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HSBC weighs $7bn sale of Canadian business

HSBC Bank Canada Ping An
HSBC Bank Canada Ping An

HSBC has hired bankers to find buyers for its Canadian business, as it resists calls from its biggest investor to split the global bank in two.

The 157-year old lender said on Tuesday that it was in “the early stages” of reviewing strategic options for its retail bank in Canada. An outright sale of the Vancouver-headquartered business is “amongst the options being explored”.

It is understood that JP Morgan has been enlisted by the bank to sound out potential buyers for the division, which could sell for up to $9bn (£7.9bn). HSBC is the seventh-largest bank in Canada.

The potential exit from the market comes as HSBC tries to see off pressure from the Chinese insurer Ping An, its biggest shareholder, which is demanding that the bank split its booming Asian business off from its stagnant western operations.

The Chinese insurer, which holds an 8pc stake in HSBC, claims that such a move would create between $25bn (£22bn) and $35bn (£31bn) of additional market value.

HSBC argues that a split would destroy value by forcing the bank to replicate processes.

“I very much doubt [the sale of the Canadian unit] will be enough to pacify Ping An, as they continue to argue for a broader break up of the group to drive value,” said Gary Greenwood, an analyst at Shore Capital. “This is basically fiddling around the edges.”

While HSBC has operations in more than 60 countries, it has been trying to slim down its operations after years of underperformance. It has been cutting costs and winding down unprofitable businesses in the Americas, Europe, and Africa.

Instead, it is focusing on Asia where it makes over two-thirds of its profits. It pulled out of Brazil in 2016 and the US and France in 2021.

Robert Murphy, managing director at Edison Investment Research, said it was “doubtful whether this sale has anything to do with Ping An” and said any funds raised could go towards funding dividends for investors.

The drive to pare back costs has also reached London, where the bank is considering whether or not to extend the lease on its Canary Wharf headquarters when it expires in 2027.

A spokesperson for the bank said: “HSBC regularly reviews its businesses in all its markets. We are currently reviewing our strategic options with respect to our wholly owned subsidiary in Canada.

“Amongst the options being explored is a potential sale of HSBC Group's 100pc equity stake in HSBC Bank Canada. HSBC Bank Canada is a very strong business and Canada's leading international bank.

“The review is at an early stage and no decisions have been made.”

HSBC shares rose 4.5pc in London.