HSBC Holdings Plc (HSBA), Europe’s largest bank, has no plans to sell a stake in its U.K. consumer unit, one of the most profitable in the country, said a person with direct knowledge of the matter.
The bank could sell a 30 percent stake in the unit, which has a value of about 20 billion pounds ($33 billion), to help it comply with rules requiring banks to insulate their U.K. consumer units, the Financial Times reported earlier today, citing unidentified people with knowledge of the project. HSBC’s board hasn’t discussed such a plan and regulators haven’t required a sale, said the person, who asked not to be identified because they weren’t authorized to speak publicly.
A sale would reverse HSBC’s acquisition of Midland Bank in 1992. The consumer bank is now the most profitable in the U.K., generating a 14.3 percent return on equity, according to analysts at Credit Suisse (CSGN) Group AG. That may increase as growth returns to the U.K. The country’s economy is set to expand 1.4 percent in 2013, up from the 0.6 percent predicted in March, Chancellor of the Exchequer George Osborne said last week.
“It’s unclear to us at this stage what the regulatory and strategic merit of such a move would be,” Amit Goel, a Credit Suisse analyst with an outperform rating on the stock, wrote in a note to clients. “It’s not obvious how this would improve the treatment of capital and funding.”
Heidi Ashley, a spokeswoman at HSBC in London, declined to comment on the discussions.
The stock fell 0.4 percent to 656.5 pence at 2 p.m. in London trading today, for a market value of about 123 billion pounds. The shares have climbed 1.6 percent this year, the worst-performer after Standard Chartered Plc. (STAN) Lloyds Banking Group Plc (LLOY), the U.K.’s biggest mortgage lender, has climbed 63 percent.
HSBC’s U.K. consumer bank made a profit of 1.63 billion pounds in 2012, adjusted for gains and losses on the bank’s own debt and asset sales, Credit Suisse’s Goel said. The lender has added small businesses as clients as other British banks such as Royal Bank of Scotland Plc curbed lending following the financial crisis.
“The biggest beneficiary for business-banking in the U.K. is HSBC, because it has been able to take clients,” said George Godber, a fund manager at London-based Miton Group Plc (MGR), which owns HSBC shares. “Right now, it should be in a very good position.”
The U.K. government is due to implement the proposals made by John Vickers’s Independent Commission on Banking by 2019. The group stopped short of forcing banks to split their consumer and investment banking operations, recommending retail units should have their own capital, board and risk committees.
HSBC’s position could change in future if the rules are revised, the person added.
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