A report on FT.com says HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) is the latest UK bank mulling a spinoff of its retail and commercial banking operations through a share offering, and that it has discussed the proposal with its board as well as investors.
Impending regulatory requirements require banks to shield their retail operations from the risks attached to their other businesses such as trading in currencies and commodities. The capital requirements for doing business in the UK are also likely to become more onerous.
HSBC joins the queue
It is no surprise, therefore, that HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) is considering the move to list its retail businesses separately – it has always chafed at the extent of regulatory compliance enforced on banks in the UK. However, it ran afoul of regulators last year and had to cough up huge penalties to settle alleged transgressions such as money laundering ($1.9B) and mis-selling of insurance products ($1B).
Other banks on the sidelines with similar plans to list retail businesses are Lloyds Banking Group, RBS’ Williams & Glyn’s unit and One Savings Bank. Spanish bank Santander has, however, temporarily shelved its plans to list its UK subsidiary, though it remains interested.
Retail ops could list for £20B
HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) may list a 30% stake that could command a market capitalization of as much as £20B, according to estimates. This would allow the bank, in one stroke, to unlock value from these assets as well as take off some regulatory pressures.
String of disposals
In 2010 the bank spun off its Asian private equity arm, one of five such arms that it planned to offload to comply with regulations such as the Volcker Rule in the US. In October 2011, the bank sold its Canadian PE business to Graycliff Partners, and in March 2012, sold a majority stake in its Dubai PE outfit to company executives.
Last year, HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) also disposed of its general insurance businesses in Hong Kong, Singapore, Argentina and Mexico to AXA Group and QBE Insurance Group Ltd. for $914 million. Its Thai retail banking operations were sold to The Krungsri Group and its Bank of Ayudhya PCL unit.