HSBC's largest shareholder outlines bank break-up strategy

In a rare public statement, Chinese insurer Ping An said HSBC was lagging behind international peers and a recent improvement in performance was tied to rising interest rates, which have now peaked.

Ping An outlined revised proposals for restructuring that highlight 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.

"It is necessary for HSBC to push for structural reform to fundamentally address HSBC's underlying market competitiveness issues," Michael Huang, chairman and CEO of Ping An Asset Management, said in a statement.

Ping An last year suggested a series of ideas for HSBC to separate its business but Huang said the bank's management had "exaggerated many of the costs and risks" associated with a split.

The previous proposals involved spinning off the bank's Asia business into a separate entity listed and headquartered in Hong Kong, and a consolidation of the bank's interests in the region, Huang said.

"HSBC Group has drained HSBC Asia of dividends and growth capital to support its relatively low return non-Asia businesses," he added.

"In effect, HSBC Asia has been subsidising the group's relatively low return non-Asia businesses."

The revised proposals called for London-listed HSBC to engage in a "strategic restructuring" that would see it create a separately listed bank headquartered in Hong Kong.

Huang said the proposal would allow HSBC to retain control over a separate Asia business.

"Secondly, each structural solution would deliver material benefits to the group's shareholders including valuation unlock, capital relief, long-term efficiency gains, geopolitical risk mitigation and competitive repositioning," he added.

However, HSBC said the proposed restructuring alternatives would not "deliver increased value for shareholders. Rather they would have a material negative impact on value."

"We remain clear that our current strategy is the fastest way to deliver returns," the bank said in a statement.

HSBC was among a number of major banks to cancel dividends early in the Covid-19 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.

HSBC bank on Monday said pre-tax profit fell in the first half, and appeared to rebuff calls to spin off its Asian activities on the eve of a key shareholder meeting.

On September 20, HSBC released a fresh report depicting ASEAN’s exports for the year to date which underlines the bloc’s resident export performance, largely thanks to an extended tech cycle and high commodity prices.

HSBC is mulling the sale of its Canadian business, the Asia-focused bank said Tuesday.