HSBC exaggerating costs of spinning off Asia unit, Ping An argues in rare rebuke
Ping An, HSBC’s largest shareholder, has publicly criticised the bank ahead of its AGM as it confirmed it will back calls to restructure the lender.
The Chinese insurer, which holds an eight per cent stake in the bank, has long argued in favour of spinning off HSBC’s Asian business, which generates the vast majority of the lender’s profit.
These calls have been repeatedly rebuffed by HSBC’s leadership, who argue it would impose significant costs on the bank.
But in a rare public statement, Ping An said HSBC has “exaggerated many of the costs and risks” of a restructuring while refusing to “countenance any benefits”.
“We have been extremely disappointed by HSBC management’s consistent closed-minded attitude to all solutions,” Ping An said.
Although noting a recent improvement in the bank’s performance, Ping An said this mainly stemmed from higher interest rates, which were likely to peak soon. It argued the bank continues to underperform compared to its global peers and said its profitability targets were not ambitious enough.
Ping An confirmed it would back calls for “structural reform” at its upcoming AGM on 5 May.
It recommended that “the original spin-off solution be adjusted to a strategic restructuring solution,” arguing that it would “improve performance, enhance value and accelerate growth opportunities.”
Ping An said its solution would mean HSBC remained the controlling shareholder of a separately listed Asian bank to “preserve global business line synergies”.
“We believe that a structural solution which creates a separately listed Asia business headquartered in Hong Kong will crystallize multiple benefits to all HSBC Group shareholders,” Ping An concluded.
At the upcoming AGM shareholders will vote on whether to commit the bank to provide regular updates on restructuring, including a spin-off of the Asian business.
While the proposals have Ping An’s support, influential shareholder advisory firm Glass Lewis advised shareholders to vote against the proposals.
HSBC has faced intense pressure from its shareholders in recent years to break up the bank, with shareholders arguing that the lender’s global divisions hold back its Asian business.
In 2022 HSBC’s Asian business contributed $13.7bn (£11.1bn) to the bank’s $17.5bn (£14bn) total profit. The European business meanwhile saw a $415m (£336m) loss.
Over the past few years HSBC has withdrawn from retail markets in the US, Canada and France, although the bank’s plans to sell its French retail business faced problems last week after rising interest rates forced the buyer to stump up more cash.
Discontent with HSBC was further fuelled when British regulators prevented banks from handing out dividends during the pandemic. That decision starved Asian shareholders of dividends, provoking a backlash from retail investors in Hong Kong.
Investors are also concerned that HSBC’s position straddling east and west will become increasingly untenable as relations between the two deteriorate.
An HSBC spokesperson said: “It is our judgment, supported by third-party financial and legal advice, and with third-party assurance, that alternative structural options will not deliver increased value for shareholders. Rather, they would have a material negative impact on value.”