Reports of HSBC plans to float UK arm played down

Analysts have played down reports that HSBC has plans to float off its UK arm, saying that such a move would make little business sense.

Stuart Gulliver

Reports suggested the bank could float up to 30 per cent of its UK retail and commercial banking arm to create a separate British bank.

Shailesh Raikundlia, analyst with Espirito Santo, said that to ensure ring-fencing, HSBC would have to move the rest of its business to Hong Kong.

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“The group’s main UK subsidiary, HSBC Bank PLC, is a lot broader in nature than a ring-fenced bank would be – it contains investment banking operations that would not be allowed within a ring-fence and also houses some continental European business,” he said.

Analysts at Credit Suisse said that it is “unclear to us at this stage what the regulatory and strategic merit of such a move would be”.

Ian Gordon, banks analyst at Investec, said: “Do I think it’s going to happen? No.

“It’s an interesting debating point. It plays to the sorts of arguments you hear from (HSBC chief executive) Stuart Gulliver from time to time, mainly the view that HSBC as a whole is valued at less than the value of its constituent parts.”

HSBC declined to comment.

The reports claimed the float could help the bank meet UK regulation and unlock value for shareholders.

UK banks now have to ring-fence their retail banking units from riskier investment banking under new rules designed to give more protection to depositors and taxpayers should any more bailouts be needed.

A listing would be a logical move to meet that requirement.

The reports, citing people familiar with the project, said the plan was at an early stage but the matter had been discussed with investors and informally at board level.

HSBC is Europe’s biggest bank with a market value of £122.09bn and its UK arm is estimated to be worth about £20bn. Much of its IT infrastructure is based in Sheffield.

If HSBC did list its UK arm it would partially reverse its takeover of UK bank Midland more than 20 years ago, which resulted in it moving its stock market listing to London from Hong Kong.

There is frequent speculation the bank could move its headquarters back to Asia.

Analysts said that spinning off its retail business into a separate UK listing could make that prospect more likely.

HSBC is structured as a collection of country based subsidiaries. The holding company owns all the businesses around the world.