HSBC to advise on record-breaking Saudi Aramco IPO, chief executive confirms

HSBC has been formally appointed as an adviser on the initial public offering of Saudi Arabia’s national oil giant Aramco, predicted to be the biggest listing debut in history, chief executive Stuart Gulliver confirmed on Monday.

Saudi Aramco is valued at between US$1 trillion and US$1.5 trillion, according to a March 29 report by Sanford C Bernstein & Co. and Rystad Energy AS.

A 5 per cent stock sale based on a US$1 trillion valuation would raise US$50 billion for Saudi Arabia and about US$1.5 billion for HSBC if the standard 3 per cent banking fee is applied. There have been unconfirmed reports that the IPO could be worth as much as US$100 billion.

Hong Kong remains in the running for the listing, but it is facing competition from Tokyo, Singapore, and London.

Gulliver was speaking at an informal shareholders’ meeting in Hong Kong, during which outgoing chairman Douglas Flint responded to shareholders’ concerns about compliance challenges, particularly in the US, as well as the oft-reported difficulties individuals and companies have had when opening an HSBC bank account in Hong Kong.

“There have been complaints from the chambers of commerce about the difficulties of opening an account with HSBC,” Gulliver said. “This is directly a result of enforcing improved standards, and these improved standards are a direct result of the deferred prosecution agreement and the monitor.”

In 2012, HSBC was fined US$1.9 billion for compliance breaches relating to drug money from Mexico, and signed a deferred prosecution agreement. This meant the bank would not face prosecution but was obliged to have a monitor in place for five years to report on its progress in making changes to its anti-money laundering procedures.

The agreement is due to expire this year but could be extended or, in an extreme case, the bank could even be prosecuted if the Department of Justice considers HSBC to be in breach of the agreement.

Flint said the US Department of Justice had reported that HSBC was making progress in raising its anti-money laundering standards.

HSBC announced last month that Mark Tucker, currently chief executive at pan-Asian insurer AIA Group would become chairman on October 1.