Proactive Investors - HSBC Holdings PLC (LON:HSBA) suggested shareholders will get some bumper returns after it agreed to sell its Canadian business to Royal Bank of Canada for CA$13.5bn (US$10.1bn, £8.3bn) with the deal expected to complete in 2023.
The FTSE 100-listed bank estimated it would pocket a pre-tax gain of US$5.7bn on the deal.
HSBC's CET1 capital ratio would be enhanced by around 130 basis points over and above its existing capital plans, it added, with a signal that there could be some reward for shareholders – though not for a while.
The shares jumped over 4% to 510.3p, their highest in over two months.
The Asia-focused lender said it would continue to target a return on average tangible equity (RoTE) of at least 12% from 2023, excluding the gain on this deal.
"The board will proactively consider opportunities for organic growth and investment, and the appropriate amount of additional surplus capital created as a consequence of this transaction to be returned by way of a one-off dividend and/or share buybacks (in addition to any existing share buyback programme)," the bank said in a statement.
The timing of any shareholder distributions related to the Canada sale are likely to be from early 2024 onwards, it said, once the deal is completed.
Noel Quinn, HSBC's group chief executive, said: “The deal makes strategic sense for both parties, and RBC will take the business to the next level.”
Recent third-quarter results from the bank showed a strong increase in income thanks to higher interest rates, but profits slid 42% due to US$1.1bn of provisions for potential bad debts amid heightened economic uncertainty and the continued weakening of mainland China’s commercial real estate sector.
The CET1 ratio was 13.4% at the end of September, lower than the minimum 14% targeted.
Quinn and the board have been under pressure from the lender's largest shareholder, Chinese insurance giant Ping An, which has called for a spin-off of its Asia business and for cost cutting to be “much more aggressive”.
HSBC Canada operates more than 130 branches and has over 780,000 retail and commercial customers.
A review by the group considered its "relatively low market share" and the prospect of investing in expansion compared to in other markets led to the conclusion that a sale was "the best course of action strategically for the HSBC Group".