HSBC Holdings: Jefferies Downgrades Hold to Buy Amid Market Uncertainty

HSBC Holdings: Jefferies Downgrades Hold to Buy Amid Market Uncertainty

On September 12, 2025, Jefferies downgraded its rating for HSBC Holdings from "Buy" to "Hold," citing market uncertainty and potential risks associated with the bank's recent privatization of Hang Seng Bank. The move comes amidst a backdrop of global economic volatility and increased regulatory scrutiny in the banking sector.

Privatization Impact on HSBC

HSBC's privatization of Hang Seng Bank, announced on October 9, 2024, is expected to enhance the Group's overall profitability. The transaction involves a 30% premium over the closing price on October 8, 2024, and is valued at HK$290.3 billion. This premium acquisition highlights HSBC's commitment to its Hong Kong business and optimism about Hang Seng Bank's brand value Hsbc Holdings (0005.HK): Privatizing Hang Seng Bank's profitability and Global Strategy competitiveness to the next level^[1].

Financial Impact on HSBC

The privatization will lead to a one-time reduction in HSBC's Common Equity Tier 1 (CET 1) ratio by 125 basis points (bps). However, it is expected to boost Return on Equity (ROE), Earnings Per Share (EPS), and Dividend Per Share (DPS) slightly. HSBC plans to accelerate revenue growth and strengthen capital endogenesis to quickly return to its target CET 1 range. Despite the suspension of share repurchases for three quarters, the shareholder return dividend+repurchase rate is expected to remain above 8% in 2026 Hsbc Holdings (0005.HK): Privatizing Hang Seng Bank's profitability and Global Strategy competitiveness to the next level^[1].

Market Uncertainty and Jefferies' Downgrade

Jefferies' downgrade reflects concerns over market uncertainty and the potential impact of the privatization on HSBC's capital adequacy ratio. The bank has suspended repurchases for the next three quarters, which may affect its 2026 consolidated shareholder return. However, the overall shareholder return is expected to remain at a high level, with the Cash/Money Market dividend ratio projected to be around 5.8% in 2026 Hsbc Holdings (0005.HK): Privatizing Hang Seng Bank's profitability and Global Strategy competitiveness to the next level^[1].

Long-term Strategic Implications

In the long run, privatizing Hang Seng Bank is expected to improve HSBC's business efficiency and internal collaboration capabilities in Hong Kong. This strategic move aims to enhance the bank's competitive edge in the increasingly fierce Hong Kong banking industry. The CEO of HSBC emphasized that the benefits of privatizing Hang Seng outweigh simple buybacks, highlighting the potential for long-term profitability and shareholder returns Hsbc Holdings (0005.HK): Privatizing Hang Seng Bank's profitability and Global Strategy competitiveness to the next level^[1].

Conclusion

The Jefferies downgrade reflects the market's cautious stance amidst economic uncertainty and regulatory scrutiny. However, HSBC's strategic move to privatize Hang Seng Bank is expected to deliver long-term benefits, including enhanced profitability and business efficiency. Investors should closely monitor the bank's performance and regulatory environment to assess the impact of the privatization on HSBC's fundamentals and shareholder returns.

References

Hsbc Holdings (0005.HK): Privatizing Hang Seng Bank's profitability and Global Strategy competitiveness to the next level^[1] https://news.futunn.com/en/post/63086867/hsbc-holdings-0005-hk-privatization-of-hang-seng-bank-to