BANKING giant HSBC is weighing up a £20 billion flotation of its core UK banking business to help meet UK regulatory pressures and unlock value for shareholders.
The board is believed to be in early stage discussions to offer up to 30 per cent of its British retail and commercial banking arm.
Following the recent Vickers report on the structure of UK banking following the financial crash, British banks are now preparing to ring-fence their retail banking units from riskier investment banking to give more protection to depositors and taxpayers should any more bailouts be needed.
City banking analysts yesterday said a public listing of HSBC’s UK banking arm would be a logical move to meet that requirement.
One analyst said: “You could see the logic, yes.
“For one thing, there is momentum behind various UK banking assets coming on to the stock market over the next couple of years. The market climate is getting better for banking assets.
“HSBC may want to benefit from that, and the bank has also been clear in its unease with the growing costs of regulation in the UK.”
Shares in Lloyds Bank, the most UK-centric of the big four British banks, have risen nearly 70 per cent over the past year compared with 4 per cent for HSBC as it continues its gradual move out of part-taxpayer ownership.
Lloyds has already met European regulatory requirements to internally split off more than 600 branches under the renewed TSB brand ahead of the latter being floated on the stock market next summer.
Royal Bank of Scotland’s Williams & Glyn’s unit of more than 300 branches is set to list publicly by 2015, while Santander UK, under chief executive Ana Botin, has signalled its intention to float in the UK when market conditions are favourable.
However, the recommendations in the Vickers report are not to be legally implemented until 2019, and it is thought HSBC may decide to seek some of the upside from its current 100 per cent ownership of its UK assets before bringing in minority shareholders.
The UK and HSBC’s traditional heartland of Hong Kong comprise nearly 50 per cent of the assets of the global giant, which also has operations from the US and mainland Europe to the Middle East and other parts of Asia.
It is understood that informal soundings have been taken among some senior institutional investors in HSBC in recent weeks.
But it is also believed that HSBC chief executive Stuart Gulliver has not got anyone working on the demerger of the UK assets currently or called in any advisors to help on it. The bank declined to comment yesterday.
Analysts said they believed the UK high street and commercial banking business, which lends to medium-sized, although not the biggest, businesses, could be worth £20bn on the stock market.
Such a move would mark a partial U-turn of HSBC’s acquisition of the UK’s Midland Bank over two decades ago. That transaction put HSBC at the top table of British banking alongside Lloyds, Barclays and NatWest, the latter snapped up by Royal Bank of Scotland in 2000.
HSBC is Europe’s biggest bank with a market value of $200bn (£122bn). “Such a move would crystallise a higher rating for the whole group, especially in the light of buoyant investor sentiment on the UK economy,” Shailesh Raikundlia, an analyst at Espirito Santo, commented.
Banking profits in Britain have rebounded after several difficult years when the domestic economy slowed after the financial crash, and banks such as RBS, Lloyds and Northern Rock had to be bailed out by the taxpayer.