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Banking giant HSBC has unveiled plans to take its troubled Hong Kong-listed business Hang Seng Bank private in a deal valuing the subsidiary at 290 billion Hong Kong dollars (£27.9 billion).

London-headquartered HSBC, which already owns around 63% of Hang Seng, is proposing to pay around 106.2 billion Hong Kong dollars (£10.2 billion) to buy out the remaining shares for 155 Hong Kong dollars (£14.90), which is a 30% premium on Wednesday’s closing price, and de-list the business.

HSBC said it will keep the Hang Seng brand and branch network following the proposed deal.

Shares in HSBC had dropped by more than 6% on Thursday morning following the announcement.

Hang Seng, which was founded in 1933, is one of the largest domestic banks in Hong Kong.

It was bought by HSBC in 1965, marking a milestone deal for the group at the time, but the subsidiary has struggled in recent years after being hit hard by Hong Kong’s property slump and seeing rising bad debts.

Georges Elhedery, group chief executive of HSBC, said: “Our offer is an exciting opportunity to grow both Hang Seng and HSBC.

“We will preserve Hang Seng’s brand, heritage, distinct customer proposition and a branch network, while investing to unlock new strengths in products, services and technology to deliver more choice and innovation for customers.

“Our offer also represents a significant investment into Hong Kong’s economy, underscoring our confidence in this market and commitment to its future as a leading global financial centre, and as a super-connector between international markets and mainland China.”

But HSBC said it would not buy back any shares for the next three quarters to boost cash reserves needed for the deal, which it expects to complete in the first half of 2026.

HSBC had faced pressure from its biggest shareholder, Ping An, in 2022 to split its Asian and Western businesses, though it fended off the investor calls.

It has also since launched a restructuring of Hang Seng and recently appointed a new chief executive for the unit.

HSBC said: “One of HSBC’s strategic priorities is to grow in Hong Kong.

“HSBC believes it is best positioned to do so by strengthening the Hong Kong banking presence of both HSBC Asia Pacific and Hang Seng Bank, focusing on their relative strengths and competitive advantages, but continuing to allow all customers to choose where to bank.”

It added it plans to “continue to invest in people and technology across both HSBC Asia Pacific and Hang Seng Bank”.

But it signalled potential for cost-cutting in the region, saying it “expects there to be an opportunity to create greater alignment across HSBC and Hang Seng Bank that may result in better operational leverage and efficiencies”.

It marks the latest move under an overhaul being led by Mr Elhedery since he took on the top job last year.

He has already reorganised HSBC into four new divisions and pulled out of some businesses.

Victoria Scholar, head of investment for Interactive Investor, said: “HSBC said it wouldn’t carry out any share buybacks over the next three quarters to fund the deal, sending shares sharply lower.

“Share buybacks have been a big part of investors’ rationale behind holding shares in HSBC after the bank paid out 11 billion US dollars (£8.2 billion) to shareholders last year.

“Hang Seng bank has been caught up in China’s property crisis, pushing up its bad debts.

“HSBC meanwhile has been carrying out a major global restructuring, cutting costs, pulling away from investment banking, exiting certain markets and focusing more on wealth management and on Hong Kong.”

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