Ping An suggests HSBC spin off Asian operations

HSBC’s largest investor has called on the banking giant to cut costs and move out of certain non-Asian territories to boost returns and long-term value.

Ping An Insurance, a Chinese financial services conglomerate, also suggested that the FTSE 100 group divest its Asian division, where it derives most of its profits, from its western operations.

The Shenzhen-based company, which owns more than 8 percent of HSBC, has long urged the bank to make sweeping structural reforms, believing it to be lagging behind rivals.

The company said HSBC Group was in the bottom quartile in 45 percent of key operating metrics compared to peers, while in Asia it was last or penultimate in more than half of the metrics in 2021.

Ping An also noted that the bank’s return on tangible equity has averaged only 7 percent over the past five years, which she said was “far too low in absolute terms and also low compared to peers who also suffered from a low interest rate environment’ .

And while the group admitted that recent rate hikes had boosted HSBC, it claimed the benefits they provided were “temporary and unsustainable.”

It wants HSBC to pursue “much more aggressive” cost-cutting measures, including reductions in staff numbers and IT costs, as well as at its global headquarters.

Ping An insisted this was the “most important, urgent and absolutely necessary action for HSBC to improve its business performance…especially amid slowing growth in the global financial sector.”

In addition, the company believes HSBC should accelerate its Pivot to Asia, claiming it has seen little concrete impact from the strategy, and should consider a possible separation of its Asian operations.

While it has been widely reported since at least February that Ping An has pushed for a split of HSBC’s operations, it did not publicly comment on the proposal until Friday.

The debate over this has arisen at a time of rising tensions between the UK and China, and controversy surrounding HSBC’s reliance on the Chinese market, particularly after protests in Hong Kong over the region’s national security law.

HSBC and its CEO Noel Quinn have consistently hit back on proposals to divest the company, claiming it would cost too much, be very complicated and potentially hurt long-term creditworthiness.

No other institutional shareholders have publicly sided with Ping-An, while many analysts have rejected the idea, pointing to the damage it could do to the bank’s finances by weakening the East-West link.

Ping An said: ‘We will support all initiatives, including a spin-off, that are conducive to improving HSBC’s performance and value; we will consider any suggestions that could help HSBC improve its development and operations strategy.”

HSBC Holdings Shares were up 6.4 percent to 492.7p during late afternoon on Friday, making it one of the ten highest risers on the FTSE 100 Index.