The Financial Times reported that HSBC Holdings plc (HSBC) is contemplating the listing of 30% stake in its U.K. retail and commercial banking unit. The anticipated move seems to be part of the company’s efforts to adapt to the changing regulatory landscape.
The spin-off will enable HSBC to comply with the stringent clauses of Vickers rules that will likely be implemented from 2015. As per the provisions of Vickers rules, banks in the U.K. are required to ring-fence their retail banking operations from other businesses including investment banking, brokerage services and global trading.
Though the talks to convert the company’s U.K. subsidiary to a separate entity are at the preliminary stage, its materialization will make HSBC the fourth largest investment banking operator in Britain. Additionally, the new entity will likely have a market capitalization of nearly £20 billion.
If HSBC goes ahead with its plan to list its U.K. subsidiary, it will join other banks that announced similar moves in the recent past. Lloyds Banking Group plc (LYG) is planning to list its TSB subsidiary in 2014 while The Royal Bank of Scotland Group plc’s (RBS) Williams & Glyn’s unit is set to float separately by 2015. Moreover, Spain’s Banco Santander, S.A. (SAN) is contemplating a similar move and wants to list its U.K. subsidiary.
Adding a local stock exchange listing enables the company to be flexible while raising funds in that location if required. This would be useful for HSBC in the U.K., in case the British regulatory capital requirements become more stringent.
Currently, HSBC carries a Zacks Rank #4 (Sell).
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