HSBC's sale of its Singapore insurance business is expected to enhance the capital positions of the bank with a higher CET1 ratio.
According to S&P Global Market Intelligence Senior Research Analyst Ralph Chen, with the transaction targeted for completion in 1H 2027, the new capital boost is expected to position the bank to execute several potential short-term capital events.
Mr Chen further listed three primary scenarios for how management may deploy this liquidity:
1. Resumption of share buybacks
HSBC is expected to restore its share buybacks plan, as the bank has held it on pause since 3Q2025 through to 1Q2026, Mr Chen noted.
He further highlighted that last year, HSBC announced a multi-billion deal offering to buy out minority stakeholders in Hang Seng Bank, thus halting buybacks to retore CET1 ratio.
“With the CET1 ratio rehabilitated by the divestment, we expect the buyback programme to be resumed,” he said.
2. Special dividend distribution
In addition to the buyback plan, Mr Chen pointed out that HSBC “is likely to distribute a special dividend, alongside the regular quarterly dividends”.
According to figures from S&P Global Market Intelligence, in 2024, the bank sold its Canada and Argentina businesses and passed down the capital to shareholders as a special dividend of $0.24 per share along with the 1Q2024 quarterly dividend.
Said Mr Chen, ““We expect similar event might happen with the precedence.”
3. Reinvestment in high-growth areas
Alternatively, Mr Chen said management may opt for a more conservative capital return strategy and instead re-deploy capital to investments in high-growth areas, such as private credit markets which HSBC previously showed strong interest.
Content reproduced with permission from S&P Global Ratings and S&P Global Market Intelligence.