Chinese demand break up of HSBC: Ping An wants Asian spin-off

Chinese demand break up of HSBC: Bank’s biggest shareholder Ping An wants Asian spin-off

  • Ping An wants to see bank spin off its Asian business into a separate entity
  • Rupture with Ping An marks a worsening of HSBC’s geopolitical woes 
  • Bank increasingly torn between China and the West 
  • Ping An argues separate business would be able to generate bigger profits

HSBC is facing calls from its biggest investor to split the bank into two. 

Chinese insurance giant Ping An, which has an 8 per cent stake, has told executives it wants to see the bank spin off its Asian business into a separate entity listed on the Hong Kong stock market. 

The rupture with Ping An marks a worsening of HSBC’s geopolitical woes, with the bank increasingly torn between China and the West. 

Right strategy? Boss Noel Quinn and HSBC’s Hong Kong headquarters

Ping An, which has its headquarters in Shenzhen and is part-owned by the Chinese government, argues that a separate business would be able to generate bigger profits. 

It believes HSBC, which is led by chairman Mark Tucker and chief executive Noel Quinn, is being held back by its Europe business and as a result shares have lagged over the past five years, down 24 per cent over the period. 

But Tucker has rebuffed calls for a break-up, saying yesterday at HSBC’s annual meeting that he was happy with the group’s strategy and performance.

But he is under increasing pressure as about 65 per cent of profits come from Asia, compared to just 20 per cent from Europe. 

The bank has controversially sided with China over the past couple of years. HSBC came under heavy criticism in 2020 from British politicians when it backed Hong Kong’s controversial national security law that led to widespread protests in 2019. 

It also froze the accounts of democracy activists protesting against China’s crackdown on freedom of expression in Hong Kong. Ping An has reportedly told HSBC that this balancing act would be harder, with China’s failure to condemn the Russian invasion of Ukraine cited as a factor that would increase tensions. 

‘HSBC has found itself in a situation where it’s stuck between a rock and a hard place, trying to please the East and the West at the same time,’ said Gary Greenwood, at broker Shore Capital. 

He added: ‘The reason for HSBC maintaining its current global structure is that it’s a global bank but if globalisation is in reverse the logic is less obvious. The bank has also been moving senior executives to Asia, although the CEO has yet to move.’ 

A second top-10 shareholder told the Financial Times that Ping An’s proposal was a ‘pretty interesting idea’, adding: ‘For HSBC, it’s existential. They are not in a tenable structure. You wouldn’t create this institution from scratch.’ 

Breaking up the bank would follow the Prudential playbook. The insurance group split its Asian unit from UK operations in 2019, but kept its listing in London. 

The new businesses, Prudential, M&G and Jackson National, are collectively worth £4billion more than they were as one entity. 

HSBC said it had a ‘regular programme of engagement with all our investors’ and that it believed it had ‘the right strategy’ and was ‘focused on executing it’.