HSBC’s largest shareholder revives debate over bank breakup

By Michelle Toh, CNN Business

HSBC has long prided itself on being the bank that connects East and West. Now he’s under pressure to redesign that model after a challenge from its largest shareholder, one of China’s most powerful financial corporations.

Ping An, China’s biggest insurer, is pushing for HSBC to restructure its structure, which could eventually mean decoupling the bank’s hugely profitable Asian business from its Western business, according to a person familiar with the matter.

The Chinese insurer has asked HSBC to explore a reorganization, with the aim of increasing its valuation, as well as simplifying its regulatory requirements worldwide, the person told CNN Business.

Ping An spoke to HSBC privately, ahead of the bank’s results and annual shareholders’ meeting last week, though he didn’t recommend a specific way forward, according to the person. But options would include splitting off the lender’s Asian operations or setting up a separate entity in Hong Kong, the bank’s biggest market.

HSBC shares jumped 2.6% in Hong Kong and traded around 0.6% lower in London on Tuesday. Ping An’s intervention was first reported over the weekend by the Financial Times and Bloomberg.

Ping An holds an 8% stake in HSBC, according to the bank’s latest annual report.

The Chinese giant has been paying closer attention to the structure of the London-based lender since it was forced by UK regulators to halt dividend payments in 2020.

It caused an outcry among retail investors in Hong Kong, where HSBC is a mainstay of many portfolios, and prompted the bank to justify its global structure and improve shareholder value.

HSBC cut its dividend last year. In a statement on Tuesday, a spokesperson for the bank stressed that it was “committed to maximizing value for all of our shareholders,” without specifically mentioning Ping An.

“We believe we have the right strategy and are focused on executing it,” the spokesperson said. “Implementing this strategy is the fastest way to generate higher returns and maximize shareholder value.”

HSBC has doubled its global position lately, despite investor scrutiny and geopolitical tensions.

During an earnings presentation in February, CEO Noel Quinn said 77% of its wholesale banking revenue had “some form of cross-border connectivity” and half of its global banking and markets division revenue “at the ‘East’ came from Western customers. .

But the bank has long questioned its organization and even its headquarters, because Asia is at the heart of its activity.

HSBC was founded in Hong Kong over 155 years ago, but has been based in the UK since 1992, after acquiring Midland Bank, a major British retail bank.

Asia made 65% of HSBC’s profits last year, and the bank has shifted more resources to the region and transferred several of its top executives to Hong Kong.

In a statement on Tuesday, Ping An said he would “support any suggestions aimed at improving HSBC’s value and improving its business management.”

“We want a debate on the future of the bank. We want shareholders to participate in the debate and come up with solutions for HSBC,” the firm said. “Ping An supports all reforms and investor proposals that can help HSBC’s operations and long-term growth.”

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Shawanda H. Saldana