Ping An to insist on HSBC Asia spin-off proposal

HSBC’s largest shareholder Ping An Insurance will press on with its call for the bank to spin off its Asia operations despite pushback from executives, reports said.

The restructuring bid highlights HSBC’s precarious position as US-China tensions rise, with some observers doubting whether Europe’s largest lender can continue to straddle east and west.

Chinese insurer Ping An believes it is in need of urgent and radical change, and was not swayed by arguments against the move presented by the bank’s leaders last week, Bloomberg reported, citing an unnamed source.

HSBC listed 14 reasons against changing its structure, including a lengthy transition period that could last up to five years as well as loss of direct access to US dollars.

CEO Noel Quinn said last week that an “alternative structure” would have a “negative” impact on the bank and would not deliver increased value to shareholders.

The lender had “considered many of these options over recent years”, and recently updated its analysis with third-party financial and legal advice, Quinn added.

But Ping An, led by Chinese tycoon Peter Ma, was disappointed by HSBC’s underperformance and is worried about geopolitical risks affecting the London-headquartered bank, according to Bloomberg.

Ping An insists a spin-off would generate additional market value of $25-$35 billion, release $8 billion in capital requirements, and save on headquarter and infrastructure costs, the report added.

The Financial Times reported a source as saying: “HSBC only emphasised and clearly exaggerated the downsides and challenges of spinning off its Asia business, but did not mention the huge benefits and long-term value that a spin-off could create.”

Ping An on Friday declined to comment on the reports. Previously, it said it supported a debate and any proposals that benefitted shareholder returns at HSBC.

An HSBC representative said the bank had nothing to add beyond the executives’ earlier remarks.

Last week, HSBC said its pre-tax earnings sank 15 percent to US$9.2 billion after it took a $1.1-billion hit on possible credit losses, but added that it would revert to quarterly dividends in 2023.

HSBC was among a number of major banks to cancel dividends early in the pandemic after a de facto order from the Bank of England — a move that riled some Hong Kong investors.

Some retail investors have cited the dividends cancellation as a reason to back Ping An’s spin-off proposal.

A face-to-face meeting between HSBC executives and Hong Kong investors last week turned chaotic as disgruntled shareholders protested outside the venue. — Agence France-Presse

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