang Seng Bank's stock is directly attributable to Knight Vinke's call for privatization.

"Hang Seng has substantially improved its profitability. It has done a great job in its fee-based income business, which I believe lends strong support for the share prices we have been seeing recently," said Bank of China International analyst Wong Kwok-wai.

Meanwhile, HSBC announced it has successfully expanded into the emerging insurance market in India and Vietnam. HSBC shares closed Friday at HK$138.80, slipping 0.5 percent.

(By Karen Cho)

Editor: Ronald Li