HSBC soars on spin-off talks

HSBC Holdings's shares jumped the most since 2011 in Hong Kong after a newspaper reported that the lender may spin off its UK retail bank and the company earlier pledged to review its domicile.

Shares of HSBC, Europe’s largest bank, rose as much as 6 per cent, the biggest intraday gain since Dec. 1, 2011, to HK$78.25. The stock was up 5.2 per cent as of the noon trading break, compared with a 1.3 per cent increase in the benchmark Hang Seng Index.

HSBC is considering spinning off the retail bank for about £20 billion, the Sunday Times newspaper reported, without saying where it got the information. Chairman Douglas Flint said Friday that the lender would consider moving from the U.K., where a bank levy cost the firm £750 million last year, more than any other lender.

“Today’s gains are mainly being driven by the possible spinoff of HSBC’s U.K. retail bank, on top of the relocation potential,” said Linus Yip, the chief strategist at First Shanghai Securities Ltd. in Hong Kong.

A spinoff would recreate Midland Bank, which HSBC bought in 1992, although a deal isn't imminent, the London-based Sunday Times said.

Hong Kong is viewed by analysts as the bank’s most likely destination should it relocate. A transfer should cost no more than $1.5 billion because HSBC still has a base in the former British colony, according to Chirantan Barua, an analyst at Sanford C. Bernstein in London.

Europe accounts for less than a quarter of profit at the bank, which operates in more than 70 nations. On Friday, the Hong Kong Monetary Authority noted what it called HSBC's "deep historical links" with the territory and said it would take a "positive attitude" should the lender decide to move. HSBC was founded in Hong Kong and Shanghai in 1865.

In the UK, Prime Minister David Cameron said last week that HSBC’s decision to consider moving underscored the need to keep the country business-friendly.

Bloomberg