Oct 9 (Reuters) - HSBC said on Thursday it planned to privatise Hong Kong's Hang Seng Bank after its majority-held subsidiary has come under fire for its performance and exposure to faltering property markets in the city and mainland China.

HSBC will offer HK$155 per share, valuing the deal at about HK$106.1 billion ($13.63 billion) for the purchase of the 36.5% of shares not already owned by HSBC.

HSBC said the offer was made at a 30.3% premium to Hang Seng Bank's closing price of HK$119 on Wednesday.

The offer price could be adjusted for any dividends, except the 2025 third interim dividend, HSBC said in a statement to the Hong Kong Stock Exchange.

"The privatisation exercise represents a significant investment into Hong Kong," HSBC said in the announcement.

"It represents HSBC’s strong conviction in Hong Kong’s future as a leading global financial centre and super-connector between international markets and Mainland China."

Hang Seng Bank has reported rising bad loans over the last few years due to its relatively high exposure to the Hong Kong and mainland Chinese property markets.

Impaired loans reached 6.1% of its gross loans as of end-2024, up sharply from 2.8% at the end of 2023.

Reuters last year reported that due to worries about a potential rise in bad loans amid growing economic headwinds and the property sector crisis in China, HSBC in early 2024 started planning to tighten risk management at Hang Seng Bank.

HSBC said on Thursday the deal would have a negative impact of about 125 basis points on its common equity tier 1 (CET1) ratio, which stood at 14.6% at June-end.

It said the bank expected to restore its CET1 ratio to its target operating range of 14.0% to 14.5% through organic capital generation and by not initiating any further buybacks for the next three quarters.

Privatisation schemes are commonly used in Hong Kong to streamline corporate structures and reduce the costs associated with maintaining a public listing.

The offer price is final, HSBC said, adding that it does not reserve the right to revise it.

($1 = 7.7815 Hong Kong dollars)