HSBC soars on retail spinoff talk

H S B C H o l d i n g s P l c ’s shares jumped the most in more than a year in London on Monday after a newspaper reported the lender may spin off its UK consumer bank as the company pledged to review its domicile.

Europe’s largest lender surged as much as 4.6 percent — the most since January last year — and traded 3.2 percent up at 649.6 pence ($9.8) at 8:50 am on Monday in London, compared with a 0.5-percent drop in the FTSE 100 Index.

In Hong Kong, the stock ended 3.6 percent higher at the close of trading, posting the biggest intraday gain since December 2011.

HSBC is considering spinning off the consumer bank worth about 20 billion pounds, the Sunday Times repor ted, without saying where it got the information.

Chairman Douglas Flint said on Friday the lender would consider moving from the UK, where a bank levy cost the firm 750 million pounds last year, more than any other lender.

“Today’s gains are mainly being driven by the possible spinoff of HSBC’s UK retail bank, on top of the relocation potential,” said Linus Yip, chief strategist at First Shanghai Securities Ltd in Hong Kong.

Heidi Ashley, a spokeswoman for HSBC, declined to comment on the plan for the UK business. The bank is due to update investors on its strategic review on June 9.

A spinoff would recreate Midland Bank, which HSBC bought in 1992, although a deal isn’t imminent, the Sunday Times said.

Hong Kong is viewed by analysts as the bank’s most

percent likely destination should it relocate. A transfer should cost no more than $1.5 billion because HSBC still has a base in the SAR, according to Chirantan Barua, an analyst at Sanford C. Bernstein in London.

Europe accounts for less than a quarter of profit at the bank, which operates in more than 70 nations. On Friday, the Hong Kong Monetary Authority noted what it called HSBC’s “deep historical links” with the city and said it would take a “positive attitude” should the lender decide to move.

HSBC was founded in Hong Kong and Shanghai in 1865.

“Given HSBC’s historical Hong Kong connection and the size of its group balance sheet, we believe a mainlandbacked banking system in Hong Kong is probably the only realistic option for its headquarters,” said Ronit Ghose, an analyst at Citigroup Inc.

“The recent increase in the tax burden on UK banks, especially via the bank levy, may have been a tipping point,” he said.

British Prime Minister David Cameron said last week that HSBC’s decision to consider moving headquarters underscored the need to keep the country businessfriendly.

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