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HSBC eyes listing of £20bn UK bank
HSBC has sounded out investors about a flotation of its UK arm, in a move that would realise value from its high street banking business and address regulatory pressures. The bank has in recent weeks asked investors whether they would support the sale of a sizeable stake in the UK business. It has also discussed the issue informally at board level, according to three people familiar with the project. If Stuart Gulliver, HSBC’s chief executive, presses ahead with the plan, it will partially reverse the group’s landmark acquisition of the UK’s Midland Bank more than 20 years ago. That deal helped HSBC to become Britain’s the fourth biggest high-street operator after Lloyds, RBS and Barclays. Thinking is at an early stage, according to those involved, but the plan would be likely to involve the listing of a minority stake of up to 30 per in the UK retail and commercial banking operation. Investors estimate that such a business could float with a market capitalisation of about £20bn. Such a move would coincide with a slew of other bank listings in the UK. Lloyds Banking Group is preparing to float its TSB subsidiary next year, to comply with EU state aid penalties imposed after its UK government rescue. Royal Bank of Scotland’s Williams & Glyn’s unit is also set to list by 2015 under the same EU penalty regime. Virgin Money, too, has signalled a desire to list over a similar timeframe, while Spain’s Santander remains keen to part-float its UK subsidiary, though it has shelved plans for the time being. It emerged on Sunday that One Savings Bank, the lender formed from a restructuring of building society Kent Reliance by private equity firm JC Flowers, could also float next year For HSBC, a carveout of the UK business would help to deal with the requirements of the incoming Vickers rules, which demand that UK banks ringfence their domestic retail banking operations. Although formal separation is not required, some bankers believe that the strictures of the rules may motivate bigger lenders to break themselves up. Other regulatory changes, such as a tougher capital regime in the UK than elsewhere, may also make it logical to spin out a British operation. HSBC has made little secret about its irritation with the growing costs of being a UK regulated bank. The group is expected to pay about £900m, or 40 per cent, of the industry’s £2.2bn bank levy, to the Treasury this year. And it has long bemoaned the ringfencing rules and steadily rising regulatory capital requirements. HSBC has toned down its public complaints, calming fears that it might move its headquarters to Hong Kong. Although a listing of the UK business could bring a potential move of the group HQ back on to the agenda, people close to the bank said that any question of redomiciling remained "off the table". Some HSBC executives believe that floating the UK business would also make sense on valuation grounds. It would crystallise a higher rating for the whole group, especially in the light of buoyant investor sentiment towards the UK and the prospects for its banking sector. Shares in Lloyds, the only "pure-play" listed UK high-street bank, and a close proxy for the HSBC plan, have risen nearly 70 per cent over the past year compared with only 4 per cent for HSBC.