HSBC lobbied for Asian business separation
Bank resists calls from China’s largest shareholder Ping An Insurance
A Chinese flag flies in front of HSBC’s headquarters in Hong Kong. (Reuters file photo)
HSBC Holdings Plc has launched an internal review in the face of pressure from its largest shareholder to discuss the separation of the bank’s Asian operations.
The London-based bank is examining the issue of the meltdown after Bloomberg reported late last month that Ping An Insurance of China was pushing the lender to take action to improve returns, according to people familiar with the matter, who requested anonymity. Private Information.
Executives oppose the idea of splitting up HSBC but have begun the analysis in an effort to respond to Ping An’s argument that the bank’s investors would be better off if they were able to choose to invest in a purely Asian company headquartered in Hong Kong.
One of the sources said Goldman Sachs bankers were recruited to help with the review. Wall Street Bank, one of HSBC’s retained advisers, was helping prepare its defense against the breakup calls.
The work is still in its early stages, but one person said the goal was to complete the report in the coming weeks and submit it to bank managers.
Ping An, which counts Thai CP Group among its shareholders, said in a private note that the breakup of Prudential set a precedent for the HSBC split. But others see the split of Prudential Plc, the insurer that carved out its Asian unit from its UK operations in 2019, as a poor comparison given the limited network effects the insurance industry can exploit.
Spokespeople for HSBC and Goldman Sachs declined to comment. A Ping An representative did not immediately respond to a request for comment.
About 65% of HSBC’s pre-tax profit last year came from Asia, and Hong Kong is the bank’s single largest market. However, HSBC argued that while Asia appears to be the dominant source of its revenue, much of this is actually business with Western clients booked into the region.
In a presentation to investors last year, HSBC said that half of its foreign exchange revenue booked in the East came from Western clients, while about 65% of its securities services revenue in the East originated from the West.
Highlighting so-called network effects will be a key part of the HSBC case for shareholders who make no sense to break up their businesses around the world.
Analysts at Barclays estimated this month that the changes could cut 3% to 8% of the HSBC group’s market value.
HSBC considers its global network an essential part of its business and has positioned itself as a financial bridge between the rapidly growing economies of Asia and the rest of the world.
This model has faced increasing pressure in recent years amid heightened geopolitical tensions between China and the United States that have led to criticism from both Western and Chinese officials.